A new face in the alternative finance sector is offering a different take on the typical “peer-to-peer” model.
Marketplace lending is the term used to describe the evolved, institutionally fuelled version of the old peer-to-peer model. Flendr, which launched a few weeks ago, represents the polar opposite point on the lending spectrum.
The platform facilitates lending and borrowing, as well as a form of donation based crowdfunding, between friends and family members. As the name would suggest, lending is at the heart of the proposition. Borrowers and lenders agree to terms (amount, repayment schedule, etc.) via the platform. Interest rates are also subject to negotiation, but in truth there needn’t be an interest rate at all. CEO Daniel Green prefers to think of it in terms of a “thank you” or “reward”, rather than as a yield. Some lenders will demand gratitude, others will not.
The Flendr model is starkly different from the established peer-to-peer lending structure, and the two ought not to be confused. Flendr is not due diligencing prospective fundraisers. The “market” sets the rate – i.e. loans have not been professionally priced. Of course, platforms like Funding Circle also employ an auction-based model, but those auctions take place within sensible pricing parameters. For instance, the minimum rate that may be offered to a “B” rated Funding Circle loan is 9%. Though it might seem like semantics, it’s important to create a clear distinction between the Flendrs and Zopas of the world.
Flendr is about making money flow within established social networks. The platform should be viewed as a potentially powerful enabling tool, rather than as a serious investment product. The model brings to mind Agree It – an app that launched in early 2014 with the goal of empowering Facebook friends to lend to one another.
Naturally the loans extended via the Flendr platform will be very small in size. Mr. Green indicated in an interview with CNBC that the platform itself levies a 2% fee on every transaction.
According to a study of 2,000 UK consumers conducted by the platform, 40% of people over 55 years old are reluctant to lend even a single pound to friends and family, owing to the stress of past experiences. Flendr intends to streamline and sweeten the process, through auto-reminders, monitoring tools and a secure system. The platform will look to capitalise on the 44% of UK consumers (a result that was also unearthed in the above survey) who are keen to support their loved ones financially. As Mr. Green puts it:
“Why wait for banks to make decisions or pay 1000% APR with payday lenders? Most of us have friends and family who want to help. And while you might not know someone who can lend £250, you may know five people who can lend £50 and help you to take a course, organise a special event or just bridge the gap in a tight month. Flendr removes stress by providing an easy way to fund loans with group borrowing as well as one to one loans. Flendr sets out how much has been borrowed, when cash is due and even allows borrowers to pay an optional ‘thank you’ interest rate to their lenders.”