Saturday, July 23, 2016

Faircent - Park your funds

Faircent is peer to peer lending platform. It acts as marketplace and connect prospective borrowers and lenders. It is co-founded by Rajat Gandhi and Vinay Mathews in 2014. Faircent provides small loans with average ticket size of around Rs 1.5 lakh. It allows lenders to give personal loans in range of Rs 30,000 to Rs 5 lakh and up to Rs 15 lakh for business purposes. 

Business Model


Borrower and lenders have to register on portal by submitting requisite details and paying predetermined fees.

The borrowers profile is analyzed based on its internal rating and score is assigned to each borrowers. Based on the score the borrowers are bucketed into different category.

Once registered, borrowers and lenders can interact with each out without any intermediate party. Borrowers can raise request on platform or reach out to lenders citing their funds requirements. Lenders can also make offer to borrowers.

Faircent assigns ratings to borrowers by using algorithm that analyzes big data.  The rating is based on demographic, financial data from bank statements and credit cards, data from national credit bureau indicating history of servicing loan and social data from facebook and LinkedIn to identify the credit-worthiness of borrowers and to assign scores.

The terms and conditions of lending, interest rate and installment phases are negotiated and mutually decided by borrowers and lenders. The borrower has an option to accept or reject the offers from the lenders.

Once the consensus is reached, borrowers and lenders enter into formal contract. The contracts specifies detail of financial transaction along with liabilities of each party. 

Pictorial representation based on publicly available information. Icon obtained from Board of Innovation

Innovation based on psychology parameter: To ensure that borrowers do not default, the Company creates connects borrowers and lenders from same profession or same community or based on their mother tongue. This creates social pressure to repay loan and thereby reduce incidences of default in repayment. The borrower's profile is also rated by Editor - Low, Medium, High and very High risk. These rating is displayed on website to all visitors.

Partners

  • Yodlee provides cloud platform for digital financial service. Its bank account aggregation technology (to link multiple bank accounts - saving account, loan accounts, credit accounts, etc) would enable Faircent in reducing time taken in processing loan application and thereby make efficient lending decisions. It allows users to see credit card, bank and investment accounts on a single screen.
  • TransUnion for real time credit appraisal of borrower. TransUnion has an eKYC module based on Aadhar card. The partnership will enable Faircent to build robust algorithm for data analytics and maps multiple data points of potential borrowers in real time.
  • Lenddo uses customers social data and online behavior information in its patented model to determine individual's willingness to pay. 

Revenue Model

  • It’s a listing-based subscription model.
Listing fees from borrower - Rs. 1,500
Listing fees from lenders - Rs. 1,500 to invest up to Rs. 1.5 lakh. Thereafter, additional fees of Rs. 1,000 for every additional lakh. Thus, the effective fees received by Faircent is 1% of the lending amount.
  • The maximum recommended rate of interest ranges from 12% to 36% and the loan tenure from 6 months to 36 months.
  • Borrower of pay interest between 1-15th of every month. Failure to pay EMI attracts penalty interest of 24% p.a. on the amount due for the duration of delay. This penal interest is transferred to lender. Additionally, borrower also pays towards administrative fees and other charges
  • The interest received from borrowers is transferred to lender either by cheque or online fund transfer.
  • If borrowers defaults in paying regular monthly installment, then they are charged penal interest which is directly given to lenders.
  • If borrower profile is not accepted then Rs. 1,000 is refunded to them. 

Funds Raised



So, if you have funds lying ideal, park it here and earn cherish passive income