- Lenders can turn standing orders into portfolio plans. The interesting part is that lenders can share (publish) their portfolio plans on their member page and other lenders can use it for themselves.
- Bidding via API. This allows bidding to be delegated to third party applications. Much like the bid snipers and bidding agents it now becomes possible to entrust third party applications to invest money at Prosper. It remains to be seen how lenders will make use of this
- Referral award for new borrowers raised from 35 US$ to 50 US$. Example button below. If you use that and your loan is funded, I am paid 50 US$.
Today a new MyC4 release went online. The new version allows multiple standing orders which can be targeted by country, provider and/or industry of the borrower. There are several small improvements in usability, e.g. display of borrower APR.
MyC4 users have transfered 507,000 Euro in funds, but so far only 214,000 Euro of those have been loaned. Demand in loan opportunities is lagging behind investor's cash looking for investments. The majority of lenders (investors) still is Danish – MyC4 is located in Denmark, but the number of investors in other countries is rising.
So far I am satisfied with MyC4. I have invested in more than 50 active loans – true microloans – sometimes my share is as low 10 Euro – and so far everything is going smooth. Another 16 bids are on open listing opportunities.
Matt Flannery of Kiva.org describes in a blog post which obstacles Kiva has to overcome to make accounting not a too time consuming task for the local fireld partners (MFIs). With some MFIs having over thousand loans and slow internet connection Kiva needed to find a solution that saved time.
About a year ago, we realized that many of our Field Partners were having trouble doing so. The sheer number of page loads was making it prohibitively difficult for a Field Partner to register repayments on time, even when the actual borrower collections in the field were happening like clockwork. Thus, we introduced "exception-based" repayments. The idea, used widely in MFI accounting systems already, is to have regularly scheduled payment registered automatically in a system unless the loan officer marks an exception — an event signaling that something went wrong and the borrower did not pay the full amount. Since borrowers typically repay 95% (or so) of the time, loan officers only need to register something 5% of the time.
Kiva's first whack at exception based payments was very crude. The feature was written by me in late '06 in between blog entries and trying to keep the site up. Many of our Field Partners adopted the feature out of necessity and it saved them a lot of time. However, it was very difficult to mark an exception, so most of them never did. Thus, many of our Field Partners never mark exceptions and just repay all of their loans on time, even in the 5% case where the borrower defaults. This creates misleadingly high repayment stats on the site and we are working to correct that.
Kiva plans to have group loans. The post does not describe in detail, how group loans will work, but I am looking forward to examine this feature:
In addition to that, we are rolling out a number of features to further reduce the work required by our Field Partners and increase transparency. Group Loans will go live on the site this week. This will allow Field Partners to post up groups of up to 50 on the site as an individual loan application on the site. Group-lending is common practice in microfinance, but was not well supported by Kiva until now.
Also Kiva will change how currency exchange risks are handled:
we will be introducing local currency support for all of our Field Partners. This will allow the disbursement and repayment amounts on the site more closely mirror the actual accounting books of each MFI. This creates more transparency around financial flows. It also paves the way for a future reality where our partners will not need to bear currency risk. Hard currency lending has fallen out of favor in the microfinance world and we hope to soon be on the cutting edge of local currency lending.
- Auction: The model of Prosper seems much more straightforward to me then the auction model of MyC4. The possibility of bidding above the maximum interest rate as long as the weighted average interest is below it, gives it a major twist. Every lender on a loan ends up with a different interest rate while borrower nominal interest rate is the weighted average (mind-boggling, isn't it?). And the full transparency of all bids during bidding process is interesting.
- Usability, communication and transparency: The interface is designed for much interaction. Everywhere the user can post comments (to profiles, to blogs, to loans, to listings). And with a user added avatar on every comment, it is very personal. No anonymity since real names are used (not screen names). Anybody can view the loans other lenders are invested in. Users can add icons to their profile to show which motivation led them to MyC4 (be it profit, education, social lending, …)
- Defaults. So far none, but naturally it is much to early to judge. Hopefully MyC4 will have defaults as low as Kiva and prove that third world borrowers are more reliable.
There will be continued coverage about my experiences at MyC4.
- Minimum loan amount is now $500 (down from $1000)
- The automatic diversification mechanism LendingMatch can now be used with as little as $500. LendingMatch uses the $500 to build a portfolio of 25 different loans
- claims usability improvements on referral program, that pays $5 for successful invitations
- borrowers in Arizona can use Lendingclub
Yesterday Prosper announced major improvements to the site and the customer service. Biggest news is that Prosper will manage customer support inhouse starting end of February (so far it was outsourced to a provider in the philippines). Credit and employment data on borrowers for new listings is now much more detailed. Due to bad experiences borrowers with a HR credit score below 520 and NC borrowers can no longer use Prosper.
Prosper raised fees for new listings and increased group leader rewards for AA to D loans while eliminating group leader rewards for E and HR loans.
Lenders will be glad to hear that Prosper now offers a Identity Theft Guarantee on all funded loans.
Read about the changes in detail (quoted from a Prosper announcement):
Prosper’s First Anniversary
First of all, let’s take a moment to celebrate. On Feb 5, Prosper turned one year old. In our first year, exactly 7048 loans with a value of $35,166,711 were made on the Prosper marketplace. If you’re coming from the perspective of a massive bank, $35M might not seem like a lot. Considering that all of that money came out of actual people’s pockets, it’s quite amazing.
Customer Support Improvements
We are in the process of significantly improving the support we provide our community. We have not met your standards, or our own, for customer support. While our service levels will not be transformed overnight, our hope is that you have already seen an improvement in our response time.
The biggest change is our plan to manage customer support ourselves rather than rely on an overseas provider. By the end of February, all customer support will be handled in our San Francisco office. Concurrently, we are making changes that will allow us to speed up key processes, such as identity verification and the loan review many borrowers go through once their loan is funded.
As a result you will experience speedier and more professional answers to your inquiries.
Friends and Endorsements
Back in August, we started allowing group leaders to write an endorsement for their group members. Since then, a group of Stanford MBA students did a regression analysis of lender bidding, and found that a group leader endorsement was the single biggest contributor to increased bidding on a borrower’s listing. A GL endorsement turned out to be twice as valuable as improving by one credit grade. Said another way, a GL endorsement is worth two credit grades.
To encourage and expand this kind of activity, we’re introducing the concept of Prosper “friends”, who can leave an endorsement, just like a group leader. So very soon you’ll start seeing borrowers have multiple endorsements, from GLs and also from their friends. Also, importantly, if a friend places a bid on that borrower’s listing, we’ll highlight that bid as the truly strong endorsement that it is.
In addition to helping borrowers get funded, a borrower’s friends will also be notified if the borrower goes 15d late. We hope that this virtuous cycle of endorsement and accountability will improve delinquency rates among borrowers.
Invite your friends to Prosper now:
Additional Credit and Employment Data
In response to requests from lenders, we are making more Experian credit data available. Now lenders will have six additional credit data fields and four new self-reported employment status fields to review. This new data will help lenders further evaluate a borrower’s loan request.
New credit fields:
- Amount delinquent: Total past due amounts owed by the borrower. This includes any charge-offs or other unpaid derogatory balances. This includes amounts included in Chapter 13 bankruptcies, but excludes all other bankruptcies.
- Public records in last 12m: The number of negative public records on the borrower’s credit report over the last 12 months. Negative public records include, among other things, bankruptcies, liens, and judgments.
- Current credit lines: The number of credit lines presently current that have been reported within the last 6 months. These lines can be open or closed.
- Open credit lines: The number of credit lines presently open that have been reported within the last 6 months.
- Revolving credit balance: Sum of outstanding balance on all open revolving credit lines reported within the last 6 months.
- Bankcard utilization: Overall balance/limit ratio on open bankcards reported within the last 6 months. Calculation: (sum of total balances) / (sum of total limits)
New employment fields:
- Employment status: The borrower’s employment status. Options include: full-time, part-time, self-employed, retired, and not employed.
- Length of status: The number of months and years that the borrower has had the stated employment status. If employed or self-employed, since when has the borrower held their current job or owned their current business? If retired or not employed, since when have they had this status?
- Occupation: The borrower’s current occupation.
- Income range: The borrower’s current income range, in $25,000 increments, or over $100,000. A borrower may also decline to state their income range, in which case “Not displayed” will be shown.
Also, (and this is my favorite feature), you won’t have to keep clicking that little “plus” button next to the credit grade to expand the additional credit data. If you like it expanded, it will always be expanded. If you like it collapsed, it will do that, too.
Learn more about credit data:
Questions & Answers
Are you tired of going to RML to see if anyone has asked a borrower substantive questions about his or her listing? Now you can ask a borrower a question directly from the listing page, and if the borrower chooses to answer it, they can also choose to publish it on the listing page so that everyone can see it.
Learn more about Q&A:
We have built a new tool that will help lenders understand how different characteristics contribute to a portfolio’s ROI (Return On Investment). Located on the Marketplace Performance page, this tool will enable lenders to create projections of expected returns based on the actual performance of loans to-date.
See the marketplace performance page now:
Credit Grade Adjustments
Borrowers with an Experian Scorex PLUS(SM) credit score below 520, and borrowers with an NC (No Credit) rating, will no longer be able to borrow on Prosper given their low appeal to lenders relative to the costs and resources required to process their listings.
The underlying Experian Scorex PLUS credit score range for E and remaining HR (High Risk) borrowers will change slightly to be consistent with the spread for other credit grades. There will be no credit grade changes for borrowers with an AA, A, B, C or D credit grade. The credit grade spectrum is shown below:
Borrower & Lender Fee Changes
Not surprisingly, it costs more to list and service loans from borrowers with lower credit grades. To better align our fees with these costs, we are raising the closing fee for E and HR borrowers and the servicing fee for lenders on loans made to B, C, D, E and HR borrowers. The new fee structure will only apply to listings created after February 11, 2007.
New borrower closing fees:
AA – A: 1%
B – D: 1%
E- HR: 2%
New lender servicing fees:
AA – A: 0.5%
B – D: 1.0%
E- HR: 1.0%
Failed payment fees also will change from $5 for each incident to $15 per monthly billing period (subject to state limits).
See the new fee structure:
Group Leader Reward Changes
We’re making a significant increase to the revenue that group leaders can earn. In recognition of the effort they put forth to grow and manage their groups, group leader match rewards will change from a flat $10 or $20 to .5% of a funded AA, A, B, C or D loan from a new borrower to Prosper. There will be no match rewards for loans made to E or HR borrowers.
This match reward change should drive a dramatic increase in new high quality listings. A group leader can now earn four times what they could earn before for an average listing and twelve times their previous return for a $25K loan.
Learn more about group leader rewards:
100% Identity Theft Guarantee
Prosper will now offer a “100% Identity Theft Guarantee” on all funded loans. Although we have a stringent process in place to prevent fraudulent persons from using stolen identities to acquire loans, there are still limited times when identity theft occurs. In the future, if a loan goes into default because the borrower is a victim of identity theft, we will repurchase the loan from the lenders for the unpaid principal amount.
Learn more about 100% Identity Theft Guarantee:
Collection Agency Shuffle
As of today, we are removing NCI as a collection agency, and replacing them with Firstsource, LLC. All lenders who had NCI chosen as their default collection agency will now have Firstsource set as their default agency. Additionally, all loans in collections with NCI have been transferred to Firstsource.
Learn more about Firstsource here:
What’s new on Prosper?
There’s a new page under the “Home” tab called “What’s new?”, where you can see what the biggest changes from each big site update has been, all the way back to the original site launch on Feb 5, 2006.
See what’s new: