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Interview with Andrew Graham, Borrowell

Can you tell us a bit about your background and why you decided to start the platform?

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Before launching Borrowell I led the insurance business at PC Financial, a mid-sized Canadian bank, which got me interested in consumer finance. As I looked at what was happening around the world and saw the kind of innovation that was happening in fintech, I was especially impressed with how marketplace lending was transforming the lending experience for consumers. I wanted to bring that experience to Canada - to offer better rates, better service and a better customer experience to Canadians, and attractive returns to investors.

Can you give us a brief introduction to Borrowell?

Borrowell is an online marketplace lending platform providing Canadian consumers with better borrowing options. Our affordable, fixed-interest loans are funded by carefully selected institutional investors including a mid-sized bank and an investment manager. We have a great roster of equity investors representing some of the top business leaders in Canada, and we have a strong team, with deep expertise in credit risk, technology and consumer marketing. 

Why is there a need for Borrowell in the Canadian market?

In many industries, the Canadian market is dominated by a small number of large players, and financial services is no different. As Canadians we're very proud of the stability of financial system, and the fact that our banks weathered the financial crisis without requiring any government bailouts. At the same time, this conservatism and the size of our banks can hinder innovation, and we think there's room in the market to offer a segment of Canadians another option when it comes to unsecured consumer loans.

Tell us about the regulatory framework that applies to peer-to-peer lending in Canada.

The regulatory framework for financial services in Canada is complex. Regulations for lending differ across our ten provinces and three territories, and there are stringent anti-money laundering, cost of borrowing and know your customer regulations. Pure "peer-to-peer" lending is very challenging in this regulatory environment, so Borrowell works exclusively with institutional investors for now. On top of all of this, there is the complexity that comes from the vastness of our country, the resulting regional differences, and two official languages.

Looking at the specifics of the platform- what are the borrowing rates, fees and average interest yields?

We're offering rates as low as 5.9% APR. We charge a one-time origination fee ranging from 1-5% to the borrower, and a servicing fee to investors equivalent to 1% of payments. We anticipate yields net of defaults and fees to be in the high single digits.

What type of consumer and investor are attracted to your platform?

We know that there is a large number of responsible Canadians with good to great credit who reliably pay back their loans, yet have few affordable borrowing options. Canadians carry more than $80 billion in credit card debt, about 1 in 3 carry a revolving credit card balance, and most credit cards charge 19% interest or even higher. And Canadians have lower delinquency rates than our US counterparts. On the investor side, like much of the rest of the world, yields on fixed income are low at the moment, with the target bank rate at 0.75%. So we've had lots of interest from Canadian institutions that are looking for higher yields and the diversification a new asset class offers, as well as US and other investors looking for geographical diversification in the marketplace lending space.

How do the investors pick their loans? Is it via an auction model or are the funds auto-diversified?

Funds are auto-diversified between investors.

What is the minimum and maximum loan sizes you can accommodate?

We're offering loans from $1,000 to $35,000, with 3 year and 5 year terms.

What is the minimum investment amount?

Because we are only working with institutional investors, the investment amount would be determined on a case-by-case basis.

Where do you see the platform in a year’s time?

We see our first year as proof of concept. So we're focused on finding good Canadian borrowers, acquiring them at reasonable cost, and providing amazing customer service that makes them tell others about Borrowell. And we're showing our investors that our credit underwriting model is working as predicted and will generate the returns for them that we forecasted. So we are very excited about the months ahead.

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