Interviews

Interview with Vittorio Levi of Boober Italy

Posted in Boober, Interviews, Italy on June 30th, 2009 by P2P Lending News – Be the first to comment
The most recent news from the Boober brand is that Boober Netherlands was shut down earlier this year by Dutch regulators. Can you give us some information about whether Boober.nl has plans to re-open, and how Boober.it is related to Boober.nl?
Boober.it started in November 2007 as a joint-venture between Boober International and Centax (which is a financial service Italian company mostly focused in check services). Boober Italy acted as a licensee of Boober International which was owner of the brand, the platform and the market rights for all over Europe. In October 2008, Boober International decided to discontinue their activity and at Centax we decided to buy the 50% of Boober Italy, the Boober brand and the website platform plus the possibility to exploit all the European market except for Netherlands. As far as Boober.nl is concerned, we have no visibility of their plans but I believe they will no re-open in the future.
Do you have any plans to open Boober sites in other countries in the near future?
Our plan for expansion in other European countries will target 2010 after consolidation on the Italian market. Priority countries will be for us Spain, Portugal and easter countries where internet is rapidly growing as a business instrument (Romania, Hungary, Slovakia, Poland).
How is Boober Italy regulated? Do you have explicit regulatory clearance from Italian officials? If not, do you need to or plan to seek it?
Centax is a financial service provider, regulated by the Bank of Italy and we have submitted the Boober peer-to-peer landing platform which was approved within the present frame of Centax activities.
Can you give a little more information about Boober Italy is regulated? Are P2P loans considered securities in Italy as they are now in the US? What does Centax’s “Financial Service Provider” status allow Boober to do? Does it only allow Boober to issue loans to borrowers, or also to sell them to lenders?
The p2p loans in Italy are regulated by Bank of Italy as any other financial service. P2P Loans are permitted only between private individuals; thus means that loans are not permitted between individuals and companies or intra companies. Centax is a regulated company by the rules of Bank of Italy operating in the area of the payments systems and credit transfer. We have started this initiative in the p2p loans over the internet because we see great opportunity for the future, but our core business is totally different and it is focused on the area of cheque services and processing. In our business model we don’t issue loan to borrower but we manage the marketplace between lenders and borrowers, promoting the website on the net and providing a certain number of back-office services both to lenders and borrowers, the most important being the risk assestment and evaluation.
Is there a specific model that Boober had in mind when building their site? Was it based on eBay or an existing P2P lending company?
We inherited the Boober.nl original model, which is close to eBay and adapted it to the Italian regulations.
Boober.it launched more than a year and a half ago. How much in loans has been issued through Boober to date?
738.000€ and 123 borrowers have been funded by more than 300 lenders. Currently our volumes are still too low for producing meaningful statistics month by month or day by day. When Boober.it will reach its expected dimension, more statistic will be implemented in order to give to the user meaningful data to consider.
Do you publish public statistics about your lending activity?
Yes, you can find some statistics on Boober.it homepage (look at the top).
What is the aggregate default rate to date on loans issued during your first year of activity (Nov 2007 – Nov 2008)?
About 2%, concentrate in only few loans. But looking at the statistics from Sep 2008 to nowadays, the default rate is 0%.
According to your lender fees page, Boober charges (but is currently waiving) a EUR 9.95 annual subscription fee. Is there a reason you have decided to waive this fee? How long do you plan to continue waiving the subscription fee?
The decision to waive the fee is related to promotional activity and we will keep it at least for the rest of the current year. Maybe it could be extended for the 2010 too.
According to your lender fees page, Boober charges a 10% commission on all accrued interest. Is the fee charged even if the borrower defaults and the interest is unpaid?
No. In the case of a default term, no commission is charged.
How does Boober Italy differentiate itself from Zopa Italy?
We are a direct p2p lending market, while Zopa Italy is an indirect social lending service. It means that on Boober.it the relationship between lenders and borrowers is more direct, personal and warmer. The lender chooses his investments request by request, pondering the uniqueness of each borrower. It is not automatic like setting “I will lend money to all the C users rated in 24 months”. In Boober.it all the borrowers are called by name, not only by credit rating, as well lenders can talk with the borrowers through the personal forum which is opened under each published request. On the other side, the borrower has the freedom to design his personal loan, setting the amount and  the number of terms and the rate. It means that, once he get the credit rating, he is not forced to accept conditions decided by the system as it goes on indirect social lending websites.
Does the average Italian know that Boober is an option for them to get a loan or invest their money?
Only partially because our marketing and communication coverage is very limited because we want to move very gradually into the market and the internet users in Italy are far less in percentage of active population compared to the other European Countries. However the p2p lending model had a lot of coverage from the Italian press during the last 12 months because was seen as an alternative to the credit crunch.
What have you learned about Italian borrowers that has surprised you?
The relationship with their banks. Many of them have been keeping a deposit account in the next-door-bank for several years. Nevertheless, when they have asked a loan to their banks, it has been denied or the bank offered expensive conditions. It sounded so strange.
What have you learned about Italian lenders (investors) that has surprised you?
Their expertise. Most of our lenders are used to invest in the stock market, so they know more than we expected about statistics, defaults, risk management, ratings etc. That’s a great opportunity to fine-tune Boober.it day by day thanks to their precious suggestions.
Do you have a story of sucess or a bit of feedback that you have received from your users that you’d like to share?
Yes, we have two interesting stories: one about a borrower, the other about a group of lenders. I start from this last one: Booberwatch (booberwatch.forumfree.net) is the name of the independent forum created by some of the lenders who wants to share opinions and information about Boober.it. Their suggestions and also their criticism is precious for Boober’s growth. The second story is about Checoale1, a borrower who got a 10000€ loan to buy solar panels for his house. It’s wonderful to see how ethical living and ethical finance found a synergy through Boober.it.
Based on the activity on the Booberwatch forum, what are the primary complaints that your lenders have? Which are your priorities to address?
Many complaints but we are really happy of that. It is the potential of web 2.0 and we want to capitalize their criticism. So, they would like to have more information about the borrowers, i.e. job, work contract, monthly income, other debits and so on. As i said before, many of them are very expertise and they would like to evaluate the risk on their own. We are working to give them as many information we can according to the Italian privacy rules. As well they encourage us to be more present on Booberwatch in order to settle a more constant communication between them and Boober.it. This issue will be also faced improving our social networking area, i.e. setting up an official chat, or an instant message service.  Improving MyBoober, which is the account management system, is one of our priority, according to the complains of many users which defined it ‘not user-friendly at all’ and difficult to extract data. The new version has already being projected, we will realize it as soon as possible.
What is next for Boober Italy?
We would like to improve our social network features in order to let the users establish a stronger connection each others: i.e. detailed and customized user profiles, chat, or private messaging. As well the 2.0 side could be improved by user generated content like a Booberpedia (or a WikiBoober) where the users are invited to write the lemmas of a social lending encyclopedia.
What is the future of P2P lending in Italy?
We believe there are great opportunities for p2p lending in Italy because the Italian market is well behind other key European markets in term of personal loans and the credit rates offered by bank or other financial institutions are extremely unattractive and difficult to be released. If we accept the forecast of Garner Group in 2013, 10% of retail credit market will be done through internet p2p lending, for the Italian market we will talk about a credit volume of about 1.5-2 billion euro value.

Boober LogoVittorio Levi, CEO of Centax S.p.A. and Boober Italy, was kind enough to answer some questions about Boober Italy and the state of prestiti personali in Italia, or P2P lending in Italy.

The most recent news from the Boober brand is that the original Boober site in the Netherlands was shut down earlier this year by Dutch regulators. Can you give us some information about whether Boober has plans to re-open in the Netherlands, and how Boober Italy is related to Boober Netherlands?

Boober.it started in November 2007 as a joint-venture between Boober International and Centax (which is a financial service Italian company mostly focused in check services). Boober Italy acted as a licensee of Boober International which was owner of the brand, the platform and the market rights for all of Europe. In October 2008, Boober International decided to discontinue their activity and Centax decided to buy 50% of Boober Italy, the Boober brand, the website platform, and the right to open sites in all European countries except for the Netherlands. As far as Boober.nl is concerned, we have no visibility of their plans but I believe they will not re-open in the future.

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Lending Club’s CEO Explains Loan Funding, Privacy Issues

Posted in Interviews, Lending Club on April 9th, 2009 by P2P Lending News – Be the first to comment

Lending Club LogoOn March 10, P2P Lending News published a story about how Lending Club had funded 24% of the loans issued through their platform. Renaud Laplanche, the Founder and CEO of Lending Club was nice enough to address some of our concerns in an interview.

Thanks for taking the time to answer some questions. As you know, we have some concerns about Lending Club’s practice of funding borrower loans. At the very least, it seems to contradict the “social lending” aspect of your business which is so heavily advertised on your site. We look forward to getting your perspective.

Why does Lending Club fund loans out of its own pocket?

We are committed to making the platform work for both lenders and borrowers.  We fund some of the loans only to ensure that all loans approved by our credit team get fully funded. The smaller loans tend to get funded in full by the lender community, but the larger loans can require additional funding, which Lending Club provides.

This makes the platform more efficient on both sides: borrowers get the full amount of their loan, and lenders avoid a situation where they would commit funds but the loan ends up not closing because it is insufficiently funded.

What is the plan for continuing this practice in the future? How much longer do you expect to be funding loans?

Our primary business model is to operate the platform, not to make loans. We only participate as a lender on a temporary basis to help the platform operate more efficiently.

There is no specific timeline for funding loans; we will continue funding portions of loans until large loans get fully funded by the community.  Our goal is to have the community funding as much of the loans as possible.

Why don’t you notify investors during the “In Funding” period about which loans are being partially funded by Lending Club itself?

We typically complete the funding of larger loans on the last day, so there is little opportunity or benefit to signal Lending Club’s funding in a particular loan.

Would you be willing to disclose the borrower profile and credit criteria under which Lending Club lends its own money to borrowers?

We do not apply any specific credit criteria. Any loan that has been approved by our credit team and is reaching the end of the funding period without being fully funded will typically get funding from Lending Club.  Also note that when Lending Club participates in a loan, there is no impact to pricing as in other platforms that are based on an auction model.

Are you concerned that by funding some but not all loans, Lending Club is creating a conflict of interest when it comes to collections? Seems like although it is in your best interest to collect equally on all delinquent loans, if you had a shortage of resources, you might prioritize the loans that Lending Club has participated in?

Our collections team and external collections agency have no knowledge of which loans have been funded by Lending Club, nor would it be a factor in their collections strategy if they had such a knowledge: our main interest is to grow the platform for our customers, not to make money on proprietary investments.

What percentage of your approved borrowers do not receive sufficient funding from investors to issue a loan?

As you have pointed out, Lending Club has funded roughly 25% of the dollar volume of loans since we reopened on October 14, 2008. That’s roughly the percentage of loans that would have gone unfunded if Lending Club had not funded them.  Note that this is different from other platforms that do not filter loans upfront, and can experience 90% to 95% of the loans being left unfunded.

It sounds like LC’s position is that every loan that has been approved by your credit team is properly priced and worthy of funding. If that’s the case, why not take the Pertuity Direct model (or the Zopa UK model) and just take lender money, allocate it across all of the approved loans, and give net returns back as they come in? Why bother with the individual loan requests?

We believe all loans approved by our credit team are worthy of funding but we certainly do not impose this view on our lender members. Any lender who has a different opinion can choose to fund specific loans that match his or her own criteria (which would not be the case in the alternative that you are mentioning). Many of our lenders enjoy the opportunity to control exactly which loans they invest in, and we give them the tools and the ability to do exactly that.

Regarding your statistics file, it has been stated that the downloadable file was removed from Lending Club’s statistics page because of privacy concerns on the part of certain borrowers. What privacy-related data was included on the statistics file which is not also included on your daily prospectus supplements?

None. The prospectus supplements and sales report are mandatory filings and we have no control over their content. The downloadable files, however, are both voluntary and more prominent, and they are the ones that created privacy concerns. 

You said there was no difference between the data in the downloadable stats file and the prospectus supplements, but by modifying the downloadable stats file you are only addressing one side of that issue. What if borrowers raised the same privacy concerns about the data in the prospectus supplements? Does the SEC have any understanding of borrower privacy issues, or will Lending Club borrowers simply have to deal with having their credit information, hometown, colleges, and employers posted publicly on the internet along with their loan request?

We are trying to strike the right balance between protecting the privacy of the borrowers and letting them share useful information with the lenders. Please note that the information that will no longer be included in the downloadable files (but will continue to be published anonymously as part of our mandatory reporting requirements) is both self-reported and optional. It is made clear to the borrowers that this information is public, and borrowers can decide not to provide such information.  

You have probably seen this post about how Lending Club’s practice of publishing certain borrower information makes the correlation of LC loan requests to actual identities fairly simple. As a company, does this concern you? Do you have any plans to change the way this information is collected or published?

The article you are referring to suggests that the main technique for de-anonymization is based on screen names. Some of our borrowers use screen names that can be traced back to their actual identity; some even use their first name and last name as screen name and share personal information about themselves publicly. While we do not encourage borrowers to do so, we respect their right to de-anonymize their profile.

When can we expect the downloadable statistics file to be back up on the Lending Club site?

We will put the statistics file back up as soon as this particular privacy issue has been resolved, which we are hoping to be the case in the next 2-3 weeks. Note that the new file will be minus a few fields that have the potential to compromise a borrower’s privacy.

Congratulations on raising the $12M Series B. Now that you have some extra cash, what are your priorities over the next 6-12 months?

Thank you. We will use the funds to further develop our platform and the Lending Club brand, and bring exciting new products later this year.

Lending Club has continued to fund portions of their borrower’s loan requests, but notably, the last two sales reports filed with the SEC contain no loans on which Lending Club participated as a lender. The downloadable statistics file has not yet been reinstated.

Interview with IOU Central’s VP Marketing, Barry Coleman

Posted in IOU Central, Interviews on March 18th, 2009 by P2P Lending News – 2 Comments

IOU Central LogoAfter realizing that IOU Central is planning a launch in the United States, I reached out to Barry Coleman, the VP of Marketing for IOU Central to ask a few questions about their plans.

Thanks for taking the time to chat with us. Tell us a little about yourself and what you do at IOU Central.

I am the VP of Marketing for IOU Central Inc. (IOU Central). I officially joined the team in December 2008, but I acted as a consultant to IOU Central for several months prior. Most of my professional experience has been in the mortgage industry (sales & marketing). My front-seat view of the inefficiencies that helped create the collapse of the sub-prime mortgage industry is what excites me most about peer-to-peer lending. I like that we have an opportunity to seize control of borrowing & lending. Keep fees & costs low… and let borrowers & lenders take full advantage of true, market-driven rates… That is what peer-to-peer lending is all about.

What was the origin of IOU Central, the company?

We were incorporated in Delaware in August 2006 under the name IOU Central Inc. and as a wholly owned subsidiary of IOU Central Inc. (IOU Canada), a Canadian corporation, which had been formed two months prior.

How did you decide to first launch with a Canadian site (as opposed to a US site)?

Because there was no peer-to-peer lending operation in Canada, the management of IOU Canada decided to first launch its website in Canada. IOU Canada was the first company in Canada to offer peer-to-peer lending.

What regulatory issues did you run into in Canada?

Officials from Quebec’s Financial Markets Authority claimed that IOU Canada needed to register to deal in securities in order to operate its peer-to-peer lending business and accordingly requested that all new activity on the website be stopped.

Are you actively working on re-launching the Canadian site? Or are you focused primarily on the US site?

Currently, we are primarily focused on launching our US site. With regards to our Canadian operations, the management of IOU Canada is working with Quebec’s Financial Markets Authority in order to be able to offer peer-to-peer lending in Canada.

How is the regulatory environment in the United States different than Canada?

We believe the regulatory environments are somewhat similar.

Will you be following the same registration process that Lending Club completed?

Yes.

How long do you expect the SEC registration process to take?

We will not be able to commence live operation of our loan marketplace in the United States until we file our registration statement with the Securities and Exchange Commission (SEC) and until the registration statement is declared effective by the SEC. Based on current expectations, we plan to commence live operation of our loan marketplace this summer.

Your web site says “We are looking forward to releasing an online marketplace that will revolutionize peer-to-peer lending”. How will your site be different than existing P2P lending sites?

I don’t want to go into too much detail about our platform because we plan to file our registration statement with the SEC next month. With that said, I can say that we are confident our model takes positive aspects from many of our competitors. We like the true market aspect that bidding creates, and we like the security of only lending to qualified borrowers.

Aside from regulatory issues, what is the most challenging part of launching a social lending site?

The biggest challenge that I think faces our company and peer-to-peer lending in general is the ability to manage defaults. There are risks to investing in peer-to-peer loans. This is why we have designed a proprietary underwriting engine and credit-score grading system that allows only the most qualified, credit-worthy borrowers to post loans on our loan marketplace. Our approach is simple… only borrowers we would lend our personal money can post loans on our site.

The goals for your marketplace seem somewhat at odds: on one hand, you want tight control on underwriting, and on the other hand, you want market pricing. How do you see it?

We don’t think these desires contradict themselves at all. We are building a platform that will allow a true, open marketplace of qualified, credit-worthy borrowers. This creates a win-win for both borrowers and lenders. Lenders can have confidence in their investment with better borrowers, and borrowers will have the advantages of rates determined from our marketplace.

How are IOU Central’s operations funded? Have you raised funding from VCs, or another source?

IOU Canada was primarily funded by a group of angel investors.

How big is the IOU Central team? Where is everyone located?

Our corporate headquarters, which includes operations and most of the management team, are located just outside of Atlanta, GA. IOU Canada’s offices, which include most of R&D and technology, are located in Montreal, Quebec, Canada. The entire team is comprised of seven senior executives with experience that spans all facets of the business, plus several other employees and consultants.

It has been noted that Robert Bialek and Arkadiusz Hajduk, who originally co-founded FairRates in Denmark, joined your team before the original launch; how did that connection happen?

Our CEO, Phil Marleau, learned of FairRates and was impressed with the team’s technical expertise. After several discussions with Robert and Arkadiusz, Phil flew over to Copenhagen in the summer of 2007 to meet with the team. In the end, IOU Canada ended up acquiring their company.

Tell us something interesting or amusing about working at IOU Central.

I take great pride in working at IOU Central. Our entire team (including all contractors & consultants) has completely bought in to this concept. Peer-to-peer lending is a fascinating industry with an unlimited ceiling. Now, more than ever, is the perfect time to introduce this industry. With banks (and other lending institutions) tightening credit guidelines, it is very difficult to borrow money. On the other end of the spectrum, investors are having a hard time diversifying their portfolio with solid investment choices. IOU Central and peer-to-peer lending offers both.