How Fairrates’ problems became IOU Central’s headstart

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IOU Central launched first in Canada. As I already mentioned in my first post on IOU Central they profited from the knowledge input the two founders of danish Fairrates.dk brought with them. Fairrates had problems with fraud cases due to incomplete access to credit histories.

Here are some interesting notes by Bartlomiej Owczarek from Virtuous Cycle taken at a conference in Poland where Fairrates founder Arkadiusz Hajduk, now product manager at IOU Central, gave a presentation:

  • The startup was initially located in Denmark
  • Two guys on a sofa
  • I liked the quote – “expert is a person who committed all possible mistakes in a narrow field of specialty”
  • Idea was inspired by Prosper
  • They didn’t bother with business plans and presentations (note: maybe not so good in the end, given later credit history problem, see below)
  • Nevertheless, they got angel from early on – entrepreneur, house builder
  • Features of their angel – did call from time to time, but otherwise didn’t require much reporting, in retrospect now they would prefer someone more of a “mentor” type
  • They coded for 4 months without office
  • Then they got office, at respectable location (good for customer trust)
  • They coded another 6 months when they had office
  • First version was seen and tested by some 30 people
  • Operating model assumed that they don’t make credit decision or take on risk – all this is on the lender
  • Highlight of the “growth” period – 90 minutes on the front page of a major business portal
  • After launch, lenders turned out not a huge problem; in a first week, one person offered equivalent of ca. PLN 50k
  • However, huge problem with (good) borrowers
  • Also, in Denmark there is no access to credit history (only yes/no credit problems query possible)
  • Side note: banks in Denmark do not care to advertise to people more than 25 years old, because no one ever changes the bank
  • They had two evident fraud cases
  • In the end, business model didn’t fly because of borrower problem (people took wait-and-see approach), resulting in the “decline” phase
  • Luckily, they were approached by people from Canada, who had non-technical capabilities in the area but needed technology platform, and they sold out
  • Angel apparently got 150% of his initial contribution
  • Lessons learned: don’t hesitate to kill your own ideas

(via Prosper Lending Review)

New features at Prosper

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Immediately following up on the previous post on Prosper.com, the list of new features at Prosper is now known. Most notable are:

  • 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$. Example button below. If you use that and your loan is funded, I am paid 50 US$.

Business & Personal Loans. Great Rates. Prosper. 

Prosper Days 2008

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The Prosper Days 2008, next week Monday and Tuesday in San Francisco, are the main yearly event by Prosper.com. The schedule covers topics like borrower experiences, managing large portfolios, earning a risk adjusted return, collections. You can still register for 55 US$ (includes all sessions and meals).

Several blogs already speculate if and which new features will be announced at the Prosper Days 2008. Traveler wrote a long post on that yesterday. 

Banks to loose 10% market share to social lending by 2010?

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Consultancy Gartner predicts that: "By 2010, social-banking platforms will have captured 10% of the available market for retail lending and financial planning". Not surprisingly Zopa is happy about that forecast. I think this is an over-optimistic outlook but James Gardner of BankerVision (working at Lloyds TSB bank) who also thinks it is aggressive points to the example of Paypal, which has been underestimated years ago. A more supportive view comes from Antony Mayfield while taking Zopa as example.

Kokos – p2p lending in Poland

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Kokos.pl launched the first p2p lending service in Poland. I interviewed Dorota Janik, PR Manager of Bluemedia, about the new service.

P2P-Banking.com: Can you please describe Kokos?

Dorota Janik: Kokos.pl is the first p2p lending or social lending system in Poland. It opens new possibilities in e-finance industry and fills a niche between offers of banks and other financial institutions.

The main advantage of Kokos.pl is being able to offer a much more beneficial interest range for both the lenders and borrowers, and a higher level of security than on other web based auction systems.

The most stress has been put on the borrower verification process. Kokos.pl uses Biuro Informacji Gospodarczej (BIG) to check borrowers credit history and to assign their rating in the system. Continue reading →