Peer-to-peer lending is a relationship between Borrowers and Lenders facilitated through a marketplace. Harmoney's role is to administer the Harmoney marketplace. This page details the ins and outs of how we do that.
Harmoney is NZ's largest lending marketplace. Our marketplace matches people who want to borrow money, with those who want to lend money. It's people lending to people.
How does Harmoney manage the Marketplace?
How does Harmoney manage the Marketplace?
Harmoney uses two funding models in order to make loans to Borrowers. These are:
- the Peer-to-Peer Service, where Borrower loans are funded from investments by retail and wholesale investors through its peer-to peer marketplace; and
- a wholesale funding model, where Borrower loans are funded from investments by wholesale investors.
Borrowers are treated the same regardless of whether their loans are funded from the Peer-to-Peer Service or the Wholesale Funding Model. Loans are allocated for funding from either source in accordance with Harmoney’s Loan Allocation Policy described below.
Harmoney’s Loan Allocation Policy
Harmoney’s loan allocation policy is designed to allocate loans between the wholesale and retail investor marketplaces on a fair, reasonable and equitable basis to ensure that each marketplace receives a representation of the overall risk grade of Borrowers approved to submit their loan (Loan Allocation Policy).
Harmoney sets a loan allocation percentage for each marketplace. Harmoney does not select specific loans to be allocated to either marketplace. Harmoney may, from time to time where it receives high loan application volumes or a higher proportion of funds from wholesale or retail Investors, allocate a greater proportion of loans to be funded from either the Peer-to-Peer Service or Wholesale Funding Model. Harmoney’s Loan Allocation Policy seeks to ensure that over time there is a representative sample of loan applications available in each marketplace.
The Loan Allocation policy allows some loans to be allocated directly to the wholesale marketplace. These relate to:
- A new product, service, or feature or
- Change in risk underwriting process, or policy
New Product, Service, or Feature
Harmoney proactively seeks feedback from all stakeholders, including Lenders, Borrowers, regulators, industry bodies etc. We do this via surveys; call centre communications, and online correspondence and feedback loops. Based on this feedback we are constantly improving our offer with new features and services, and developing new products.
Before launching these features, services, or products, Harmoney may make the decision to channel some or all loans to wholesale Lenders for a defined period as part of the testing process. The reason for doing this is to ensure that the product and processes work as expected prior to attracting multiple Lenders on a single loan.
Changes to Risk Underwriting Process or Policy
Harmoney regularly reviews its policy and process with regard to underwriting risk. Harmoney has a data science team tasked with producing analytical work to improve the quality of the decisions Harmoney makes as to the approval and risk grading of potential Borrowers who apply to list on the marketplace.
Amendments to the credit policy and process are made following a review process where either statistical or actual experience suggests that improvements can be made. The Credit Committee will consider the analysis and recommend to our Board of Directors one of the following:
- Level 1 - that the analysis supports a change, and that the change is unlikely to result in any material adverse effect to forecast default rates; or
- Level 2 - that the analysis supports change, and that the change may result in material adverse change to the forecast credit loss but that the quantum can be reasonably ascertained.
We may choose to test a level 1 change exclusively with wholesale Lenders for a period of time before making the loans available in the marketplace.
For level 2 changes, Harmoney has created an "off marketplace" specifically designed for wholesale Lenders only. Harmoney may use the “off marketplace” to test and learn in order to better establish the credit default rate likely to result given the changes. Once tested, the rules may or may not be adapted and offered to all Lenders, but this is dependent on the results of that testing. This may occur where, for example, the loan amounts sought exceed the usual limit specified on the Website, or where there are other particular credit features on the basis of which Harmoney determines to make the loan listings available to wholesale Lenders only.
Loans funded 100% by the Auto-lend Option
If a loan is 100% funded by retail Lenders using auto-lend option, then it will not appear on the marketplace. This is because the auto-lend process runs just before the loans go onto the marketplace. Harmoney dynamically manages the proportion of loans that can be funded by auto-lend based on Lender demand and loan flow.