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  • @fintechna 7:36 pm on October 27, 2016 Permalink | Reply
    Tags: , , , p2p lending, peer-to-peer,   

    5 Reasons Peer-to-Peer Lenders in India could attract poor credit quality 

    5 Reasons Peer-to-Peer Lenders in India could attract poor credit quality fintech

    Lending is emerging in and will be successful if the Credit quality on these platforms have a reasonable default rate and provide good returns to the lenders.

    Peer-to-Peer Lending is a new asset class and it is important to create Awareness, Education and Understanding for lenders on how to proceed further to add in your investment portfolio.

    At Citibank Consumer Bank, where I worked for close to 20 years, I learnt a concept of “Negative Self Select”.

    In simple terms “Negative Self Select” means customers who choose your product and brand have poor credit track record. If most of the poor credit profile are choosing your product or brand your portfolio quality is bound to perform poorly over time compared to the industry peers.

    Then the question arises, What leads to “Negative Self Select” ?

    As a Bank, we used to have 3 key criteria to understand if we were a potential target of “Negative self select”.

    They were:

    1. Heavy documentation / Cumbersome Application – asking for more information or documents then the industry.
    2. Slow process – if the industry is processing a loan in 7 days your process take 10+ days or more.
    3. Higher interest rate – if you price your credit product higher than others and information is seamlessly available then a good customer will choose the loan which costs them lower.

    These 3 criteria could work in combination or stand alone. It is quite logical that the best customer would not want to be inconvenienced by Heavy documentation, wait for long or pay higher cost for borrowing until and unless s/he does NOT have a choice.

    Only, poor credit quality customers would go through these inconvenience as they do NOT have a choice.

    However, for Peer-to-Peer Lending platform there are 2 more challenges:

    1. Brand Awareness: The belief that borrowers do not care about the brand from which they borrow – is not correct. A good borrower does not want to borrow from an unknown brand. They care about their personal information, kind of practices the borrowers adopt post disbursal of loan and how will they get serviced during the loan period.
    2. Confidentiality of the transaction: Most cars and houses in India are sold with financing however no one puts a sign on the car or house the name of the bank they took financing from. Similarly, the good borrowers do not expect finance company to publish their name of their website.

    At Monexo (http://www.monexo.co/in), we have solved for all of them before we launched our platform, namely:

    • our process is digital and fast. Approvals are given the same day and we can 100% guarantee disbursal once the loan is committed by our lenders. Monexo is the only company which can give this guarantee. This is NOT possible on other P2P platforms as they rely on lenders to transfer funds to borrowers. Lenders may forget, get busy or even change their mind. We are making the loan process “paperless”.
    • we rely on Data Science and ask for minimal documents on our platform. More documents does not mean better credit – it means more inconvenience to borrower and good ones will leave.
    • we price our loans across the spectrum of 13% to 30% which allows us to play across and NBFC pricing. We also have launched 20% Interest Discount offer for Personal Loan Transfer – this could save customers as much as Rs. 20,000 over 3 years. Visit us at – https://www.monexo.co/in/campaigns/personal-loan
    • yes we are young company however are trustworthy. Our Founders have 70+ years of Financial Service and experience with Global Brands. Further, we believe in Education, Awareness and Understanding of our product and services is critical rather than selling. Every customer can connect with us as and listen to our Free Webinar https://www.monexo.co/in/webinar.
    • finally, we respect our borrowers privacy and do not put their pictures or name on our website. We share the borrowers profile, Credit Score, Monexo rating and other key demographic and income details for lenders to make decision.

    We are building a new paradigm for borrowers and lenders with our 3D’s – Digitial, Data Science and Democratisation of Finance at Monexo (http://www.monexo.co/in). Visit us, talk to us and engage with us in our vision of “making borrowing more affordable and investing more rewarding.”


      is Founder at Monexo Pvt. Limited
     
  • @fintechna 7:36 am on June 14, 2016 Permalink | Reply
    Tags: , , , , , p2p lending   

    Marketplace Lending: Attractive, Stable Returns in a Zero Interest Rate World. 

    Marketplace Lending: Attractive, Stable Returns in a Zero Interest Rate World. fintech

    “Global yields lowest in 500 years of recorded history. $10 trillion of negative interest rate bonds. This is a supernova that will explode one day”    

    -Bill Gross, Co-founder of PIMCO

    Legendary bond investor Bill Gross doesn´t mince words here. The coming supernova will destroy the life savings of countless hard working people worldwide. Yet most investors continue sleepwalking toward an impoverished future. Not only is a very large percentage of private savings held in today´s radically overvalued government and corporate bonds, but most public and private pension savings as well are invested in these same markets.

    Why do savings continue to pour into government and corporate bonds despite very low or even negative yields and the potential for huge losses when interest rates normalize at some future time? Based on my twenty-five years of experience as an advisor, my guess would be simply momentum, along with a self-serving investment management industry that consistently puts the customer´s interest last. Asset management is a huge industry that continues to turn its wheels as it has for decades, investing a large share of the savings of its customers in government and corporate bonds. The fact that the endless quantitative-easing bond purchasing programs by leading central has distorted the fixed-income capital markets to a very dangerous extent is not sufficient to stop these wheels, especially while billions of dollars in fees and commissions depend on continuing to do “business as usual”. 

    What is an investor to do? The answer is surprisingly simple. The first step to get out of a hole is to stop digging. Accept Bill Gross´ wake-up call, and invest no further in traditional bonds or bond funds that hold overvalued, often negative yielding fixed income instruments. Rather, take some time, do some research, and educate oneself about the growing alternatives to traditional fixed income that do provide for steady, attractive returns without the risk of being burned in the supernova that Bill Gross predicts. In short, my recommendation is to turn to

    Marketplace lending, also known as marketplace finance, is where savers can secure attractive returns by lending funds to individuals and businesses directly without the intervention of banks or purchasing bonds on the public exchanges. These loans can be made directly through any number of online platforms, or through investment in specialized investment vehicles (mutual funds or unit investment trusts) that focus on marketplace finance. At this point, the track-record is sufficiently clear, and the new investment vehicles sufficiently developed for me to make this recommendation to any serious client who is willing to learn new ways of building their savings without accepting the risks of grossly overvalued bonds.

    A further advantage of this approach to achieving reasonable returns on savings is that marketplace finance largely focuses on short maturities (as short as 60 to 90 days, and almost never more than 3 years). These short maturities reflect the needs of business and individuals for loans (often secured by assets or insurance policies) for inventory acquisition, trade finance, small business expansion, aircraft leasing, consumer loans, factoring, discounting  invoices, or any of a myriad of alternatives that allow investors to earn returns from deploying their savings into the real economy of commerce and trade, rather than the quantitative easing bubble in the public bond markets created by central banks since the 2007 financial meltdown. An important advantage of these short maturities is that they permit “self liquidation”, allowing the investor to recover invested funds if necessary through maturity of the underlying loans, even if secondary markets are disrupted during a financial crisis. 

    Let´s look at the track-record now. For US investors, the Orchard US Consumer Marketplace Lending Index demonstrates a 6% return in the last twelve months, with notable stability and predictability that will allow even anxious investors to sleep at night. 

    Marketplace Lending: Attractive, Stable Returns in a Zero Interest Rate World. fintech

    In case one believes that the US experience is exceptional, let´s look at the UK market, where the Liberum Alfi Returns index tracks investor returns from the leading marketplace lending platforms in Great Britain. Once again, the twelve month lagging return is approximately 6%. It is noteworthy that this index demonstrates that even in the midst of the financial crisis of 2007-2008, investor returns never were lower than 5%.

    Marketplace Lending: Attractive, Stable Returns in a Zero Interest Rate World. fintech

    Finally, for investors who prefer to delegate to professional management rather than lend directly on platforms, I would recommend the pioneering and innovative Luxembourg SICAV-SIF,  Synthesis Market-Based Financing Fund.   Founder and CEO  Spyros Papadopoulos has built an attractive track record of over three years of positive returns month after month through employing a variety of lending strategies moving well beyond , with a particular expertise in trade finance. 

    Marketplace Lending: Attractive, Stable Returns in a Zero Interest Rate World. fintech

    As per the warning from Bill Gross, there is a clear and present danger in the bond markets today that could have catastrophic consequences for savers, as well as wiping out their public and private pension plans. The good news is that there are alternatives available for investors who are willing to face the facts and make the effort now to learn about the attractive and low volatility returns that marketplace finance can provide. 


    is Partner at Clearwater Private Investment and this post was originally published on linkedin.

     
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