Credit worthiness in the US: 11% of adults don’t have credit reports. for Black and Hispanics this rate is 15%. Lack of access forces many into the hands of…
Payday loans: 1/20 households has taken one out at some point. Annual rates of 300-1900% per year. 75% of revenue in the industry is driven by people that have to take out a new loan to cover a first. Full of hidden fees. The payday loan market is $9b/yr, with an average loan size of $375 and repaid interest $520 (140%) according to Pew. This is predatory lending by loan sharks.
Flipr is the alternative.
What it does
Flipr is a peer to peer micro-loan marketplace intended to connect borrowers and lenders allowing:
- Borrowers to gain access to loans of $1000 or less, build their credit, and break out of vicious lending cycles that are economically crippling.
- Lenders to make market-beating rates of return on almost any amount of excess capital while helping others.
How? At sign up we gather borrower’s bank account information, SSN, CreditKarma score and FICO alternative credit score. Based on this, using a proprietary algorithm, we calculate an initial credit limit and base interest rate. Credit limits and base interest rates are subject to be raised and lowered respectively as borrowers prove credibility and successfully repay loans on the platform. Borrowers create a profile that includes a photo and a bio.
At sign up we gather the same information from lenders and allow them to start offering loans immediately. Lenders are informed that they bear the risk for all potential defaults and of what recourse they have in these cases (can report the borrower and give them a lower rating which affects their internal credit rating and potentially could even have them banned from the platform.
The marketplace allows borrowers to set: the amount needed, their desired interest rate, and the tenor of the loan. Borrowers are then matched against lender’s offerings and enabled to apply for a number of loans. We will provide a risk rating to the lender. Ultimately, the lender decides whether to accept or deny the loan application at which point they transfer the money to the borrower and the deal is closed.
Once a loan agreement is reached, the borrower and lender have the ability to chat through the app (phone number exchanges and the like are discouraged) and even to renegotiate loan terms.
Upon the repayment or termination of a loan the lender rates the borrower and it is the basis of this rating that future credit worthiness is calculated.
Over time the algorithms that calculate initial credit worthiness and interest rates will become more robust as we learn about user behavior.
How I built it
We conceived a system that connects borrowers and lenders using p2p technology.
We built out the app for deployment on iOS using Swift. For our back-end we used Parse, which has a very friendly interaction with the iOS application environment. We built out the back-end pretty quickly and spent a majority of our time on application development. Our system uses a proprietary alogorithm to calculate initial credit-worthiness.
Challenges I ran into
iOS story board is difficult to implement and does not play well with others. Sleep deprivation Finding an algorithm for calculating the
Accomplishments that I'm proud of
We have built a functional iOS application, a robust back end system to store data, and we're most proud of the actual concept which could, in fact, provide tremendous social impact with relatively low investment.
What I learned
Members of the team learned about: Swift, iOS, the process of building an app, finance and the micro-lending/trust-based lending industry.
What's next for Flipr
This would be an interesting and fun project to continue to develop - bringing to market could yield fruitful results both from a monetary and a social theory perspective. Refining our risk score algorithm would be a key step.