Platform update: minimizing cash drag through loan application process improvements

July 29, 2015Bondora News

In the upcoming weeks we are going to release a few major improvements to the loan application process aimed at limiting the time the investors’ capital is locked in the loans and does not generate return.

Earlier this summer we started factoring in funding availability when making loan offers to the borrowers, and we already see fewer loans on the market that end up unfunded. We are going to continue our efforts with the following changes:

  • We will perform analyst review of the applicants’ information and provided documents before listing the loan application on the Primary Market. This change will eliminate loan cancellations that are caused by the discrepancies in the provided information.
  • Further, we will require loan applicants to complete bank account, ID and address verification before listing the loan application on the Primary Market. This change is expected to limit loan cancellations due to incomplete verification of the applicant.
  • We will also eliminate two bits of functionality to reduce privacy concerns raised by our customers. Primary Market questions and answers section will be removed along with a download link under My Investments to the loan application document signed by the borrower.
  • Finally, we will limit the time that a loan is listed on the Primary Market by half, as part of our ultimate goal of getting all loans that we list on the market to be funded within 24 hours. This change will limit the time when investors capital is locked in the “reserved” status and produces no return.

According to the laws, loan applicants should have a right to cancel their loans applications; however, we believe that the above changes will allow us to minimize the “opportunity cost” for investors in case of such cancellations.


27 responses to “Platform update: minimizing cash drag through loan application process improvements”

  1. The first two mentioned changes (verification of documents and ID before listing) should have been implemented for quite some time. The limitation of time which loans are listed on primary market is nice to have but not really necessary.

    But when will you implement changes in the portfolio manager (possibility to select between countries and / or between fully verified and non-verified loans)? An answer to that question would be appreciated.

    • Thanks for the positive feedback. We will launch an API in September that will allow investors to create custom and advanced filters as well as own scoring. This however will not be implemented in the UI but we’ll soon likely have third party service providers who can offer such a service on top of the API.

    • If you plan to launch API, why you not publishing at least preliminary documentation? Number of us will be interested to be prepared and like to plan works

  2. p.s. Have you already provided access to demo API to anybody (i.e. Peerlan)?

    • Hello Andrei, thanks for your questions. We cannot publish API documentation yet because the API is in development and it may change. Also, we don’t have environmet set up for API production and sandbox (for developers)

  3. I am keen to get the API asap. You will want to do some beta testing with some investors first before general release.

    • They selected way and go it. This is post from my another comment buy suites there:”Unfortunately with Bondora it could be always so, that if private lenders will build good API+scoring (better than some special customer of Bondora), API will be changed in order to close such possibility. Or API calls will go to “queue” to allow some special guys or Bondoras PM to get good segment bids.”

    • In the future we’ll have two channels for executing bids:
      1) API (hopefully with third party service providers creating services on top of it for people who want advanced analytics/filtering)
      2) Portfolio Manager which will be further

      Bid execution rules are not known however it is likely that whole loan buyers and/or Portfolio Managers will be have a better position in the queue.

    • Partel, it means there will be no Primary market like it is available now? And when you say “whole loan buyers ” you mean investors into each loan or investors who fill whole loan at once?

    • Hi Andrej, it is likely that one day we’ll discontinue the Primary and Secondary market ‘views’ in our system as we move over to the API and API based trading as well as start including Secondary market loans in Portfolio Managers. Essentially Bondora.com will likely become a very light and easy-to-use user interface aimed at borrowers and passive investors. Advanced investors with more complex needs will be supported over APIs where we might create separate services under different brands catering for specific needs however we are betting that a community of developers will become active as well to create such services.

      Yes, whole loan buyers are investors who fund 100% of the loan and typically only want full loans.

  5. I don’t see the necessity to remove the functionality of the Primary Market questions and answers section. If there are some inconsistencies in the application or points on which clarification are needed, it is very useful to be able to ask the applicant directly. The applicant is not obliged to reply, so I do not see this as a privacy issue. It also increases the likelihood of investing if a good reply is given.

    Regarding the withdrawal of access to the borrower’s loan application, doesn’t the lender have the right to know who he is lending to?

  6. In order to get the customer to provide all necessary documents and information prior to the market and facilitate an easy user experience, we are restricting customers access to the rest of the site other than designated areas required in the loan flow. Q&A section is not part of these flows and as its scarecely used and most of investments made through Portfolio Managers we have decided not to continue with this feature.

    Loan document is removed to protect borrowers’ personal information similarly as we restrict borrowers’ access to their lenders’ records. Privacy is a key concern for both borrowers and lenders and we are keen to faciliate a marketplace that looks after for both sides of the transaction.

    • @Andrej D, Very true about the point you made on share of loans funded only by Portfolio Managers. I was however referring to the total amount funded by Portfolio Managers vs. bids. This currently stands at 80% to 20% (https://peerlan.com/bids-type-graph) and is also the basis of our decision to put more focus on improving passive investments tools AND creating an open platform for third parties to build active investment tools. However we shall not create and maintain tools within the website aimed at active portfolio management.

  7. This is not the Isepankur we wanted. Im sorry, Pärtel you have Failed the original investors who had big hopes.

    • Bondora has developed the original idea further and now encompasses much more than originally. In order to beat the banks we need to work with large investors as well as retail investors so there would be enough capital to properly compete with traditional institutions.

    • You want to beat banks with the same way as they operate. They will always beat you with experience and capital.
      It should have been “we are going to make it different”, by outplaying banks with different approach.
      Now you will become another lendinghouse, zopa etc.. I would have the idea from Transferwise.. just beat banks.

      Tho good luck!,
      Disapointed Estonian investor

    • I do not believe that there is a lack of supply from retail investors. I bet retail investors fill 100% of all loans that do not have exessive default rates.

      At the moment you do not get filled all available loans as many of them are beyond risk tolerance for any investor with a serius mind. I believe that insitutional investors are even smarter than retail investors. So, institutional investors like retail investors will also refrain from investing into Spain that has a default rate of 60% (loans of 2013) and 49% (loans of 2014) or slovakia with a default rate of 71% (all loans 2014). I can not imagine that insitutional investors would invest into loans described above. So, at the end it is a competion for the same loans between retail and insitutional investors. I may forsee that institutional Investors get better and faster access to loans than retail investors. Bondora may also allocate good loans completely to insitutional investors and leave the breadcrumbs for the little guys.

      Pärtel,

      Isepankur/Bondora wanted to be different. Bondora wanted to rip traditional banking into pieces. It turns out that, not surprisingly, Bondora’s will increase ties with the same people and organizations that are also involved in traditional banking.

      I believe that it is only fair to let retail investors know how Bondora will include insitutional investors and how Bondora will handle the different goals and interests of each party. By doing so you would give the retail investor a chance to decide weather to stay with you or move to aready available alternatives.

      YaCop

  8. >along with a download link under My Investments to the loan application document signed by the borrower.

    Yes, please, you can do it for new loans, but it can not be done with existing loans.
    Legitimate expectation principle. When i loaned the money then i had expectation that this information is available. You cannot remove it. This damages interests of investors.
    Mostly i am talking about knowing ID code. And for Estonian loans only

    Arguments
    a) It seems that you are not follow borrowers death information [343-1CDDE997-0164] BOA47417
    b) personal bankruptcies of borrowers. I am not sure that you make claims correctly and on time
    [3E7-1C0FA473-012D] BO652A17

    When investor does not not the borrower he cannot even raise the alarm.
    Yes, you can do it for new loans, then the investor can choose not to invest with you, but you proabably have to restore this functionality for old loans. And i am quite serious about this. My loan management procedures are ruined at the moment.

  9. Pärtel, please let competent people contact me to sort out my needs with existings loans. Sry for writing here, but helpdesk would probably be dead end and it would be more convinient to avoid court enforcement

    • @YaCop

      Essentially institutional investors will be focused on higher risk segments not lower risk, low yield segments. Therefore there will be little conflict between more risk-averse retail public and funds looking for higher returns. In consortium we can fund a wider mix of borrowers, faster and at better terms than banks.

    • Actually, reading comment from rk, I would like to add.: if as you say institutional investors will look on more risky loans – why you destroy current PM? You can simply give institutional investors HR +Spain+Finland. Do you believe in what you told?

  10. I see that now only less than 50 loans are available, only or near HR … So we cannot invest. In the past about 3 pages of 100 loans .

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