rrr
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Post by rrr on Aug 19, 2020 5:13:47 GMT
I can't stop thinking that the current issues at Ratesetter are largely caused by the investors themselves.
The investors rushed to the door all in the same time, causing a stampede.
What if the people actually trusted the model and supported the company in its crusade on the likes of Lloyds, RBS, Barclays and HSBC (all of them have terrible 1-star pages on Trustpilot)?
If people didn't cause a stampede, there would be a natural flow of money coming in an out, allowing for the Access product to work as intended.
Do we really have to blame ourselves for the current liquidity issues?
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Post by Deleted on Aug 19, 2020 5:21:26 GMT
erm... sorry, this isn't a 'crusade', its an investment. Either the risk/reward works, or it doesn't.
The Access product is 'working as intended', from RateSetters perspective at least - it is providing them a nice cheap, captive pool of funding.
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macq
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Post by macq on Aug 19, 2020 6:14:21 GMT
While any run for the door will not help - it could be argued that the investors in RS (and p2p in general) are the Ones who do/did believe but its the other 99.99% of the population who either through mistrust of a new product,bad press,lack of money,seeing platforms in trouble etc. did not allow it to get off the ground in any real way and that stopped it from challenging the banks and becoming a crusade
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Greenwood2
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Post by Greenwood2 on Aug 19, 2020 6:55:05 GMT
If, as we assume, RS is effectively closing down when Metro take over there will be nothing left to have trust in. We are just left with the concern that the last out will be left holding the hot potato.
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tjtl
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Post by tjtl on Aug 19, 2020 7:09:27 GMT
Hang-on. What if we all shopped at Marks & Spencer- they wouldn't have to lay off 7,000 staff, or at Debenhams- they wouldn't be teetering on bankruptcy, or ate at the Pizza Express at the O2, it wouldn't be facing closure.
It is up to the supplier to provide what customers want- whatever the economic circumstances, and if they don't then they go under. Covid-19 intensified and accelerated the pressures P2P firms were (with the benefit of hindsight) always going to suffer- at a time of historically low interest rates the P2P model just doesn't work.
I still have a reasonable six figure sum in RateSetter, I am very sad to see its demise into the arms of MetroBank, but am on the other hand delighted it now has a stronger parent who can at least protect the platform - if not the individual loans and investments.
RateSetter had set out to be a trailblazer in personal banking, it will now end up as a footnote, another example of a business that set out to challenge the established order, but the established order- aided by ghastly economics, won.
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Post by freefalljunkie on Aug 19, 2020 8:01:59 GMT
You can't blame investors for rushing for the exit door when they judged, quite correctly, that the risk/reward ratio had changed and that the economic downturn would lead to hugely increased risk of loan defaults. With hindsight packaging loans of up to 5 years into 1 month contracts and then branding it an 'Access' product with the illusion of liquidity was always going to lead to problems somewhere down the line. Coronavirus just accelerated Ratesetter's decline, but it was in large part of their own making.
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
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Post by beagle on Aug 19, 2020 8:18:23 GMT
You can't blame investors for rushing for the exit door when they judged, quite correctly, that the risk/reward ratio had changed and that the economic downturn would lead to hugely increased risk of loan defaults. With hindsight packaging loans of up to 5 years into 1 month contracts and then branding it an 'Access' product with the illusion of liquidity was always going to lead to problems somewhere down the line. Coronavirus just accelerated Ratesetter's decline, but it was in large part of their own making. what measure do you have to suggest it was their own making?
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
Posts: 670
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Post by beagle on Aug 19, 2020 8:22:13 GMT
If, as we assume, RS is effectively closing down when Metro take over there will be nothing left to have trust in. We are just left with the concern that the last out will be left holding the hot potato. you would need rates of 99.9% for that potato
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Post by Deleted on Aug 19, 2020 8:59:23 GMT
Ha, given RateSetter's inability to turn a profit (hubris and arrogance leading to overpriced City offices aside), I bet they wish they'd thought of the Access product far sooner. Their profit margins would have been much healthier with fewer of those nasty 5-Year investors demanding 6% returns on finite duration loans, and more of those lovely docile Access investors demanding a paltry 3% return on infinite duration loans  |
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Post by nebula on Aug 19, 2020 9:06:17 GMT
Sorry but it read to me like "if dogs could fly"  Wishful but unrealistic. RS gives loans. The economy is hit. Some borrowers will struggle to pay. Investors aren't here to give unconditional support. Those who assess the risk to be higher than their threshold will pull out. Maybe you think the risk isn't that high, or perhaps you acknowledge the (now higher) risk level and you have decided to take it. We can't expect all investors to assess risks equally and to have equal risk thresholds. We also can't expect those who pull out to somehow coordinate between themselves how to RYI in an orderly and fair manner. |
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aju
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Post by aju on Aug 19, 2020 10:01:02 GMT
Sorry but it read to me like "if dogs could fly" Wishful but unrealistic. RS gives loans. The economy is hit. Some borrowers will struggle to pay. Investors aren't here to give unconditional support. Those who assess the risk to be higher than their threshold will pull out. Maybe you think the risk isn't that high, or perhaps you acknowledge the (now higher) risk level and you have decided to take it. We can't expect all investors to assess risks equally and to have equal risk thresholds. We also can't expect those who pull out to somehow coordinate between themselves how to RYI in an orderly and fair manner. There will come a time as things slow down and there is not enough lenders to let people out using RYI, or at least quickly enough. sadly the writing is on the wall as Metro has spoken and sadly ruled they are not interested in the RS loanbook and in fact RS will not be able to lend after a certain time anyway. Thankfully we did not come to the Access markets sooner (the rates were unfavourable for our risk levels) and stuck with the higher rates of the 1Y and 5Y (We were also gaming to get higher than posted rates too) Our 1Y will eventually roll down - by itself I assume although we have an RYI on it..
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rrr
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Post by rrr on Aug 19, 2020 10:19:27 GMT
Actually, any financial institution relies on age-old concept of fractional banking. All banks are engaged in maturity transformation - they are giving out long-term loans, funded by short-term deposits.
If all depositors suddenly withdraw their money, no bank can provide the liquidity in the same time.
This is something that brought down Northern Rock, Bradford & Bingley, etc. etc.
If people didn't run for the door at the same time, they would've survived.
And, you know, eventually it all comes down to normal typically.
This comes down to the question of TRUST.
What evidence, if any, do we actually have to trust Ratesetter any less than you would trust a "big bank".
Do you think that Ratesetter has worse underwriting criteria, worse talent, worse management, or anything like that?
To date, there is no evidence that the underwriting criteria is any worse than banks. That is really the key question.
Traditional banks have very poor service, very inefficient, lots of papers, emails, extra fees everywhere, they spend a lot on marketing.
If there are any entrepreneurs here, they would appreciate how much effort did it take to create something of this nature and to challenge the hegemony of the big banks.
It's like Tesla. Creating Tesla was nothing but crazy. Nobody believed in it. But they eventually persevered because their supporters stuck with them.
Unfortunately, Ratesetter investors (and, I must say, the regulators, who didn't support enough) didn't stick with them in the same way.
I think it shows our collective immaturity as society. The right thing would be not to run for the door and instead show solidarity and inspire trust, so that the natural flow continues.
Money still needs to be invested somewhere and with banks you will not get more than 1% these days.
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r00lish67
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Post by r00lish67 on Aug 19, 2020 10:35:31 GMT
Do you think that Ratesetter has worse underwriting criteria, worse talent, worse management, or anything like that? It doesn't have a Government backed FSCS guarantee of all of your capital and interest back in the event of their failure, unlike all major banks. If it did, we'd all still be there and RS would have twice as much money at hand as Marcus does. Not that I'd expect them to have that, it's a totally different ballgame.
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Post by Deleted on Aug 19, 2020 10:51:01 GMT
It's like Tesla. Creating Tesla was nothing but crazy. Nobody believed in it. But they eventually persevered because their supporters stuck with them. Unfortunately, Ratesetter investors (and, I must say, the regulators, who didn't support enough) didn't stick with them in the same way. This is an utterly ridiculous comparison. We are *NOT* RateSetter shareholders, and we have no upside from RateSetter equity increasing in value. We are fixed-income investors in a basket of mainly unsecured personal loans to the UK public, whose creditworthiness has been knocked hard by Covid. (There is also a smattering of secured/legacy rubbish in there, some so toxic that RateSetter had to take it back onto its own books). As for the regulators, well, I would argue that they allowed these 'Fin-Tech' companies far too much leeway. 'Fin-Tech' seems to be an awful hybrid of wanting access to investor money, while acting with all the discipline of a dot-com startup operating out of a garage. No wonder so many of these 'Fin-Tech' companies have failed.
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Greenwood2
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Post by Greenwood2 on Aug 19, 2020 11:11:51 GMT
Actually, any financial institution relies on age-old concept of fractional banking. All banks are engaged in maturity transformation - they are giving out long-term loans, funded by short-term deposits. If all depositors suddenly withdraw their money, no bank can provide the liquidity in the same time. This is something that brought down Northern Rock, Bradford & Bingley, etc. etc. If people didn't run for the door at the same time, they would've survived. And, you know, eventually it all comes down to normal typically. This comes down to the question of TRUST. What evidence, if any, do we actually have to trust Ratesetter any less than you would trust a "big bank". Do you think that Ratesetter has worse underwriting criteria, worse talent, worse management, or anything like that? To date, there is no evidence that the underwriting criteria is any worse than banks. That is really the key question. Traditional banks have very poor service, very inefficient, lots of papers, emails, extra fees everywhere, they spend a lot on marketing. If there are any entrepreneurs here, they would appreciate how much effort did it take to create something of this nature and to challenge the hegemony of the big banks. It's like Tesla. Creating Tesla was nothing but crazy. Nobody believed in it. But they eventually persevered because their supporters stuck with them. Unfortunately, Ratesetter investors (and, I must say, the regulators, who didn't support enough) didn't stick with them in the same way. I think it shows our collective immaturity as society. The right thing would be not to run for the door and instead show solidarity and inspire trust, so that the natural flow continues. Money still needs to be invested somewhere and with banks you will not get more than 1% these days. I wasn't in the initial rush for the door, I was prepared to wait out the interest rate haircut (due mainly/partly to Covid), although withdrawing uninvested funds, in the hope that things might improve. However with the Metro take over meaning there absolutely is no future for RS and the interest rate haircut and a possible capital haircut looming, why would anyone want to stay to the bitter end?
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Wishful but unrealistic. RS gives loans. The economy is hit. Some borrowers will struggle to pay. Investors aren't here to give unconditional support. Those who assess the risk to be higher than their threshold will pull out. Maybe you think the risk isn't that high, or perhaps you acknowledge the (now higher) risk level and you have decided to take it. We can't expect all investors to assess risks equally and to have equal risk thresholds. We also can't expect those who pull out to somehow coordinate between themselves how to RYI in an orderly and fair manner.