The Orca Money team has conducted analysis on the RateSetter loan book, having co-operated with them to bring this to production.
Please feel free to comment and make requests for analysis on P2P platform loan books, which we will be conducting further in the future.
RateSetter Review - Loan Book Analysis
*Note: this is the 2nd in our series of loan boo analyses on UK platforms, they are a work in progress.
@OrcaJord thanks for sharing.
I would like to highlight the part of the Provision Fund which is used in case of defaults. Below is the excerpt from your analysis. The main takeaway is that in the case of Zopa and Funding Circle, each investor is subject to the default risk of their individual holdings. Whereas, RateSetter pools loans in a central pot and would pay on a pro-rata basis in case of default and after the provision fund is depleted. RateSetter IMHO offers more protection in case of an industry wide credit crunch.
"Investors are exposed to the same level of risk irrespective of the loan market they choose. In the event of default, the RateSetter provision fund covers losses across all markets until the provision fund is fully depleted. If the provision fund runs out of funds to cover losses, RateSetter will activate a ‘Resolution Event’ where all outstanding loan contracts are pulled together into a central pot and investors are paid back on a pro-rata basis. Ultimately, this means investors are exposed to every outstanding loan on the loan book and not to their specific P2P loan contracts.
This is different to both Funding Circle and Zopa, where investors are exposed directly to their P2P loan contracts."
@OrcaJord, we have a real-time credit/risk assessment API which may be useful for your analysis of commercial loans. Let me know if you want to chat Mike 07779 245 479
Thanks for coming back to me. I’ve passed this on to my colleague, Iain Niblock, he’s interested in your offer and will be in touch at some point - possibly this afternoon or early next week.
Great, look forward to it
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@OrcaJord @riskopy_mike Great to see this work and connections being made. This is the sort of thing we had in mind when we launched Fintech Genome - a place to make news as well as discuss/analyse the news.
This kind of third party independent analysis of loan books is key to the development of Market Place Lending as a new asset class.
Any Index to compare perfornance across different marketplaces in the works?
@BernardLunn thanks, great to hear! I was saying to @Efi at LendIt the other week, that a forum with a broad innovative finance (fintech) reach was an excellent idea.
To answer your question about a comparative index for marketplaces, yes, we are looking to do it at Orca Money We are launching our ‘Marketplace Dashboard’ in early 2017 which will benchmark UK P2P lending platforms by some specific metrics.
I’ll keep you all posted though!
Cheers Mike, be in touch soon.
@OrcaJord Great, look forward to continuing the conversation.
FYI this is another startup in the space http://alterest.co/ They came through Winton Capital’s data science accelerator recently (we’ve been offered a spot for the next cohort).
Related to my earlier reply about the Provision fund that Ratesetter prides about; I suggest listening to the CEO podcast with London Fintech.
LFP062 – “Hard Fail” Provision Funds Revisited with Rhydian Lewis CEO Ratesetter".
’Ratesetter was formed 7 yrs ago and has accumulated an amazing 300,000 customers with an amazing 250,000 on the platform right now and have lent an amazing £1.5bn with no lender ever losing a penny of interest or capital along the way.’
@Efi @OrcaJord @
“no lender ever losing a penny of interest or capital along the way.” Wow!! Is that real? How?
Most UK P2P lending platforms have provision funds as a reserve (if you like), these tend to be maintained at a certain level of the live loan book, ensuring that should a borrower default the platform can dip into the fund to recover capital (and sometimes interest) repayments to a borrower(s). They are always discretionary, so are not guaranteed to pay out. Stress tests on loan books are the best way to gain confidence in a platform’s provision fund - if a bunch of borrowers default, the provision fund will be hit really badly, particularly on unsecured loans where no assets can be liquidated to cover loan repayments!