aju
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Post by aju on Aug 19, 2020 11:14:45 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. Am I being too flippant if I suggest RS should package all the loans up into some sort of product - lets call it say a "Credit Default Swap" - and sell them on to the banks perhaps at a huge discount, that might work, No!.
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aju
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Post by aju on Aug 19, 2020 11:16:06 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? Sadly I'm not sure I was even that clever ... being at the back of the queue, well near the back as we are.
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Post by Deleted on Aug 19, 2020 11:21:57 GMT
Am I being too flippant if I suggest RS should package all the loans up into some sort of product - lets call it say a "Credit Default Swap" - and sell them on to the banks perhaps at a huge discount, that might work, No!. Ugh... CDS. Nice reference to the 2008 crash. Especially since these 'Access' products with their 'Tiers' and 'Provision Funds' look increasingly like giant CDO/CMBS. So many similarities... packaged credit products, boom-time mentality leading to fee-chasing and poor underwriting, regulators being far too lax because they didn't want to stifle 'innovation', unexpected black-swan event taking everyone by surprise, liquidity crunch... etc If theres one thing this life has taught me... if you see the words 'financial' and 'innovation' used together in the credit markets, run a mile
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aju
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Post by aju on Aug 19, 2020 11:35:57 GMT
Am I being too flippant if I suggest RS should package all the loans up into some sort of product - lets call it say a "Credit Default Swap" - and sell them on to the banks perhaps at a huge discount, that might work, No!. Ugh... CDS. Nice reference to the 2008 crash. Especially since these 'Access' products with their 'Tiers' and 'Provision Funds' look increasingly like giant CDO/CMBS. So many similarities... packaged credit products, boom-time mentality leading to fee-chasing and poor underwriting, regulators being far too lax because they didn't want to stifle 'innovation', unexpected black-swan event taking everyone by surprise, liquidity crunch... etc If theres one thing this life has taught me... if you see the words 'financial' and 'innovation' used together in the credit markets, run a mile I don't bother if it says fintech much either, I forgot CDO and didn't get as far as CMBS but I looked it up and looks just as bad if not worse. I guess it never crossed my path as haven't had a mortgage for years let alone a commercial one.
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Post by diversifier on Aug 19, 2020 11:42:27 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? The gold standard measure: Randomised Controlled Trial. It is standard practice for companies to A/B test their products, whether it is a new soap or bank account. I do it all the time in my business. Ratesetter have very helpfully provided A/B testing between 5yr account and APM account, *proving* that the liquidity problem was their own making: A) 5yr account Ts and Cs was (approximately) what RS set up to do. Outcome: initial liquidity crisis, but now starting to ease. Queue may potentially shrink to near zero within 6-8 months from initial crisis. This is well within the 5yr time horizon of 5yr investors. 5yr investors on this board are not too unhappy about the liquidity (although somewhat concerned about the interest rate). And if RS had a future, they might well invest again in better times. If they had stuck to 5yr product only, RS would have ongoing business potential B) APM account has totally different Ts and Cs Outcome: liquidity crisis has worsened, stalling entirely well before the peak withdrawal. There is no chance really that any of those investors will get their money back inside a couple of years. Much worse, that’s well outside the expectations of those investors, most of whom have time horizons around six months to a year (ignoring the “instant Access” red Herring). We know that, because the RS performance data allows us to calculate the average turnover rate of funds between current and new investors in the before-time. Really none of those investors will ever invest with RS again. And since they are the majority, and write their experience on Trustpilot, nor will anybody else. It is either arrogance or insanity to commit your entire business until you’ve seen the results of the product testing. In this case, Ratesetter did exactly that, withdrawing their 5yr product to new investors (A), forcing 90% of their entire business to the APM product (B). When the APM product proved disastrous, there is simply insufficient left of the old business to fall back on, so that’s terminal. The worst thing actually, is there was *no reason for RS to pre-commit their entire company in that way*. The floating interest rate provides an ideal mechanism to optimally allocate funding between products, without committing to a product strategy that might later turn out to be incorrect. If RS had just left the 5yr floating rate product in the market, investors would have allocated themselves Automagically between the different products, based on the Ts and Cs and their term preferences, and then the interest rate would float to match. Don’t confuse the “higher 5yr interest rate” with the Ts and Cs. The interest rate might have floated up, or down. Neither I nor Ratesetter have a better crystal ball than the free market.
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chris1200
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Post by chris1200 on Aug 19, 2020 11:46:47 GMT
what measure do you have to suggest it was their own making? The gold standard measure: Randomised Controlled Trial. It is standard practice for companies to A/B test their products, whether it is a new soap or bank account. I do it all the time in my business. Ratesetter have very helpfully provided A/B testing between 5yr account and APM account, *proving* that the liquidity problem was their own making: A) 5yr account Ts and Cs was (approximately) what RS set up to do. Outcome: initial liquidity crisis, but now starting to ease. Queue may potentially shrink to near zero within 6-8 months from initial crisis. This is well within the 5yr time horizon of 5yr investors. 5yr investors on this board are not too unhappy about the liquidity (although somewhat concerned about the interest rate). And if RS had a future, they might well invest again in better times. If they had stuck to 5yr product only, RS would have ongoing business potential B) APM account has totally different Ts and Cs Outcome: liquidity crisis has worsened, stalling entirely well before the peak withdrawal. There is no chance really that any of those investors will get their money back inside a couple of years. Much worse, that’s well outside the expectations of those investors, most of whom have time horizons around six months to a year (ignoring the “instant Access” red Herring). We know that, because the RS performance data allows us to calculate the average turnover rate of funds between current and new investors in the before-time. Really none of those investors will ever invest with RS again. And since they are the majority, and write their experience on Trustpilot, nor will anybody else. It is either arrogance or insanity to commit your entire business until you’ve seen the results of the product testing. In this case, Ratesetter did exactly that, withdrawing their 5yr product to new investors (A), forcing 90% of their entire business to the APM product (B). When the APM product proved disastrous, there is simply insufficient left of the old business to fall back on, so that’s terminal. Doesn't this post completely miss the main reason why 5 Year has been so much less 'disastrous' than A/P/M re RYI processing? i.e. that RS isn't doing any lending out of 5 Year so all the re-investment money goes to RYI processing; whereas the very opposite is true of A/P/M? This isn't related to the models of 5 Year and A/P/M per se.Edit: The 1 Year experience also doesn't fit especially well into this analysis.
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rrr
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Post by rrr on Aug 19, 2020 11:54:38 GMT
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coogaruk
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Post by coogaruk on Aug 19, 2020 12:07:21 GMT
I see the sentiment isn't high here. I guess we will have to live with the RBS/Lloyds fat cats, flourishing on taxpayers' £££. You're flogging a dead horse. The P2P ship (in the UK at least) has well and truly sailed. Sad but true.
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macq
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Post by macq on Aug 19, 2020 12:13:43 GMT
Nobody would disagree but on here you are preaching to the Once converted (and in some cases still are i guess) But the message was the same from p2p companies but its Joe public that did not get the sentiment
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Post by Deleted on Aug 19, 2020 12:17:01 GMT
Heck, on the spectrum of P2P/Fin-Tech dog t*rds, RateSetter aren't even that bad.
If you want to see some really nasty specimens of financial manure, have a look at the list on this forum 'In Administration/Liquidation'
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Post by diversifier on Aug 19, 2020 12:19:17 GMT
The gold standard measure: Randomised Controlled Trial. It is standard practice for companies to A/B test their products, whether it is a new soap or bank account. I do it all the time in my business. Ratesetter have very helpfully provided A/B testing between 5yr account and APM account, *proving* that the liquidity problem was their own making: A) 5yr account Ts and Cs was (approximately) what RS set up to do. Outcome: initial liquidity crisis, but now starting to ease. Queue may potentially shrink to near zero within 6-8 months from initial crisis. This is well within the 5yr time horizon of 5yr investors. 5yr investors on this board are not too unhappy about the liquidity (although somewhat concerned about the interest rate). And if RS had a future, they might well invest again in better times. If they had stuck to 5yr product only, RS would have ongoing business potential B) APM account has totally different Ts and Cs Outcome: liquidity crisis has worsened, stalling entirely well before the peak withdrawal. There is no chance really that any of those investors will get their money back inside a couple of years. Much worse, that’s well outside the expectations of those investors, most of whom have time horizons around six months to a year (ignoring the “instant Access” red Herring). We know that, because the RS performance data allows us to calculate the average turnover rate of funds between current and new investors in the before-time. Really none of those investors will ever invest with RS again. And since they are the majority, and write their experience on Trustpilot, nor will anybody else. It is either arrogance or insanity to commit your entire business until you’ve seen the results of the product testing. In this case, Ratesetter did exactly that, withdrawing their 5yr product to new investors (A), forcing 90% of their entire business to the APM product (B). When the APM product proved disastrous, there is simply insufficient left of the old business to fall back on, so that’s terminal. Doesn't this post completely miss the main reason why 5 Year has been so much less 'disastrous' than A/P/M re RYI processing? i.e. that RS isn't doing any lending out of 5 Year so all the re-investment money goes to RYI processing; whereas the very opposite is true of A/P/M? This isn't related to the models of 5 Year and A/P/M per se.Edit: The 1 Year experience also doesn't fit especially well into this analysis. It is true that the reduced lending is one possibility. But I don’t think it affects the point that the 5yr account has met customer expectation, whereas the APM has destroyed the companies reputation. I also don’t think 1yr is so much a problem, from the company reputation perspective. Obviously, none of it is “nice”, and 1yr is stalling, but the max wait irrespective of RYI is 1yr, not 5yr. Again, meeting customer expectations. And people in 1yr have already had about 60% returned by normal repayment since the crisis, so they’re not screaming as hard. Put another way on customer expectation: whatever the rights and wrongs of reading the small print, most 1yr and 5yr account holders haven’t incurred life-changing loss. But a lot of APM account holders have. They are out for blood. Many of them will even sue RS in court cases that they can’t win, just to inflict loss on RS. That issue alone is going to make it virtually impossible to operate RS as a going concern. Don’t shoot the messenger, I am not among them, that is simply what is going to happen.
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iRobot
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Post by iRobot on Aug 19, 2020 12:19:22 GMT
Just wondering what the 'rrr' is short for. Perhaps it's "Rah! Rah! Rah!" - you do seem quite the RS cheerleader! If it's just the concept rather than RS itself, I shouldn't worry. Allow CV-19 to pass and Brexit to get sorted and there'll be another 'disrupter' along to tickle your RS fancy. (Admittedly, a degree of patience may be required.) Flush with a fresh round of Seedrs funding, founded by bright, young techies and not-so-bright, not-so-young, almost-made-it-but-not-quite ex-bankers with the same hopes, the same aspirations and the same promises. "RS 2.0" (Their sales pitch - sorry, "promo deck"- will conveniently forget that Metro bank are now operating in the same space with (comparatively) unlimited levels of access to significantly lower-cost funding, but, hey ... dreamers can dream, can't they?) By the way, have any of those TP entries been claimed by the companies they are addressing? Eg: "Lloyds Bank" - 1,127 reviews. Compared to the millions of customers they have, I think they'll be absolutely delighted they've only pissed off such an insignificant number! Also, take out the 'incentivised' feedback from RS borrowers and I wonder what RS' TrustPilot page would look like?
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Greenwood2
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Post by Greenwood2 on Aug 19, 2020 12:27:35 GMT
There are other P2P platforms apart from RS, and some of them are still going strong, sadly RS is now a dead duck after the Metro takeover however much lenders might want to support it.
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Post by scepticalinvestor on Aug 19, 2020 12:43:47 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
As one of those formerly docile Access investors (who stupidly assumed that the Access product was just a rebadged version of the old 1 month rolling product), I fully concur. With the wisdom of hindsight, the Access product was a prime example of the power of marketing, helping power RS' rise by succesfully creating the illusion of this amazing "savings" account that paid 3% and gave you Access to your money when needed, until it didn't.
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benaj
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Post by benaj on Aug 19, 2020 13:10:23 GMT
I haven't stopped believing in Ratesetter. I Still deposit ££££ regularly and almost instantly even when the total balance is being wind down.
Although it is not operating in normal conditions, I am happy to receive better than FSCS interest.
No loss so far with RS. Withdrawal speed from holding account is reasonable, not panicked yet.
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