Harmoney, MoneyMe lift personal loan originations in bank tech battle

Andreas Milano

Of its receivables, around half are personal loans with the rest a digital credit card book, branded Freestyle (it charges interest but also sets up a fixed repayment plan); and MoneyMe+, a merchant-funded buy now, pay later product just launched. Harmoney, whose average loan size is $25,000, reported an interim […]

Of its receivables, around half are personal loans with the rest a digital credit card book, branded Freestyle (it charges interest but also sets up a fixed repayment plan); and MoneyMe+, a merchant-funded buy now, pay later product just launched.

Harmoney, whose average loan size is $25,000, reported an interim net profit of $1.2 million. Its market capitalisation is $220 million. Its shares have disappointed since its float in November last year and were down 10 per cent to $2.06 on Wednesday.

MoneyMe, with an average loan size of $8000, reported a $1.3 million net profit, and has a market cap of $273 million. Its stock closed down 1 per cent at $1.58 after a late recovery from a post-lunchtime sell-off.

Both companies have expanded their warehouse funding facilities from major banks and say they have sufficient capacity to fund growth. Harmoney chief executive David Stevens said it was targeting $1 billion in annual loan originations, with a direct-to-customer, digital model that is highly automated – two-thirds of applications are not touched by humans.

MoneyMe CEO Clayton Howes said technology was helping to create a scalable model that allowed new products to be added without changing the credit model. “We are creating a suite of products under one ecosystem and we think the buy now, pay later experience can work for higher value purchases,” he said.

MoneyMe chief executive Clayton Howes: “We are creating a suite of products under one ecosystem.” 

Both companies are chasing a $150 billion consumer lending market in Australia that has seen a massive structural shift, with major bank share declining from 90 per cent in 2015 to 50 per cent in 2018.

Other players are newly listed Plenti, SocietyOne, which is planning an ASX listing, and the soon-to-be merged Bank of Queensland and ME Bank, which operates the Virgin Money brand. The big banks are scrambling: National Australia Bank is buying neobank 86 400, while Street Talk reported on Wednesday that banks are kicking the tyres on MoneyMe.

Jardens analyst Wassim Kisirwani said Harmoney’s originations momentum “is strong and has accelerated through the half and into second half. Margins are also trending well, aided by higher NIM and operating leverage.”

RBC Capital Markets analyst Tim Piper said MoneyMe’s third quarter “is tracking very strong, ahead of our second-half run-rate, with $90 million of originations, up from $69 million in the second quarter” as funding costs fall.

Both companies said credit quality was solid – Harmoney’s 90+day arrears are at a historical low of 0.6 per cent of loans while the MoneyMe charge off rate fell by 80 basis points to 4.7 per cent.

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