One of the fun things about following peer to peer/marketplace lending is that things are always changing. Sometimes they are good changes, sometimes they aren't. Sometimes they are just changes and we can't tell if they are good or bad either in the short or long term. Things are changing even more and faster in the Bitcoin lending market.
BTCJam has made 3 such changes that are worth noting.
5 Currencies Added to Locked Loans
Just like how BitLendingClub (BLC) added the Brazilian Real to their currencies where you can lock in an exchange rate, Jam has added 5 currencies where you can lock in an exchange rate between your home currency and Bitcoin. Those 5 currencies are:
BRL; Brazilian Real
MXN: Mexican Peso
RUB: Russian Ruble
INR: Indian Rupee
Here is what it looks like on the Jam site:
Coindesk's price is what is used to lock in the exchange rate between the USD or Real or Euro and BTC.
I am a big fan of this feature generally here and at BLC as I think that anything that increases the adoption of Bitcoin generally and in peer lending specifically is a good thing. Jam's specific currency selection of Rubles and Rupees is particularly smart. Russia's economy is suffering and its smaller, less connected (to the Kremlin) businesses need access to capital that Bitcoin lending can provide. India, on the other hand, is still growing but that growth is slowing down. There are many fast growing businesses here that have a lagging local banking and financial system that they have to work with. I like these moves alot.
I don't often invest in currency locked loans as I am then taking the risk on what the Bitcoin price will do during the loan AND taking the risk of whether the borrower will pay me or not. This can seem like lots of risk for the return and while I do it, most of the time I don't and I invest in regular BTC only loans.
Anti Fraud Expert Added
Marisela Zaragosa, who comes from the banking world and a short stint at Lending Club has been added to the team to help improve the fraud policies as well as improvement the verifications that have been so sorely lacking at Jam and so often mentioned here on this blog.
What's Good and Bad
It's all good. There's no bad that I can see from a move like this and I don't think it's 'just for show'. I think its a genuine attempt to work at a shortcoming that Jam is finally admitting that it has.
In fact, its a little bit of a victory for all of us in the BTC p2p lending world who have been calling out the platforms when they have glaring shortcomings that put our lending funds at greater risk. I am one of the first to call out Jam for their shortcomings so I congratulate them for what I hope is a genuine attempt to address this issue.
New Risk Based Pricing
In what is the most controversial of these 3 changes, BTCJam is instituting new risk based pricing that works similar to the USD lending world where all A rated loans pay X% and all B rated loans pay Y%.
This doesn't sound like it would be controversial, so why is it?
I like the uniformity of pricing based on rating and since I have seen how it works on the more mature platforms of Prosper and Lending Club, I know that it works and can work well here.
The controversy surrounds the inability to know or understand the credit rating system itself. In USD loans, everyone understands that a higher FICO credit score likely means they will be an A loan instead of a C loan. So far, we have no idea except for information received (but not necessarily verified) by Jam as being the determining factors for their internal credit score. Former head of community support and now Product Analyst at Jam Alexis Aiono told me by email a couple weeks ago that the credit rating system is a machine learning tool and algorithm that incorporates both verified information and behavior on the platform (like amounts borrowed and lent and repaid).
It's also controversial as it is seen by the many who distrust Jam already as an arbitrary placing of pricing on loans. Prosper and LC have no such issues as the degree of trust in their platforms is very high. As many as 8 out of 10 that apply for loans are declined. It still looks like Jam throws every loan up on their platform to see if it sticks. It may earn them more fees but is a low trust building way to go.
I think it could be successful but I'm taking a wait and see attitude before deciding.
BTCJam looks like it is really trying to improve its borrower and lender experience and learn from its mistakes. The anti fraud and risk based pricing moves are clearly an attempt to standardize to what established and successful USD peer lending platforms are doing. The currency additions look like an attempt to increase BTC adoption and use and all 3 together could mean big changes to how people use, interact with and profit from the platform.