In finance we tend to seek an edge, a marginal advantage that inches a company ahead of its competitors. This is how innovation is born but it can also breed products with an unfortunate tendency to be too complex for even the best-informed investors to understand.
It has become received wisdom that financial innovation means products which are ever more exotic and complex. I think this is complacent and out of step with what customers want. The best innovation delivers value and ease to customers – for example, by lowering the cost of investing, or unlocking a product which was previously unavailable.
What attracts me to RateSetter is the simplicity of the business. The primary function of finance is to connect those who want to invest money with those who can put that money to productive use. The peer-to-peer sector is solving this age-old challenge in a refreshingly simple and innovative way. A good example of this innovation is the Provision Fund, which spreads risk across the entire portfolio and allows even the smallest investor to achieve diversification.
For investors, RateSetter is making investing better by opening access to the asset class of loans. Having built my career in asset management, I find it exciting to be involved in a company which is opening up a new asset class which sits at a point on the risk-return spectrum that was not previously available, fitting neatly between the certainty of cash and the more volatile nature of equities.
At the same time, it is leading the way in providing clear and accessible information to investors, so they can make better-informed decisions.
For borrowers, RateSetter is opening access to an alternative source of affordable finance. The low cost and efficiency of accessing funds – whether for personal or commercial use – makes the whole process quick and modern. Borrowers now have a real alternative to their bank.
As a company, RateSetter has led the way in many areas. It was one of the pioneers of peer-to-peer lending and one of the founding members of its industry association. It has set high standards in transparency. It has consistently championed the importance of making peer-to-peer lending accessible to a wide audience. It has invested in its infrastructure and made the transition to a business serving a substantial customer base of investors and borrowers.
To me, RateSetter is innovation in action. The company has bright prospects and I look forward to playing my part as its Non-Executive Chairman, keeping up the good work, ensuring first class governance and allowing innovation to keep delivering for our investors and borrowers.