RateSetter Australia’s CEO speaks with FST Media about how banks can learn from the rise of digital disruptors like Apple and Google and their intelligent use of data.
FST Media: What are your key priorities for the next 12 to 18 months?
Foggo: Our first priority is to responsibly manage credit risk such that our investors get exactly what they expect, being every cent of principal and interest due. This is the most important ingredient for earning the trust of our lenders and building a long-term alternative for consumers.
Building consumer awareness of peer-to-peer (P2P) lending, and the attractions of RateSetter’s offerings both to investors and borrowers, is also a priority. We are behind the UK and US in Australia when it comes to fintech and P2P lending adoption, but increasing awareness will help us catch up.
FST Media: What is the ‘holy grail’ that is yet to be delivered in financial services?
Foggo: We see consistently delivering consumers convenience, speed of service and value – like we are all now receiving in other industries that have undergone technology-led disruption – as being the ‘holy grail’ in financial services. This has not been delivered by the large incumbents to date, but therein lies the opportunity for innovative companies.
FST Media: How will RateSetter’s Provision Fund help mitigate the threat of borrower defaults?
Foggo: Every borrower that takes out a loan with RateSetter pays into our Provision Fund, which has been established with the specific purpose of helping to protect investors in the event their funds are matched to a borrower who defaults.
Our role is to ensure that more money is paid into our Provision Fund than needs to be paid out to protect investors, on a through-the-cycle basis. We have achieved this to date in both Australia and the UK – a track record we are very proud of – and it is critical to us that we maintain this going forward.
FST Media: What are your thoughts on the increasing prominence of Peer-to-Peer lending – do lenders like RateSetter represent a threat to banks or an opportunity for innovation in the financial sector?
Foggo: Peer-to-peer lending is a threat and an opportunity for banks.
We are certainly going to attract many of the banks’ most-prized customers over time – both those investors holding cash in the bank in their own name or via their self-managed super fund (SMSF), or their premium credit borrowers who can now access better rates.
The banks will have to become more innovative and deliver better value to keep their customers. This will be good for consumers, and for our economy as a whole, as this competition will help shift finance from being a friction to a lubricant of economic growth.
FST Media: How can banks learn from the rise of digital disruptors like Apple and Google and their intelligent use of data?
Foggo: I think the senior ranks of the banks are already watching and listening intently. They know the trust and loyalty they thought their customers would always display is starting to erode, as better customer service and value is delivered by businesses like RateSetter. There is a lot they can do, although not without significant investment and profit erosion. Welcome to the new world of real competition in financial services.
FST Media: How is RateSetter harnessing the power of social media to engage with a growing Gen Y customer base?
Foggo: Interestingly over 60 per cent of our lenders are under 38 years of age, and around half of our borrowers are under 40 years of age. Social media is therefore essential to building an engaged community of borrowers and lenders. We are active on Twitter, Facebook and Linkedin and by providing compelling content, rapid customer service and real engagement via those networks we help to develop a real sense of community, such that borrowers and lenders identify themselves as ‘RateSetters’.
FST Media: What is your most effective customer acquisition channel and why?
Foggo: Without a doubt, word of mouth and customer referral are our most effective means of customer acquisition. We are seeking to reduce the spread between lending and borrowing, so it is important that we do not spend the same amounts as traditional lenders on marketing, but rather just provide a better service and better value, and then help the word spread.
Every single one of the reviews we have received from our customers on Product Review Australia has been 5 out of 5 stars, which shows the goodwill you create when you do deliver better services and value. We want to turn each customer into a RateSetter ambassador.
FST Media: How do you encourage a culture of innovation in your team?
Foggo: We make everything about the customer. Our employees are always striving to make things faster, easier, and better value and they are not afraid to try new things to get results. In fact, we insist on it.
To encourage innovation, we ensure we make it easy to innovate. We make decisions quickly, and we implement quickly. When your employees can see the direct impact of their efforts on that growth, it is proving reasonably easy to foster a culture of innovation.
FST Media: How do you define success?
Foggo: Our success will be defined firstly by our credit performance, and the number of consumers who gravitate towards the alternative we are providing. On both fronts we are tracking very well in Australia, so we see a very clear path to our longer term success.
FST Media: Every leader has a legacy they wish to be remembered for, what is yours?
Foggo: I would like to be remembered as an ‘economist’ who not only saw that there was a better way for financial services to be delivered, but someone who built a team that successfully delivered that alternative to all consumers in Australia.
Daniel Foggo spoke at FST Media’s 2nd Annual Technology & Innovation – the Future of Customer Experience & Business Intelligence conference, in addition to a distinguished panel of executives across financial services from 25th – 28th August 2015.