Folk2Folk launches a p2p lending services for interest-only loans that are secured by first mortgages. A borrower may not use the home he lives in as security, the services aims at residential buy to let, holiday homes, commercial or industrial premises, farms and agricultural land. The loan amount can be 60% or less than the value of the security.
To start lending a minimum investment of 25,000 GBP is required. Quoted interest rates for last week range from 6 to 9%. Borrowers pay a 2% fee. Fixed term loans as well as variable length loans are possible. The concept of a p2p mortgage may sound complex, but Folk2Folk says they aim to complete the lending in 8 to 10 calender days from the time the borrower applied.
There is a very detailed set of rules describing all eventualities.
Societyone, an Australian p2p lending service, presented a mobile app at Finovate Asia. Previous apps offered by p2p lending services either optimised the display of website data for the mobile interface or offered basic bidding functions for investors. This one goes far beyond that. It promises the borrower a loan application and funding within 3 minutes.
To do this Societyone implemented the following steps:
Only a few fields are required in the application (that is not a revolution but rather common sense and already used in many online application processes for loans)
The borrower allows the app to retrieve transaction data from the past 3 months directly and automatically from the bank account he links
The borrower allows the app to access his credit history data
Like other p2p lending services Societyone offers lenders an automatic bidding feature that bids directly if a new loan request matches the desired parameters
From the information in 2. and 3. Societyone calculates the maximum loan amount which the borrower has capacity to repay. From the information in 4. Societyone can determine which maximum loan amount could be instantly filled by existing automatic bids. Both information combined result in a maximum approved loan amount which is displayed to the borrower
The borrower now enters the loan amount he wants and immediately Societyone displays which lenders fund his loan (in the example in the video 12 persons fund the loan)
If the borrower confirms the loan applications the money is transferred to his bank account.
If you look further than whether there is a need by consumers to apply for loans from mobile devices rather than PCs there are a some very interesting key take-aways from this App. Continue reading →
At German Smava.de the volume of newly originated p2p loans continues to fall and reached a record low of approx. 700K Euro in January. That’s only about one-third of the volume Smava funded on its peak-time in mid-2010. Smava changed its business model in spring 2012, since then focusing on brokering bank loans and the aim to rely on the commissions paid by the banks as main source of revenue rather than the p2p lending transaction fees. There are no public figures available on the volume of bank loans brokered by Smava. I do wonder if they will reach break even by pursuing that model as competition in that market is fierce.
Prosper has raised 20 million US$ from Sequoia Capital. Prosper also announced it has appointed Stephan Vermut as Chief Executive Officer and member of the board of directors. Prospers management team is undergoing change after several persons left in December (e.g. David Silverman, Larry Cheng, Jeffrey Jacobs). The SEC recently approved Prospers new ProsperFunding LLC, a legal structure set up to offer bankruptcy protection for investors in the event of an bankruptcy of Prosper Marketplace Inc.
Ratesetter yesterday introduced a new sellout function that allows lenders to exit their contracts early.
How does it work? Lenders request the amount they wish to have returned to their Ratesetter Holding Account. Ratesetter works out whether this is possible and calculates the cost of doing so. The Lender confirms their wish to go ahead and then Ratesetter processes all the necessary assignments. The Borrower will remain entirely unaffected by this.
What are the costs involved in exiting early? Ratesetter charges a fee made up of three elements: •   The exiting Lender’s interest is reduced to the level they would have received based on the length of time they have ended up lending for. This is based on the Market Rate and products available on the day they originally lent. So, for example, if the lender had lent into the 5 Year Income market nine months ago and choose to exit now, the lender would only receive the interest the lender would have got from lending in the Monthly Access market for that period of time; if the lender had lent 13 months ago the lender would only receive what the lender would have got from lending in the 1 Year Bond market; if the lender had lent 37 months ago, the lender would only receive what the lender would have got from lending in the 3 Year Income market. With regard to an early exit from the Monthly Access market, the cost is that the lender forgoes all the interest for that month. The purpose of this charge is to ensure there is no incentive to lend for five years if the intention is only to lend for two years; •   A fixed charge for administering the exit which is 0.25% of the oustanding contract amount (currently waived for existing Lenders for a period of one month) •   An “Assignment Fee†to ensure that if the interest rate in the relevant Ratesetter market has gone up the exiting Lender can still exit. This will calculate and deduct from the exiting Lender the amount required to be added to the interest rate to ensure the incoming Lender gets what they expect. In circumstances where interest rates are the same or lower there will be no Assignment Fee.
Can the lender choose which individual contracts I sell? No, the contracts will be automatically selected, starting with the most recent contracts.
Where does the incoming Lender come from? From the same market as the exiting Lender.
Are there any circumstance when the lender would be unable to exit early? It is Ratesetter’s intention that the lender will be able to exit all contracts at any time. However, it may not always be possible to do so: •   If there are insufficient funds in the relevant market. This will be determined by a “buffer†of available funds (of which the amount in each market will be periodically reviewed) designed to keep the smooth running of the Ratesetter markets. •   If an individual contract is less than £10, the current minimum reinvesment size.
Offering a secondary market (regardless in which form) is becoming a basic functionality that lenders expect as a core feature from a p2p lending service. The 3 major British services Zopa, Ratesetter, Fundingcircle as well as American Lending Club and Prosper now offer the ability to sell loans. In other countries regulation makes the setup of a secondary market difficult.
Roughly a year ago I came across an idea that sounded extreme. There was a crowdfunding pitch for a startup that had no team and no idea. What? Well the idea was that the startup once founded would use the ‘Design Thinking’ method to develop the idea and the business model in the first months after funding and company foundation. The pitch was for 100,000 CHF. It had a strange appeal to me, so I invested a small amount. The pitch did fully fun and 4 applicants – students of the university of St. Gallen, Switzerland – were recruited as founders and off they went. The founders are not paid a salary but compensated in shares for their work.
Soon the appropriately named ‘ Design Thinking Startup AG’ was incorporated.
One year of development
As investor I received nearly weekly updates newsletter-style on what the team was currently up to. Through 38 of these reports I was fascinated by successes, drawbacks, ideas and lots of work done. Initially the team sought idea and coaching, used the Design Thinking method to identify problems (needfinding) and did market research. Finally around week 11 one of the ideas substantiated into the idea that was developed.
In between there were events for investors and shareholder meetings approving the decisions proposed by the team.
Then a prototype was built, a development company contracted, the team moved office to Zurich and a second funding round was raised (again through crowdinvesting). During the last weeks the product was presented, tested and finalized in a closed beta.
