BLender’s hybrid model creates credit ratings based on financial, social, and demographic background to upend the banks’ foothold on peer-to-peer lending – and empower emerging markets
P2P lending platform, BLender, secured $5M in funding from Blumberg Capital, one of the leading American VC firms whose most notable influence is in the global FinTech market. The company currently operates within Israel, but with the funding, BLender plans expand into Western European and Latin American markets within the coming months. Blender CEO, Dr. Gal Aviv, told Geektime that targeted countries include Columbia, Brazil, Germany, and France, among others. He also indicated that some new features will be released, although he would not disclose any specifics.
As a P2P firm, BLender’s cloud based technology connects lenders and borrowers, allowing for attractive interest rates for lenders, and quick, easy access to funds for borrowers. This of course is quite an average headline; many P2P firms exist today. Prosper and LendingClub are the two largest, having deployed over $13 billion in loans from their start dates in 2005 and 2006 through October 2014.
In a sea of P2P firms, what makes BLender different?
When asked how BLender differentiates itself from standard P2P lending platforms, Aviv gave Geektime a two-pronged response. He said the first difference is that BLender plans to operate multinationally, and not just allocate loans locally or domestically. Secondly, he cited BLender’s ability to rate individuals’ credit risk in areas where traditional credit bureaus and rating systems are not in place.
The latter is the driving factor in BLender’s business model. Aviv said, “We saw that there is a very strong credit market where there is FICO scoring [like the U.S.]… but if you look at different territories with no effective credit bureaus, the access to credit is quite low and the pricing is quite high.” BLender noticed that the major banks and the credit card companies go unchallenged in these areas, because rating institutions do not exist to provide smaller lenders with accurate information concerning default risk.
To upend the major players’ foothold, BLender developed Rating2.0, which Aviv described as a hybrid model that creates ratings based on financial, social, and demographic background. He would not go into detail about how the system works, but disclosed that even one’s browsing history contributes to an individual’s credit risk rating, which includes a psychological profile that tracks “intent to pay.” Potential borrowers can access BLender via online, mobile, or its native app compatible with iOS and Android to see if they qualify for a loan within minutes.
BLender also differentiates itself through DirectMatch, its portfolio creator, and Re-BLend, a secondary trading market within the company. Prosper and LendingClub allow lenders to invest in a variety of loans in small increments to diversify and reduce risk. BLender optimizes this process with its matching algorithm that automatically spreads lenders’ money over a wide variety of loans. With Re-BLend, lenders can buy and sell loans and portfolios among themselves, a service that is not provided by LendingClub and outsourced by Prosper.
Since its birth in November 2014, BLender has appropriated over NIS 10 million in loans, or around $2.5 million, with the average loan between NIS 15,000 and 20,000, or approximately $3,750-5,000. Currently, lenders involved with BLender are either individuals or companies, putting up anywhere from NIS 5,000 to 1 million.
Israeli policy at the moment prohibits institutional money from investing in P2P platforms. According to Aviv, institutional money accounts globally for around 85% of the funds that such platforms distribute. However, he informed Geektime that when this regulation is lifted in the coming months, BLender will enjoy more access to institutional funds. Although this shift will weaken the “peer-to-peer” marketing angle that BLender employs, these funds will be crucial in raising the company’s lending capacity to an internationally competitive volume.
Featured Image Credit: BLender