We've written in the past about the growth of the peer-to-peer (p2p) lending market
and the opportunities for the major operators in that market to establish themselves as brands, so it was interesting to read recently that RateSetter has ambitions to become a household name.
RateSetter - which allows investors to lend to businesses and individuals via its website - is one of the bigger and better-known players in the p2p market, alongside the likes of Funding Circle and Zopa.
It has announced it has attracted a further £20m of capital investment
to fund an expansion plan, and boss Rhydian Lewis says much of that cash will go on marketing, including broadcast and print advertising."We are determined to become a household name in the UK,"? he told the Sunday Times.
It's a canny move by RateSetter. The p2p market is growing rapidly in the UK - at roughly 150% a year - and that growth shows no signs of abating. On the contrary, as more people (and businesses) become comfortable with this form of investing and borrowing the faster the market will grow.
The p2p (or 'crowdfunding') market was worth an estimated £1.8bn in 2014, and we can safely expect that total to top £3bn - if not even £4bn - in 2015 as businesses continue to look for alternative funding sources and investors seek out better returns.
As in any growing market, there are opportunities for new players to grab a slice of the pie. But as that market matures and the growth starts to slow, the consolidation will begin. That's when brand presence becomes a key determinant of success, as investors and borrowers seek out the companies they trust - and trust is a vital component of any brand wanting longevity.
RateSetter certainly has plenty of competition at the moment, and the major players are jostling for position, seeking to drive more businesses and individuals to their platforms. There are lots of different business models and ways of describing how they work. Which, frankly, isn't always as helpful as it could be.
Dan Rajkumar, founder of Rebuildingsociety.com, one of those major players, was quoted last week on Businessdesk.com saying: "Crowdfunding is changing finance. It has positive social effects, but it's also often cheaper for businesses and better for lenders. Businesses can drive down the interest rate they'll pay by entering into discussions with members of our community."?
So if I want to get a return on my cash, am I an investor, a lender or a member? Or all three? And how do businesses go about that bartering?
It illustrates one of the difficulties the p2p market has in becoming mass-market, and why RateSetter needs to spend its marketing dosh wisely.
Brand awareness is one thing, but to become a household name they also need to ensure that a much bigger chunk of the population understands how the peer-to-peer market works, and that it's not seen as a high-risk option for investors - or lenders, or members, depending on how they're described - or for businesses looking to borrow.
A quick straw poll across the office suggested the peer-to-peer/crowdfunding platforms still have much to do to persuade even a relatively financially-savvy audience that investing in this way isn't aimed at risk-takers with cash to burn.
I may be slightly biased in this regard, but I wouldn't regard press and TV advertising as natural vehicles for explaining a new and complex product to a mass market audience, particularly with the "wealth warnings"? that inevitably accompany a financial ad. Even the most talented and creative copywriter can't avoid them.
Plus there's a huge amount of wastage with press and TV advertising, especially if you're targeting a business audience. And even consumers struggle to engage with financial services advertising, unless it's a clear, simple and very compelling (usually rate-led) message. Apathy is a word that gets bandied about a lot in financial services.
Better, I'd suggest, to build brand awareness - and understanding - through other channels first, then use mass-market advertising as the trigger to drive conversion.
But with a £20m war chest, RateSetter clearly has plenty of options. It will be interesting to see how it decides to spend it, and how its competitors respond.
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