In early summer 2010 Yes-secure.com launched the second p2p lending service active in the UK. Dr. Chandra Patni, CEO of Yes-secure answers my questions.
P2P-Banking.com: Dr. Chandra Patni, please tell us about the background of the Yes-secure management team and what lead to entering the p2p lending market?
Dr. Chandra Patni: I came up with the business opportunity in 2008, having reviewed Zopa I felt that a social networking based person to person lending marketplace site could become a successful alternative to Zopa. I realised there were opportunities to build and complement the social lending market. Consumers need choice. YES-secure.com allows person-to-person lending alongside social networking as people want to know who they are lending to.
P2P-Banking.com: How is Yes-secure funded?
Dr. Chandra Patni: YES-secure.com is funded by private investors alongside the directors of the company.
P2P-Banking.com: What benefits does Yes-secure offer to lenders and borrowers?
Dr. Chandra Patni: Lenders: YES-secure.com provides UK savers and investors a new way to beat inflation and earn better returns than by investing their savings in fixed deposits in a bank. Along with the introductory offers and waivers, there are a wide range of markets (A*- E) allowing lenders to manipulate their investment across various markets getting them high, assured and steady returns. Debit card verification upon registration, stringent underwriting procedures and assigning markets in keeping with the borrowers’ creditworthiness make YES-secure a safe investment destination. Additionally, YES-secure offers a secure means of social network based lending and borrowing implying lower default rates and higher returns for lenders.
Borrowers: Borrowers can get competitive rates from real people. They simply describe how much they are looking to borrow, over what period, and the maximum interest rate they are willing to pay. Then they can simply sit back and watch people bidding to lend to them. Once they find a rate they like, they can accept it and get the money paid straight into their bank account. More traditional methods of personal loan approval rarely take personal information (such as connections, personality, and general circumstances) into account and are approved or declined based solely on credit history and financial circumstances. YES-secure combine both the important credit background as well as pertinent personal information on each borrower.
P2P-Banking.com: How important are ‘connections’ to improve the funding chances of loan requests? Could you please explain the ‘Reliabilty score’.
Dr. Chandra Patni: Members can create connections with each other much like other social networking websites in order to get better rates for borrowing and higher returns for lenders. Through YES-secure, members can create connections with each other, trust can be built up and this is likely to result in a lower default rate on repayments. Additionally, receiving a loan from friends or family can be a great option for all concerned if it can be mediated by a neutral third party. Similarly, peer-review and peer-groups can go a long way in enhancing the chances of a low cost loan to high-risk borrowers. Please see the following press release for further information on how members can utilise their connections: https://www.yes-secure.com/PR12.jsp.
Borrowers can enhance their appeal as a worthy borrower by building up their profile with suitable connections who can assist them in transacting their financial activities. YES-secure’s Reliability Score represents a member’s dependability, particularly in terms of their social standing, to provide a more complete picture of the prospective borrowers. Lenders who have a personal association with a borrower can recommend them to the rest of their group thereby taking them that much closer to the desired loan. In short, we plan to bring the benefits of borrowers’ social standing to lenders by creating and taking Reliability Score into account.
The Reliability Score uses an algorithm which takes into account certain information about the member including: number of identity verified friends, number of credit checked friends, friends who are participating as borrowers and friends who are participating as lenders. The Reliability Score is represented by a number of stars from 1 to 5: the most reliable member will have a reliability score of 1 and hence will be represented by 5 stars.
P2P-Banking.com: Did you orientate yourself to elements of the Zopa model when you created Yes-secure?
Dr. Chandra Patni: Like the banking sector, consumers need choice with regards to social lending . YES-secure.com allows person-to-person lending alongside social networking, as people want to know who they are lending to. There is enough room in the market and it has taken approximately three years to develop the YES-secure.com platform. Zopa states that it welcomes other players in the market as overall it encourages interest in the social lending market.
P2P-Banking.com: How does Yes-secure assign credit grades to borrowers and how confident are you that they adequately signal the risk of default to prospective lenders?
Dr. Chandra Patni: YES-secure.com uses a third party credit referencing agency, CallCredit, which was recently awarded the no.1 FastTrack Company in Sunday Times. People are rated by a grading from A* to E based on the information CallCredit gives. Zopa turns away borrowers below C grading. Hence YES-secure.com has a more extensive lending market incorporating D or E grading and empowers lenders to make value judgements whether to lend to them.
One of the prime risk mitigation strategy is for lenders to diversify their lending portfolio such that if one borrower defaults, the loss is minimised as the loss is shared among 50 to 100 lenders. Borrowing is over fixed periods of 12 months to 60 months and borrowers can pay earlier if they wish. Lenders can lend up to £25,000. The final step in the underwriting function with YES-secure is that if we are uncertain about the borrower, we will not underwrite it. Lending interest rates are offered in eBay-style market bidding- if a lender asks for an interest rate which is too high, they will get outbid, hence interest rates are consumer regulated. Interest rates are normally between 8 and 15%, which is significantly better than the banks.
P2P-Banking.com: At one point you used Prosper Data to illustrate estimated losses. Do you think Yes secure will develop as good as Prosper?
Dr. Chandra Patni: We have based our business predictions not on the success of Prosper but the fast growth that social lending has experienced in the UK. We think that social lending will grow to the extent it has done in the US and we expect that YES-secure.com will play a role in this growth.
P2P-Banking.com: How satisfied are you with the launch and the business so far?
Dr. Chandra Patni: We are delighted with our launch and business to date, we have disbursed twenty three loans with all due repayments received promptly and in full, a happy situation after two months of business. Over twenty percent of loan requests are being efficaciously converted to funded loans. With funded loans totalling over seventy thousand pounds to a wide range of borrowers from markets A* to D and offered rates by actual lenders showing high returns with no defaults to date, YES-secure.com has had a successful beginning.
P2P-Banking.com: What portion of the funded loans did Yes-secure or employees fund?
Dr. Chandra Patni: YES-secure.com have funded around 50% of the loans disbursed currently in order to encourage lending.
P2P-Banking.com: Which marketing methods do you use to win new borrowers and lenders? Which have worked best so far?
Dr. Chandra Patni: We have launched many exciting promotions. […]
P2P-Banking.com: There was a discussion whether Yes-secure complies to the OFT guidance on how to calculate APR. Has this issue been resolved?
Dr. Chandra Patni: YES-secure.com complies to the OFT guidance with regards to both calculating APR and showing APR upon acceptance by the borrower.
P2P-Banking.com: How satisfied are you with user interaction in the forum Yes-secure maintains? Did you delete lender posts on several occasions?
Dr. Chandra Patni: Lately, our discussion forum has been extremely active, we seem to have aroused interest, excitement, support and criticism in equal measures. We welcome it all. We have the good fortune of getting sound feedback from very seasoned lenders and borrowers. What is important in the whole process is the constant engagement between us and our members; it can only lead to improvement in YES-secure.
P2P-Banking.com: Where do you see Yes-Secure in 3 years? Is P2P Lending a threat to banks?
Dr. Chandra Patni: We believe that social lending will become quite a significant share of overall lending. Gartner has recently commented that P2P lending will increase to $5 billion of loans by 2013, highlighting the future potential of social lending. This is an ambitious prediction and we haven’t based our business predictions on these figures but instead on the fast growth social lending has experienced in the UK.
Thank you for the interview.