Q&A with Lenders
We're breaking from formula slightly this month with our regular Q&A segment: instead of us asking questions to one of our team, we've given our Lenders the opportunity to ask us questions instead.
It seems like it might become a regular segment too, because we were overwhelmed with over 150 question submissions. We would love to answer all of them, but we've had to narrow it down to the questions that were most frequently asked. So without further ado, let's dig in!
Credit & Collections
How do you determine a Borrower’s risk grade?
We can’t go into a huge amount of detail about exactly how (it’s a bit hush-hush), but it’s really all about looking at the cumulative picture of the information that Borrowers provide during their application; using all of that data to create a picture of the statistical probability of that individual defaulting on any loan they may take out.
It’s not as simple as “do you make enough money” – in fact, income level only has a very small role to play – we look at credit history, age, employment type, and a number of other details to come to the risk grade.
Our scorecard is continuously refined by our fantastic data science team, and independent tests run on it have shown it to significantly outperform expectations.
What’s your collections process?
We have an in-house collections team who manage a significant part of our collections process, but also outsource to Dun & Bradstreet.
Collecting is an integral part of running a consumer finance business (our core team has previously been involved in two successful consumer finance ventures). Click here to read our full collections process.
How do you meet your obligations as a responsible lender (CCCFA) especially ensuring loans are affordable?
Affordability assessments are one of the most critical elements of loan assessment. We require Borrowers to supply three months’ worth of bank statements, as well as detail their regular expenses, assets, liabilities, and income. All of these details are cross-referenced to ensure that they agree with one another, and bank statements are reviewed for any red flags.
We calculate a minimum surplus amount based on these details called “uncommitted monthly income” (UMI), and require certain levels to be met there in order to consider the loan viable (you can read more about UMI at sorted.org.nz).
Is it just me, or are there fewer loans in the marketplace at the moment?
Yes and no. There’s two factors at play here – seasonality and Lender demand.
Just like most industries, consumer credit has high and low periods throughout the year. As a rule of thumb, Autumn/Winter is low season, and Spring/Summer is high season. Volume growth will start picking up faster soon.
But Lender demand is a huge factor, too. While volume in July 2016 was ~$2.5m higher than in 2015, the number of Lenders on Harmoney has almost doubled. Yes, there’s more volume, but at this current point in the low season, high demand means that volume is getting spread across more Lenders.
Curious if you guys yourself use the platform's services and how do you find it?
Most of our staff do have Lender accounts (but employees can’t take out loans). There is a lot of competition between the team – we do have a RAR leaderboard in the office which is eagerly watched. It’s really important that we use the platform, it keeps the whole team connected to the Lender community and helps us understand where things can be improved. It also means that we’re developing enhancements knowing how they’ll be used, and testing them on our own accounts.
What proportion of your total lending is to the retail market and will you commit to continue to support individual lenders like myself?
At present, approximately 28% of funds lent on the marketplace are from retail Lenders. We absolutely intend to continue supporting the retail segment of our market - retail lenders are a core element of the peer-to-peer proposition.
In the same respect, we equally intend to continue supporting the wholesale segment of our market. Both are important, and we certainly don’t have any intentions of abandoning either.
Business & Product Updates
Can you notify me when I have enough funds to reinvest?
Soon, yes! We know that a lot of you are very keen to have this feature. We're in the midst of a complete overhaul of our comms - it (and other notification options) are not far away – we promise!
The reports show a considerable increase in Harmoney Corp’s operating losses this year. Are you confident you can offer a continuing platform?
Yes - we planned for a loss in F16, and raised capital in order to cover the loss. We’re absolutely confident that we can continue running the platform – losses are entirely normal in the early stages of running a low-margin business like ours, where early investments in systems and personnel are critical to success. We’re aiming for cash-flow neutral later this year.
It is important to note that there is a back-up service in place that will step in and collect payments from Borrowers and distribute to Lenders should Harmoney go into liquidation or be in breach of its licence for more than 5 days.
How do you prioritise new features?
We have a product roadmap for both the Borrower & Lender products. For prioritisation on the roadmap, we take a number of factors into consideration – how much Lenders/Borrowers want the feature, how resource intensive it will be to implement, how it aligns with business priorities, etc. Some things that Lenders don’t even know about will be prioritized at #1 because they’re critical to the day-to-day running of the business, just as some things that have little impact to the day-to-day running of the business will be prioritised at #1 because of their importance to Lenders.
What exciting changes are you working on bringing out next?
Hold onto your britches, because there is a lot coming up, and we’ll be in touch with you all very soon with details... Exciting times ahead!
Thank you to all of the Lenders who submitted questions for the Q&A. Don't forget that our Lender Services team is always on hand to help you out, so don't hesitate to contact firstname.lastname@example.org if you have more questions!