By Ryan Weeks on 26th October 2016
New open-source, blockchain system PUFIN aims to bring “order and uniformity” to marketplace lending – for free.
LendingCalc.com, a data analytics start-up in the marketplace lending space, is launching a blockchain-fueled network, with the aim of creating global loan identifiers. LendingCalc.com’s Ben McMillan and Mike Mazier have filed to patent a fee-free system to use blockchain technology to generate unique identifiers for loans. The idea is that the yet-to-launch system will be a free to use, open-source resource for the marketplace lending industry.
PUFIN has been launched against the backdrop of the US Treasury’s white paper – “Opportunities and Challenges in Online Marketplace Lending” – which was published in May. The paper arrived just days after the dismissal of former Lending Club CEO Renaud Laplanche, who was discovered to have overseen the falsification of loan data during his long stint in charge of the platform.
One of the key side headings in the white paper was: “Greater Transparency Can Benefit Borrowers and Investors”. Respondents to the Treasury’s Request for Information – which directly informed the white paper – were strongly in favour of greater transparency within the sector, specifically in relation to standardised, loan-level data for investors. The absence of a developed secondary market was also noted en masse. A number of commentators have since suggested that blockchain could be the key to developing an overarching secondary market within the marketplace lending space.
In the immediate aftermath of the Lending Club fiasco, loan validation software company Global Debt Registry – which acts to ensure that the disclosures made by lenders are accurate – experienced a surge in interest from online lenders. The newly launched PUFIN will seek, in a not dissimilar fashion, to capitalise on the recent drive for greater transparency within the marketplace lending sector.
The assumption must be that LendingCalc.com – which offers data aggregation, portfolio analytics, proprietary loan scoring and data acquisition, and automated undwriting algorithm services – will hope to establish itself as a major analytics firm in the sector, with PUFIN acting as a kind of "loss-leader" product.
"Marketplace lending is in a rapid growth stage, which will make reliable and widely adopted systems and standards essential,” said LendingCalc.com co-founder and PUFIN co-author Mike Mazier. “The need to uniquely identify loans compares to problems addressed by currently standard systems such as CUSIP, which has charged fees to license its identifiers for decades."
While built for marketplace lending, PUFIN will be available to any financial instrument. "Anyone will be able to freely generate a unique 34-digit address and associate it with evidence of a financial instrument using the same blockchain technology that has been well demonstrated by Bitcoin,” said Mazier.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.