Uber partners with SocietyOne to deliver car loans to its drivers

Sharing economy behemoth Uber is partnering with Australia’s leading peer-to-peer lender SocietyOne to provide existing and potential drivers with loans to buy new cars, as the car-booking company looks to ramp up its workforce to put further pressure on the taxi industry.

The deal will provide SocietyOne, which is backed by media moguls James Packer, Lachlan Murdoch and Ryan Stokes, with access to a potentially high-growth market for lending – Uber drivers – and shows how nimble, fintech start-ups can win niche business in the digital economy from incumbent banks.

David Rohrsheim, CEO Uber Australia, and SocietyOne CEO Matt Symons outside Uber’s offices in Sydney.

In the past 18 months, the number of drivers on the UberX platform in Australia has gone from zero to 20,000. Uber Australia’s CEO David Rohrsheim says the partnership with SocietyOne “will help grow the business faster, there is no doubt about it”.

The deal could herald a new era of car ownership, where drivers could work casually for Uber to pay for a new vehicle, Mr Rohrsheim suggested. “You have SocietyOne coming in to the market saying if you drive one night a week and cover all your payments through Uber, you can now own a car.”

As the Turnbull government prepares to release its innovation statement on Monday, SocietyOne chief executive Matt Symons said the Uber deal is a concrete example of a local start-up forging a relationship with one of the biggest global tech players.

“This is a very exciting, innovative partnership and is an example of the sorts of strategic partnerships we want to forge to bring our disruptive finance proposition to many more Australians over the coming years,” he said.

“This is a validation of small, fast-growth tech companies punching above their weight.”

SocietyOne, which has 75 staff in Australia and New Zealand, is receiving around $80 million of applications for personal loans each month but only places a small proportion of those on its platform in order to maintain credit quality for its investors. It has matched around $60 million this year, with origination growing at 10 per cent a month. It expects to open the platform to retail investors next year.

SocietyOne has pioneered “risk-based pricing” for personal loans in Australia, meaning interest rates are determined after a detailed assessment of a borrower’s individual circumstances. Interest rates for Uber drivers will depend on their overall credit quality but Mr Symons said good borrowers should expect to borrow at lower rates than offered by banks.

According to website comparison site RateCity, SocietyOne offers secured car loans from 6.45 per cent, undercutting the best rate from the big four banks by more than 1 percentage point.

Bank processes anachronistic

As more Australian workers choose flexible jobs and with a growing number of students and retirees seeking casual work, the credit assessment processes of many banks looks increasingly anachronistic, Mr Rohrsheim said.

“The nature of work of drivers using the Uber platform is flexible; they can vary their hours, go on holidays, maybe work for a few months of the year. This is a new way of working, build around their life, and more Australians are looking for that. However, traditional lenders often build credit profiles around a nine-to-five job, requiring an income and a PAYG statement,” he said.

“SocietyOne recognises a growing sector of Australian want to work flexibly and they have come up with a product to get loans to those people. They are providing what consumers want in the same way that we are, and I think there is a lot of room for that.”

Uber filed capital raising documents in the US last week valuing the company at $US85 billion ($115 billion). The company operates in nine cities in Australia and New Zealand. In Australia, it has only been officially approved in the ACT. Despite this, it says it has over 1 million users in Australia where take-up has been solid due to a tech-savvy market with high credit card and mobile phone penetration combined with taxi fares being among the most expensive in the world.

Uber has worked with some US banks to provide financing for drivers and in May this year partnered with UK peer-to-peer lender Zopa to arrange financing. This deal represents the first time in Australia that Uber is referring drivers to financing options tailored to them.

Mr Symons said as a niche segment, Uber was not something incumbent banks would have the focus to build dedicated solutions around, but pointing to the growth trajectory of Uber around the world, he reckons “there could be tens of thousands people needing finance”.

Uber requires its drivers to have a car less than 10 years old. Mr Rohrsheim said this meant that each year, around 10 per cent of its workforce will need a new vehicle. Furthermore, between 10 per cent and 15 per cent of prospective drivers applying to Uber do not have a suitable vehicle because it is too old.

Ahead of the release of the innovation statement, Mr Rohrsheim said he had been excited by Prime Minister Malcolm Turnbull’s use of the word “agile”.

“Agile gets me excited because it is a call to action,” he said. “Unlike ‘be disruptive’, or ‘be innovative’, which don’t tell me what to do when I come to work, ‘agile’ suggests go out there and take some action and try some things. The government has been able to deliver quickly on this policy, so that sets the right tone. Work fast; put things out there.

“It’s the same with SocietyOne. They are just diving into this market and they will learn. They homeloansplus.org/payday-loans/ review are giving it a go. They have worked hard to get this ready and so have we – and I think that is agility.”

Mr Symons said the rise of Uber boded well for the take up of P2P lending. “SocietyOne is a trusted way for investors to get access to creditworthy borrowers. If people are comfortable renting their apartments and sharing their cars with strangers – thousands of people are doing it every day, both as hosts and drivers, or renters and passengers – it is not a huge leap to say they might use digital platforms to get personal loans.”