Exactly 12 months ago we rebranded from isePankur to Bondora, as the name didn’t reflect our global ambition. Nevertheless, we clearly realized that the name change was only a minor piece of the challenge and in order to transition from a local startup to a player that defines the new rules of lending across Europe, we had to make major improvements and create more value for both our borrowers and investors.
The original promise of peer lending was that advancements in technology will allow making lending more efficient; thus, allowing investors to earn premium returns while at the same time providing borrowers better rates than they could get from traditional lenders.
It is the technology that can deliver on the original promise, and thus, we spent the last twelve months putting technology to work throughout each and single part of the lending process and below are some of the highlights of what we, together with you, were able to achieve so far.
Jul ’14: Moving loan application online
We completely revised the process for collecting loan application data from the borrowers, which allowed us to move the process completely online and allow the borrowers to apply at their own pace and at their preferred time.
Those of you, who have been with Bondora for longer time, probably still remember, that previously we called borrowers to collect the data for a loan application. Thus, the borrowers could apply for a loan only when we were at work, which made the loan application a lengthy process and in essence, wasn’t much different from applying with a bank.
We thought that it wasn’t right, especially in the age when everything is available on a 24/7 basis, so we rebuilt the whole loan application process to allow borrowers to apply whenever they wanted. We don’t have to call borrowers to get their data, they can upload their documents on their own schedule and we built the back-end tools to process these data.
This process change also required us to build sophisticated systems for data validation and fraud detection. Again, we put technology to work and achieved the level of sophistication in fraud detection that would be just impossible to instrument through a human-powered process.
Aug ’14: Opening the books
We launched an unprecedented initiative of providing the full loan book for a download for our investors aiming for as much transparency as data protection laws allow.
The more we automated the data collection and processing, the more we felt obliged to our investors to be as transparent as possible about the data behind the loans they invested in. Thus, we made a decision to provide as much information as the data protection laws allow.
Although our scoring model will remain proprietary to prevent fraudulent activity, we are completely transparent about the data we collected from the borrowers for all the loans that got through our approval process (including the ones that were not funded by investors) allowing investors to validate our decisions.
Completely opening the loan books was an unseen case for the financial industry, but we believe investors deserved open data as much as borrowers deserved 24/7 service.
Nov ’14: Bondora Ratings and Risk-Based Pricing
We introduced credit scoring and, later that year, risk-based pricing, which allowed us to offer borrowers the interest rates that reflect their individual risk profile.
Banks are perceived to be highly inefficient, but they have done a few things right, building sophisticated credit scoring being one of those. As the loan origination volumes on our platform continued to increase, it was the time for us build our own credit scoring and pricing model to reflect the individual risk profile of borrowers.
Although hesitant to “inherit” a piece of the outdated banking process, we realized that without evaluating risk of each individual borrower we will continue “penalizing” borrowers with great credit history and underprice the loans to the borrowers within higher risk profiles.
As the result, we have built internal credit scoring capacity and, by the end of 2014, the technology to instantly evaluate risk profile of borrowers, which is now known as Bondora Rating.
Dec ’14: New Portfolio Managers
We introduced new Portfolio Manager, which allowed us to offer investors easy-to-use and time-efficient tools for investing into the loans of their preferred return and risk level.
Being a marketplace lender, it is important for us to make both sides, the demand and supply, work as efficiently as possible. Otherwise, none of the improvements we make on the loan application side would translate into better service for borrowers, and our service would be no different to the slow inefficient service offered by traditional lenders.
Investing on our platform is rarely a sole occupancy of our investors and their time is super precious; thus, we had to provide easy-to-use and time-efficient tools to invest into loans. As the result, we introduced the new Portfolio Manager that aims to allow investors achieving the desired return level without the need for calculating the required split per loan rating and the amount to invest into each loan.
Investing through Bondora can be as simple as choosing the desired return level using one of the Portfolio Managers, and most of the investors have already chosen this method. As the result a scored and priced application from a borrower can be funded through Portfolio Managers in minutes rather than days.
Jan ’15: Series A Funding
We raised $5 million from early Lending Club backers to accelerate building top notch engineering team and growing the platform.
Those of you following the peer lending space, most likely followed the IPO of Lending Club, one of the earliest marketplace lenders that went public in the United States at the end of 2014. A month later, we closed $5 million Series A round from Valinor Management, a US-based private investment firm, that was one of the earliest backers of Lending Club and is still a shareholder in the company.
The funding is important for us from the two angles: a) we have more financial resources to attract top engineering talent and continue improving our platform; b) our new investors have been with Lending Club through their path to IPO and we are happy to have their experience on our side.
Eurozone countries represent a bigger market, population wise, than the United States, and we believe the new funding round will allow us (at minimum) to repeat the success of Lending Club across the whole Europe.
Feb ’15: Instant loan offer for borrowers
We are now able to offer borrowers a loan offer instantly, which is unprecedented for any traditional lender.
Finally, we managed to improve the technology to the point where we can process the application data, exclude fraudulent activity, calculate credit score and provide borrowers with multiple loan offers instantly!
Although the transition to instant offer wasn’t as smooth as we planned, it introduced an unprecedented case: we are finally close to the eventual goal of peer lending, offering bank-level rates at the speed and ease-of-use of alternative finance providers…all of that on a 24/7 basis, across all markets we operate in!
As one can see, the instant offer symbolizes the culminating point in our last 12 months journey. It is obviously a major improvement to our offering and it wouldn’t be possible if we hadn’t taken all the previous steps.
It doesn’t mean that we will stop evolving going forward (though we are dedicated to making the current functionality work as smooth a possible first), but we hope these highlights give you a perspective on why we introduced all of the above changes despite all of the hard decisions we had to make and the technological complexity involved.
Thank you for being our customers, none of the above wouldn’t be possible without you, and to the next great 12 months!
Timing refers to April Fools’ Day, but I think that this post was meant as a true story. :)
Nevertheless I would like to ask what is the direction of Bondora for the next 12 months? What should borrowers’ and investors’ expect for? Is there any other significant plans, for example expansion to other countries? Maybe some other financial service (payday loans)?
Hello, Tauri! Thanks for a great question. We will continue executing on our vision of uniting Europe under a single marketplace; however, what we plan to achieve in the upcoming 12 months deserves a separate blog post.
I think the last idea about the instant loan is fine. However, the execution of this hasn’t been smooth at all and it’s not finished absolutely yet. It may be finished from the point of view of the borrowers. But the investors has been suffering from the point you introduced the new system. About 70% of their investments have been repaid. This repaid “dead” money is not automatically removed from the system and mess up all the investor’s stats. A lot of the investors with high portfolio values left Bondora, not because you introduced this with these problems, but because nobody from Bondora team was listening to the investors, crying every day on the forum, looking for every single help. So, in my point of view, one of the goal you should set could be the instant loan feature finishing and the communication with you investors improvement.
Hello, Miroslav! Appreciate your feedback! The introduction of the instant offer didn’t go as smooth as we planned, but as you might have noticed, we continued improving the functionality and loan cancellations decreased considerably across all ratings.
Hello Jevgenijs! But why the hell you aren’t repaired the statistics!!!??? The stats is all wrong when the money comes back. This is one of the many reasons why for example i don’t add more money to Bondora and don’t use Portfolio manager.
Can you please point to specific sections that are not working? We’ve been putting a lot of energy into fixing reports and providing new information requested by investors (such as recovery statistics).