Risk in Alternative Finance

Risk in Alternative Finance
Roy Armitage, Head of Credit, LendInvest; Jerome Le Luel, Global Chief Risk Officer, Funding Circle; Jaidev Janardana, CEO, Zopa; Ilya Kondrashov, COO, MarketInvoice; John Sun, Chief Risk Officer, AvantCredit
Moderator: Mike Baliman, Founder & Host, London Fintech Podcast

In this session, representatives from five different platforms explained how they think about risk -- including credit, fraud, reputational and portfolio risk. Businesses that have gotten risk wrong have lost sight of what they intended to do, so it is important to understand one’s business model and where one’s business is at the current moment, Mr. Armitage said.

Mr. Janardana observed risk can come from “failing to do what we intended to do, or not getting the outcomes you want” due to market forces or macroeconomic events. Mr. Luel observed risk is part of doing business, but one can control the odds and have a plan when adverse events occur. Off balance sheet marketplace lenders may not own credit risk, but their investors do -- so it is an important reputational risk for the lender, he added.

The panel also discussed the tension between verification risk and processing customers as efficiently as possible. Mr. Sun explained the progressive verification system AvantCredit uses to assess customers’ credit. The system currently auto-approves 50% of loan applications and AvantCredit is targeting 80 to 90 percent, he said.