FintruX advisor Yash Mody aims to help businesses with P2P lending
Yash Mody of P2P lending platform FintruX shares how the blockchain company aims to help small businesses and startups.
Interview from Blockchain Week London on 23 January 2018.
Read the transcript:
My name is Yash Mody and I'm a business adviser for FintruX.
FintruX is a global peer-to-peer lending platform. So we're connecting borrowers and lenders on our platform and we're doing it across the world. So we're going to be starting in Canada and Singapore first and then expanding out to other geography after that.
And what stage are you at? Have you gone live?
We are prototyping right now. We've done our pre ICO, and we've already raised twelve million dollars so we're kind of excited by that.
Can you explain a bit about how it works?
Sure. So basically, we're building the platform, which is going to be online and also on the mobile phone, so any borrower that's looking to get capital for their business, whether it's a startup or a small, medium-sized business, they can come to the website and put in all their information.
And also the investors would come to the website and put in their information. If, you know, whatever amount that they're willing to loan, and we're basically matching the borrower and investor.
So this isn't for individuals, this is all for businesses?
Yes. We're focusing on the small and medium businesses and the startup businesses because we've realized that that's the core clientele that needed the most. You know, there's a lot of services for collateral mortgages or collateral loans and even for individuals, but the small business that really doesn't have the history, you know, they find it really hard to raise capital that they need to meet their cash flow needs.
So, you say they find it hard. What are the problems that you're solving that aren't currently solved by what exists?
Yeah. So, a typical small business doesn't have the many years of history. So oftentimes when they go to a bank to get the financing, banks require them to have an account with them to have, you know, cash flow in the bank account, which kind of justifies them giving a loan. But when, if they need it, they're not going to have cash flow there. And even if the bank were to extend the credit, the requirements for the paperwork, the process, is just so lengthy, and there's just so much paperwork involved in it that it just becomes a tedious process.
It takes months and months, and at the end, even if they were to get approved, the terms and conditions are just so not favourable that at the end of the day, it just becomes an option that's not viable for them.
But surely those things are there for a reason. So how are you reducing the paperwork load and the difficulty of terms and conditions without making the situation untenable with the loan?
Yes. So, some of it is an optimization through technology. We're integrating a lot of services and service providers that can kind of connect to our platform and automate a lot of that process. And then the additional kind of benefit that we bring to the table is that we've built a whole process called credit enhancement, and that's basically ways that we figured out how to secure a loan.
So, originally, we have a traditional business and that's been around for 20 years, and we've been doing basically securitisation. Securitisation is when large institutions buy bulk leases and bulk loans. So we've been servicing that business in Canada for the last 20 years, and we've learned a lot from that business. And we've kind of learned the tricks of the trade and how they use that information to secure the loan.
So what we're doing is basically taking that information and knowledge and applying it to smaller loans, which is ideal for startup businesses. So to get, to give you, a little bit more information about that. We basically make the loan safer by applying what we call collateralisation.
So for every loan, we hold back a small portion and we spread the risk across many loans. So if there's a default, then the collateralisation amount can be applied towards that loan. So, in that way, if a lender has a default, then we can use that pooled amount to pay back the lender.
And doesn't that mean that you need a big deposit bank there or are you able to do that all through holding back part of the loan? You don't need to have a deposit bank the way a traditional bank would?
So, we're doing both of that. So, we're doing the collateralisation, and we're also, part of our token sale that we're going to raise all this money, we're holding back 5% as a reserve. So we're going to have that as a, you know, an added layer of security. So we have four layers of security and another layer that, which we've added also, is called a guarantor and we're basically building a marketplace for guarantors. So when a borrower and investor are basically signing up for the loan, we have the option of adding a guarantor to that, and the guarantor can kind of provide security in case there's a default.
And what's the incentive for the guarantor in this situation?
And so here's the beautiful part about it. It's a marketplace, so basically they can negotiate what the terms are going to be. So the guarantor will say, you know, I would require this type of compensation and the investor can accept or decline or, you know, it's on a case-by-case basis.