Elliot Moss
That was Mel Torme with All That Jazz. Good morning, this is Jazz Shapers with me, Elliot Moss every Saturday morning here on Jazz FM. Thank you very much for joining me. What is Jazz Shapers, I hear you ask if you haven’t caught it before. Jazz Shapers is the place where you can hear the very best of the people who are shaping the world of jazz, blues and soul alongside their equivalents in the world of business; a Business Shaper, and my Business Shaper today I am very pleased to say is Rhydian Lewis. He is the co-founder and chief executive of Rate Setter, they are officially in the last 12 months the largest peer-to-peer lending platform in the UK; how about that for a fact? You’ll be hearing lots from him about the wild and wonderful new world of alternative finance. Lots coming up from Rhydian very shortly. In addition to hearing from Rhydian you’ll be hearing from our programme partners at Mishcon De Reya some words of advice for your business. And, as well as all that of course, a carefully assembled mix of music from the shapers of jazz, blues and soul including new music from Jerry Alexander, classic Miles Davis, and this from Dionne Warwick.
That was the lovely Dionne Warwick with Walk On By. This is Jazz Shapers and Rhydian Lewis is my Business Shaper today, he is the co-founder as I said earlier, of Rate Setter, and indeed the chief executive, and Rate Setter is a peer-to-peer lending platform. Rhydian, thank you very much for joining me and I also should add as I said, one of them, the best, the biggest! And you’ve grown very fast. Tell me, in a nutshell, what is it, because many people may not know, what is a peer-to-peer business, what does it do?
Rhydian Lewis
We are a website that allows savers to lend directly to borrowers so in that way you cut out the bank, and the proposition is that there’s greater value to be shared out between the savers and the borrowers and we’re just the people that make it all work in the middle.
Elliott Moss
Sounds remarkably simple, and I remember reading something where you said “I was shockingly naïve in my approach to this thing”, but what you’ve just described is of course that your Rate Setter is big, I think that some other business, Oprah, is one of them, there’s a few, I forget the names, they’ve all got these natty names and indeed I’ve interviewed slightly different side the Crowd Cube Fund founder as well, a while back. It is a brave new world that has such things in it, but it sounds so obvious, take the banks out and people can lend to each other. Why, and you set up this business how long ago, Rhydian?
Rhydian Lewis
In 2010.
Elliot Moss
And why hadn’t the world of peer-to-peer existed in the form that it did? Was it because of the lack of technology do you think?
Rhydian Lewis
Yeah, I think it first started in 2005 and I think the first three or four years of it were very quiet, partly because I think people were still fearful of the internet, I mean it wasn’t that long ago that people were still worried about the safety of buying a book on Amazon. In 2007/8/9 they were still thinking, is that dangerous to be buying a book on Amazon, it much safer to buy on the High Street. Obviously, that seems an absurd concept now, everyone’s very comfortable with doing all their banking online, doing all their e-commerce online and I think that peer-to-peer lending is just a reflection of that actually.
Elliot Moss
And how much did you lend last year, go on, give me the number, the big number!
Rhydian Lewis
Last year, in 2014, three hundred million.
Elliot Moss
That’s a lot of money isn’t it? I mean that is, I know it’s about a two point three billion pound market roughly, but that’s a significant slug of that. Let me cast back, I want to go back a little bit, obviously – you’re a Modern Languages graduate from Bristol University, a fine place indeed! How did you end up here? You’re an entrepreneur, you were in the proper world of banking, I mean, you know, the serious world of banking, where the names have been around for hundreds of years. Surely your family when you said I’m going to set my own business up, they thought you were crazy, Rhydian!
Rhydian Lewis
No, they did, they did and I was so determined to do it that I think there was no way round it. They were not going persuade me otherwise. How did I come to it? I fiddled around a little bit after University with various jobs then I did move into the world of banking and I went to work for a bank that is 160 years old and is a very storied name, but it is a…it’s an advisor, it doesn’t actually deal with, it advises big companies, it’s not a consumer business in anyway it doesn’t have a banking licence. But during that period I got to understand how banks work in excruciating detail, and I always had in the back of my mind the idea of whether the peer-to-peer revolution had gone on at other industries and it’s not just in lending, you know, you see it in Ebay, Ebay is a peer-to-peer business. There’s a company called Betfair which has changed betting, which is a peer-to-peer exchange. So I’d always wondered, and actually first of all back in 2002, whether it could ever be applied to money, and at that time I wrote a couple of pages on the concept of whether you could use an Ebay like model for money. Unfortunately I didn’t keep those two pages, because I’d love to look back at them now and I should think they are all incredibly naïve, and it took me effectively eight years to get round to doing it, but the kind of catalyst was obviously the banking crisis, where it was just evident to anybody who understood what was going on, that that is a model that is still under question and you know, are they the right way to inter-mediate money, and then also you obviously have for the first time, a major shake-up of consumer trust in the old establishment, so it seemed a fantastic opportunity to put forward something new, because people are going to be more open to adopting that. I still think it’s actually early days for what we do you know, it takes time to build trust but it’s certainly heading in the right direction.
Elliot Moss
Find out where that direction is going and how actually Rhydian Lewis, my Business Shaper, has mapped it out over the last few years. Time for some music, this is I Mean You from Joey Alexander, the eleven year old piano sensation recently signed, for those of you who would like to know, to Motema Records.
That was the extraordinary Joey Alexander, eleven years old, yes eleven, with I Mean You. Rhydian Lewis is my Business Shaper. Rhydian, we’ve been talking about where you got the idea from and it was indeed a confluence of things as you said, the excruciating detail of looking at the banking world, the failure of the financial system, or the pseudo-collapse of it, the rise of technology and your own sense of, and this is the bit I want to explore, the way you could actually make something happen. Why you? Because other people would have had the same thoughts, but not everyone else went on to set up their own business. You don’t look like the obvious sort of entrepreneurial type in the sense that, you know, you went to University, you did a proper Degree, you went and worked for these big 160 year old companies and things…what drove you to go ‘I’m gonna do that?’
Rhydian Lewis
I think it’s interesting, the subject of entrepreneurism, because I think there are some people who are born entrepreneurs and then they will turn their hand to anything and they tend to be the serial entrepreneurs, you set one thing up and then go on to another and so forth, and then I think there are some people who just see a big opportunity and have the guts to go for it and know enough about it to be absolutely convinced it’s going to work. So I would class myself as somebody in the latter camp, I’m not necessarily someone who would have gone and set up a game-changing restaurant or something like that. I don’t know, maybe actually after this, you know, that there might be another escapade but I…
Elliot Moss
Well I was going to say, the thing is, it’s probably addictive isn’t it, a little a bit, because I imagine if you cast your mind back to as you set up, the lunacy of that I imagine from a funding perspective, from an operations perspective, from an is it going to work, from a compliance – all the things that you were thinking about, did you at any point go, ‘look I’ve got the guts, I’ve done it, I’ve got the idea, I know it’s going to work, I believe’, and I think belief is critical as you…
Rhydian Lewis
Absolutely critical.
Elliot Moss
But did you ever think, ‘ah, let me off?’
Rhydian Lewis
No, I think it’s interesting to look back at one’s state of mind actually, and it’s kind of unrecognisable, I mean in that, the sheer bloody mindedness and determination, and you know you have to believe because it’s all about getting other people to believe because then you get that kind of ripple effect and you know that if you falter for one moment, then you can be sure that everyone else will.
Elliot Moss
But you faltered, you must have, we’re all human, when you’re on your own or talking to your other half, you know, your other, loved and closest and nearest and dearest, did you falter and go ‘I’m not sure’ or you even to them private going ‘It’s going to be ok.’
Rhydian Lewis
Yeah, no, there have been periods of serious doubt, there’s no doubt about it, and real wobbles, but, never…that’s inevitable, and you know, you have good days and bad days. I would be lying if I said that I didn’t think there was an over-arching kind of belief that it made enough sense and that there was enough support with regards to kind of, social change as much as anything else as well as you know, the change in technology and the banking crisis and so forth, that kept pushing me forward, but there’s absolutely been periods when you just think ‘this is not going to work’, or ‘What have I got into here?’ but overall there was always a strong sense that it made sense what we were doing.
Elliot Moss
More coming up from my steely Business Shaper Rhydian Lewis, he’s the co-founder and CO of Rate Setter. Latest travel in a couple of minutes and before that some words of wisdom from our programme partners Mishcon De Reya for your business.
You’re listening to Jazz Shapers with me, Elliot Moss, every Saturday morning. I’m very lucky because I get to meet someone who has shaped and is shaping the world of business, a Business Shaper. If you’ve missed any of the 175 plus or so of the last four years, I believe you can catch quite a lot of them in iTunes, put in the words ‘jazz’ and ‘shapers’. If you’re on a British Airways flight in the future then you can go over there and have a look at the latest one who we will be featuring, and CityAM.com is another destination for you. Rhydian Lewis is my Business Shaper today, he’s the co-founder of Rate Setter, they are a ten million plus turnover business who lent over three hundred million pounds, that’s three hundred million pounds, to lots of people, peers, basically, people borrowing and people lending from each other, and he’s part of a revolution that’s happening right in front of our eyes in the world of finance. Rhydian, we’re talking about your steeliness and that sense of determination, and that, you know, of course everyone doubts but in reality you believed right the way through. Who do you think you’ve taken greatest stock from and the greatest source of advice and comfort from over these last few years as you’ve set up, is it the very closest people around you?
Rhydian Lewis
Yeah, well I actually think I’m very fortunate enough to have a co-founder and you can share a lot of the burden and you know, make better decisions by talking with each other, and you know, there are many times when we disagree on something but the kind of consensus seems to be arriving to the right decision, so I mean, he’s called Peter, he was a lawyer, so he came from a pretty traditional world as well and I admire him enormously because he is even braver than I was, because he had three young children at the time that we set up the business, which really was a brave decision. So, but having a co-founder I think is absolutely crucial and I have spoken to other people who have set up businesses that don’t have a co-founder and I think they envy that because it can be a lonely existence and you can doubt yourself, but if there is somebody…
Elliot Moss
And were you friends before, or did you become friends through work, because sometimes people say I don’t work with friends or family, but how did that relationship evolve?
Rhydian Lewis
Yeah funnily enough, we were, well we were at school together and we didn’t know each other particularly well but that shared experience gave us mutual, you know, trust, a sense of trust, so it was a good combination I always say to him, of being, we trusted each other without being friends, there wasn’t a friendship to ruin or to get in the way or muddle things up, but there was kind of underlying trust and so it was quite a good combination I think.
Elliot Moss
And are your values, because obviously business is predicated on having a great idea, having the guts to go for it, but also being driven by a sense of principle and integrity, it all being well. Do you find those are very closely aligned with each other?
Rhydian Lewis
Yes. I think that it’s completely unspoken and that was just pot luck to find somebody that…where our instincts are, you know, if there’s a decision to do with a…particularly on the sort of customer side, we just seem to have the same instincts as to what the right decision is, so that’s good fortune.
Elliot Moss
And do you ever disagree on any fundamentals and if so how do you resolve those?
Rhydian Lewis
We have a …
Elliot Moss
…he’s now thinking ‘how honest should I be?’
Rhydian Lewis
….no exactly…
Elliot Moss
I can see him whirring around, what will Rhydian Lewis reveal right now?
Rhydian Lewis
…Yeah. No, you know, well maybe there’s a time for, one has to pull rank maybe and say, that, you know, it’s important to…yeah there are certain decisions where I say…I will make them but never without kind of consulting and…
Elliot Moss
It’s okay to disagree, you can say, ‘listen I hear what you’re saying on this one, I think we’re going to do that’, and that happens, is what you’re saying?
Rhydian Lewis
…yeah, and I think everyone finds that incredibly helpful because there’s nothing worse than indecision in a business, it saps people’s sort of confidence and enthusiasm, is when things go round and round in circles, I think that’s what happens in a lot of big businesses is that you just don’t get decisions made, so everybody appreciates having quite a clear decision maker and at this stage that’s quite helpful, and so we seem to have managed to navigate that without falling out and it works well.
Elliot Moss
You see, they can be friends, and they are now, not just trust but friendship too. Time for some music, this is Miles Davis with Time After Time.
That was Miles Davis with Time After Time. I’ve been talking to Rhydian Lewis, he’s my Business Shaper today, and he’s the co-founder of Rate Setter. As you look forward now, you’ve got this business that’s sort of working, you’re growing exponentially, can a business like yours, and I think you’ve grown like 177% in the last twelve months…can you do that again? I mean, is there, is because of technology, because people are understanding how to do it, because there’s less fear, because the banks don’t seem to have arrested their own decline - is that kind of growth sustainable?
Rhydian Lewis
Well obviously it gets harder but I think that the outlook for peer-to-peer lending is very good because I think we’re still a rounding error in the system despite all the excitement around peer-to-peer lending and it’s getting a lot of attention, as it deserves, because it is probably the biggest change in lending and borrowing for hundreds of years, so it’s very exciting. But we’re still pretty small in the overall picture, there’s a huge growth to go for, and so I think that’s entirely possible that it can double every year. It’s actually… the key thing is to manage that well and people, you know, it’s a sensitive industry, there’s no doubt about it, and the key is to invest properly and get the right people and the right processes. We’re regulated now, so we get, we have somebody, to sort of oversee the industry which is very helpful I think, and gives people more confidence that it’s been done well, but I think the growth outlook is very very good.
Elliot Moss
I believe that not one investor has lost their money, is that right, that’s kind of been your, the thing that you say, is that right?
Rhydian Lewis
That’s right, I mean we weren’t the first peer-to-peer lender but we came into the market with something completely different and that’s what sort of gave us a right to exist if you like, is that we didn’t just copy, we actually innovated ourselves. So when we launched in 2010, we launched with something called a provision fund which is just a sort of central pot of money, funded by all the borrowers that’s there to protect the investors and so it effectively means that the investors, their risk is spread over the whole loan book and there is a buffer and what it’s meant is that we’ve been going five years and lent nearly seven hundred million pounds, and investors have received every single penny.
Elliot Moss
Now that’s brilliant, and that’s kind of almost your entry level for you, because you’ve redefined what the market should be doing.
Rhydian Lewis
Correct.
Elliot Moss
You look forward now, the next five, ten years, creating a vision based on what you think may or may not happen, either in the banking world or the technology world, that’s tricky. How do you find a space for you and Peter to go, ‘Right, what might it look like?’ or do you not work like that?
Rhydian Lewis
No, I think we’re definitely looking…that’s the next stage, so the first stage is just to get up and running and you know, you’re a start-up, and you need to keep your head above water and get enough trust in your system and reach a level of structure that the day-to-day works and I think we’ve reached that, and… but the next stage is how do we keep ahead of any new trends or how do we actually really disrupt and scale traditional systems. And for that, myself and others need to spend more time thinking as opposed to doing and we’re going through that process right now, which is just to delegate, get a good trust in people, better people than us at certain areas, and give them all the responsibility, allowing you to think about the strategy, because it’s not going to be one-way traffic, I mean we are trying to disrupt the most powerful and the biggest industry there is and luckily we have a lot of support from Government, who recognise that what we’re doing is a force for good and they’re desperately keen to introduce competition in banking. Something that’s just been woeful in the last twenty years or so. So there’s a lot of support for what we do, but we don’t underestimate the challenge of breaking through, beyond where we are today and that’s going to require, you know, careful strategy.
Elliot Moss
Final chat coming up with Rhydian, plus we’re going to play a track from Jamie Cullum and Gregory Porter, that’s after the latest traffic and travel here on Jazz FM.
That was Jamie Cullum and Gregory Porter with Don’t Let Me Be Misunderstood, big band sound, how good was that? Rhydian Lewis has been my Business Shaper just for a few more precious minutes and we’ve talked about all sorts of things, we touched on the future, and you’re saying now is the time for strategy to kick in and for other people to begin, as you humbly said, I’m sure it’s partly true but not completely, that better people can do the jobs that you’ve been doing. Are you fearful that you’re going to miss the hurley-burley of this crazy thing called the start-up, because you are moving to phase two aren’t you? Are you kind of going ‘well I want it, I need it’, but there’s a guilt of not being heavily involved and stressed in the way that you have been in probably in the last few years?
Rhydian Lewis
Yeah, I think it’s important to get over that, I mean, because otherwise you can tinker in other people’s job the whole time and it just slightly undermines their sense of authority.
Elliot Moss
How do you stop yourself tinkering?
Rhydian Lewis
I dunno, that’s a good question, you have to lock your door. No, you have to consciously think about it and go, you know ‘you can’t’, it’s very important to step away from things and…
Elliot Moss
But it’s not being done the way you want it to be done, you want to fiddle, what do you say to yourself, ‘Rhydian no, leave it, I’ve got more important things to do’.
Rhydian Lewis
Well, one thing I’ve really learnt is not to…you know, the expression ‘perfect can’t be the enemy of good’, you know? There are a few things that we need to do absolutely but fantastically, but most businesses are… have to compromise on certain things, and if it’s good and it’s working that’s fine, and you know, I think a lot of entrepreneurs are perfectionists about their product on every little element, and I think I’m a perfectionist in certain areas, and certain areas I realise it’s just as long as it works, that’s fine, and otherwise I think you can over-engineer a lot of things, and I think another pitfall is that we’re trying to change something very dramatic in the world you know, of lending and borrowing, but we mustn’t kid ourselves that we need to change other processes. So what I’ve seen in a lot of start-ups is that they want to do everything different, not just their kind of breakthrough product being different, but they also want to do recruitment in a different way or they want to do their management style in a different way, or whatever, everything has to be unconventional, and I think that’s a… is terrific in some respects but I do think you’ve got to focus on your core strengths basically and not worry about if certain things are done in quite a normal way.
Elliot Moss
Now, you mentioned Government, and the support obviously is there because the Government is competition, the Government wants to have a more mixed economy and all the other reasons why. What’s it like working… I imagine you work closely with its various members, what’s it been like for you as an experience?
Rhydian Lewis
Well, they… we initially went to them in 2011 and it was a kind of traumatic age, wasn’t it, after the crisis, there was a real sense of kind of, you know, where are things going so it was quite a good time to be talking to Government because we were coming with a solution, when they were just surrounded by problems. But they first… they found it very confusing initially because why would a bunch of sort of thrusting entrepreneurs be knocking on their door, talking about a sensible regulatory framework for this industry, and I think their initial response was no. I don’t think they had a regulating instinct for the coalition, you know, just putting in a regulation for the hell of it. So their initial response was no and then we explained how and they thought it was too small, too niche, too small, too much of a headache to think about a regulatory framework for peer-to-peer lending and we explained how we did think it would become quite relevant and quite big quite quickly, and also that it was a true… this was competition, this really had a… if it was well nurtured, this could be a true competition in banking and it could get funds flowing to individuals and small businesses and so this really interested Government and I think that the penny dropped and they said, ‘Yeah I think it makes absolute sense to try and get a good regulatory framework around peer-to- peer lending’ and that’s what going on at the moment.
Elliot Moss
Well, listen, I appreciate you being my revolutionary today, you’ve been great, and I’d love to know just before I let you go, what your song choice is and why you’ve chosen it.
Rhydian Lewis
Yes, it’s Sinner Man by Nina Simone, and I’ve chosen that because I enjoy listening to loads of songs by Sinner Man, err by Nina Simone and I thought that this one was, I like the mood and the sense of sort of impending danger in the song and I don’t know, it was an instinctive choice, I didn’t think about it an enormous amount, which I think is probably the way to go about things like that.
Elliot Moss
Here it is just for you, thank you so much.
That was Sinner Man from Nina Simone, the song choice of my Business Shaper today, Rhydian Lewis - a clear-headed individual, absolute clarity about what the problem was and what the opportunity was and he’s gone and approached it brilliantly. Real guts, you have to have determination to believe that what you’re going to do is going to work and boy has he had that. And someone who understands now at the phase that they are at in their business that there are better people than him to do some of those day-to-day management jobs. Really brilliant stuff. Do join me again, same time same place, that’s next Saturday morning here on Jazz FM at 9.00am. In the meantime, stay with us because coming up next, it’s Nigel Williams.