US

Do Your Friends Determine If You Are Creditworthy?

wiseclerk 4 Comments

A new US patent filed claims that may be a good idea! The patent application “System and method for assessing credit risk in an on-line lending environment” describes a risk assessment method, where the first level links on a social network would be checked for a borrower. It aims to derive insights from looking at the age and “activity” of these first level contacts.

Does What Your Friends Say About You Determine If You Are Creditworthy?

In a step further the method suggests to “invite linked users to provide a personal endorsement of the borrowing party; sending an endorsement invitation to identified users; and receiving endorsements from the identified users, the endorsement providing a rating of the user trustworthiness based on a numerical scale; determining and aggregate endorsement score from received endorsement which is included in the assessment score”

Assessment score to be used as one of several criteria

The patent filed by Canadian company Neobanx Technologies, Inc was previously already filed in Canada. Inventors Ronald N. Ingram, Dylan Littlewood and Aston Lau describe the whole process with assessment score and endorsement score being only 2 of multiple elements that are used to assess the risk.

The potential problems with using data from social networks for the purpose of risk assessment in p2p lending were already described in detail in the article: “For Debate: Can Data from Social Networks be Used to Reduce Risks in P2P Lending“.  I still think that social network data could be used to some degree as additional data for lenders – but not to the degree this patent seems to imply.

It would be most interesting to see this implemented and monitor how it works out.

What is your opinion, dear reader?

VISA P2P Payments Introduced in US

wiseclerk

Today VISA introduced p2p personal payments in the US market. VISA partnered with CashEdge and Fiserv which will incorporate the new service to their platforms Popmoney and Zashpay.

The service allows to make payments directly to the recipients VISA account.

The new VISA person-to-person payment service was launched first with selected partners in Europe in February.

VISA seeks to capture market share for online payments from Paypal.

State of Selected P2P Lending Companies

wiseclerk

More than 2 years have passed, since P2P-Banking.com published the first overview table of p2p lending companies. At that time the focus was to create a comprehensive list and to get a perspective on the loan volumes.

Today I want to look at a smaller selection of p2p lending companies and do a rating on more factors than just loan volume. While I describe below what factors led to my rating, please note that the rating represents my personal opinion.

The table lists the companies in alphabetical order and gives:

New loan volume per month

This amount is in most cases retrieved from the last month(s) figures from the company websites (if they have statistic sections), and then converted into US$ at today’s currency exchange rates. In other cases it is a rough estimate by me based on volume figures published in media in the recent past. For CommunityLend I failed to find a per month figure (the total figure from launch to mid-February is here).

Brand/Press

Extend and tone of press coverage in the past months. Since a large share of new users is introduced to p2p lending services via media, positive media coverage is extremely important. Continued positive media coverage has helped some companies to associate positive values to their brand.

Growth/Marketing

This column especially rates if the new loan volume is growing continuously month after month. Furthermore it puts the absolute volume into perspective to the size of the market. It is obvious that absolute numbers in a country with a small population (e.g. Canada) will be much lower than those in a country with a large population (e.g. US). Furthermore it takes into account if the (online) marketing measures of the the company succeed in winning new borrowers and lenders (though in most markets lenders do not need to be actively acquired).

Sustainability

Sustainability rates a mix of several factors:

  1. ROIs for lenders / default rates
    Most p2p lending companies that failed in the past, did so as a result of high default rates which led to negative lender ROIs and caused massive lender churn
  2. Ability of company to raise new funding
    Most p2p lending companies still have to bridge a considerable time-span at their current growth rate before they become cash flow positive. The ability to raise more funding to finance continued operation is essential for their success
  3. Business model

User satisfaction

This rates the publicly voiced user opinion. Major factor are the comments in forums. To a lesser degree I took the user experience published in blog articles into account. The problem with lender experiences published in blogs often is that the writer is casting a positive image, since he earns commissions for newly referred customers through the affiliate program of the p2p lending site. Also these review are often written at the start of the lending activity at which point the lender’s ROI is naturally unharmed by the experience of defaults.


Empty fields: I had not enough information to rate these. E.g. with some of the new UK p2p lending companies I felt I had too few indicators to reach an opinion on the sustainability.

Availability of information also influenced the selection of companies. Due to language barriers including more services (e.g. the Japanese p2p lending companies) was not feasible for me.

Petition Might Lower Hurdles for P2P Equity and Crowdfunding in the US

wiseclerk

A petition (‘Petition for Rulemaking: Exempt securities offerings up to 100,000 with 100 maximum per investor from registration‘) submitted last July by the Sustainable Economies Law Center to the SEC, aims to exempt securities offerings of up to 100,000 US$ with a limit of 100 US$ per investor. If a new rule granting exemption would be issued by the SEC, this could substantially lower the hurdles for peer-to-peer equity platforms in the US.

The petition 4-605  is online here.

Comments and supporters that joined after the filing are listed here.

Rebirth Financial – P2C Lending to Businesses in Louisiana

wiseclerk 1 Comment

Chonchol Gupta and Xavier Cabo, two graduates of the Tulane University’s A.B. Freeman School of Business, founded RebirthFinancial.com to enable small businesses from Louisiana easier access to loans.

Interested businesses are screened and once approved can apply for loans between 5,000 and 100,000 US$ with loan terms ranging from 5,000 to 100,000. There is only a small fee of 100 US$. Apart from that fee, the business model of Rebirth Financial bases on earning from the interest rate spread.

Any US resident can lend. Minimum amount is 50 US$. Rebirth Financial is not subject to SEC registration.

It will be very interesting to see how the first p2c lending service in the US develops. Funding Circle in the UK had a good start. Rebirth Financial has already announced that Louisiana is only the start and that they plan to expand nationwide.

Peter Renton over at SocialLending.net has an interesting long article reviewing the launch of RebirthFinancial.com, too.