Recently I was introduced to Radoslav (he goes by Radko) Albrecht, the founder of Bitbond. Bitbond is the 3rd largest Bitcoin based peer to peer lending platform and it recently received a 200,000 Euro investment from Point Nine Capital. As you will see in the Q&A below, they are poised to make some big moves in the market. I was most interested in what they do to position themselves in the market and what they do to help investors feel confident in lending on their platform. Here are my questions and his answers:
My comments are in the blocks [like this]
Differentiation and Statistics
What do you think differentiates your platform from the other BTC lending platforms (other than the 36 and 60 month terms you offer)?
We differentiate ourselves by three main factors
- On the borrower side we mainly want to focus on small businesses which for us are 1-5 person companies where the owner takes the loan as a personal loan but applies it for a business purpose. Our competitors mainly focus on consumer loans and bitcoin miners.
- We apply risk-based loan pricing. That means we as a platform set the interest rate according to the borrower's creditworthiness. On our competitor's platforms either the borrower sets the rate (Jam) or there is a Dutch auction mechanism (BLC). I think these approaches lead to a mispricing of loans and to inferior investor returns.
- We are more transparent by publishing our entire loan history here https://www.bitbond.net/statistics The download is a direct query from our database and is not manually adjusted.
[Kudos to direct queries with no manipulation of data]
Why do you use blind identifiers instead of letting people list their own name or handle (like FB or Twitter)? A few people believe that you are taking one of the best advantages (of knowing who your borrower is and engaging with them) and turning it into an investor disadvantage.
We started this way because it was easiest to implement from a technical standpoint. Until recently we were a very small team so we had to do everything as lean as possible. In January we will start with a complete redesign of our site and this point is also on our list. We will allow borrowers to disclose links to their accounts but will probably not make it mandatory. However, should there be strong demand from investors we would be open to make credentials like twitter handles or ebay usernames public.
[I like this redesign idea and that they understand that these blind identifiers can be a negative for us lenders and I hope they include Ardeva too]
What is your approximate BTC value of funded loans?
You can also see this from our loan history. The funded BTC value to date is BTC 290.6
Do you have any repayment statistics? For instance BTCJam claims they have an 85 or 90% repayment rate although no one who invests there believes that's true.
Our repayment rate is at 87%. You can also make a cross check via our statistics. The only thing that it doesn't show you is the recovery rate on defaulted / charged-off loans.
[Note all the great information that's available on their Statistics page. I can only hope that the other platforms will follow suit sooner instead of later. It is all available for download and here is the screenshot]
Can you describe in a little more detail how you calculate your borrower rating?
Every rating starts with a manual review of the three documents every applicant has to upload. These are: a government issued identification document, a residency document like a utility or phone bill, an income document.
These docs have to satisfy our criteria, otherwise the borrower gets rejected straight away. [I like that]
Then we have roughly 30 data points that we take into account for our rating. This includes personal details like date of birth and country of residence, credentials we get from facebook, ebay and other accounts which users can connect, plus data we get through the browser. We then sum up the scores for each datapoint to the total which then gives us the rating. If the minimum rating is achieved the borrower gets verified and can publish loan requests. If rejected, the borrower cannot publish any loan requests to our platform.
What exactly does Identification document on the ID check for the borrower mean?
Every borrower applicant needs to upload a photo ID or passport or a driver's license (basically every government-issued photo ID is fine). We check this document manually and also cross check the data on the document with other information we get from the applicant.
What, if anything, do you do with defaulted loans?
We take several steps to collect the funds. This includes emails and phone calls. If our collection process is not successful we charge the loan off and disclose the personal details of the borrower to the lenders.
As soon as borrowers are late on a payment we block withdrawals. [Potentially helpful and also potentially too late]
If a defaulted borrower has a remaining balance on their account we pay it out to the lenders according to their holdings in the loan without deduction of collection costs. As mentioned above we plan to pass non-performing loans to debt collectors soon which should improve our recovery rates further.
What are the top 3 countries of borrowers? investors?
For borrowers: US, Australia, Great Britain. For investors we don't know this because we don't ask for their country at sign up. But since our site so site so far is available in English only it's most likely also countries where the first language is English. This hypothesis is supported by our traffic data.
What are the top 2 or 3 loan purposes of borrowers on your platform?
Currently it's mainly bitcoin mining, bitcoin trading and educational purposes. From our statistics you can also go through the loan descriptions in case you are interested in more details. We introduce exchange rate pegged loans this week and will then focus on more traditional small businesses as mentioned above.
What are your goals for BitBond in 2015?
Some goals for us include: build an API so investors can build their own investment clients, continuous improvement to our credit scoring, start a cooperation with at least one international debt collector, redesign our site and add further features for our lenders.
Bitbond is a growing platform in the BTC peer to peer lending world. It has alot of positive attributes and some negatives that Radoslav acknowledges and appears to be working on to make his platform better and more investor friendly. The availability of statistics, active and engaged credit process verified by people and the small business focus of the platform are some things I really like. I don't invest there at the moment but I'm thinking about giving a try after having talked to Radoslav.