South Korea-based peer-to-peer (P2P) lending platform PeopleFund announced today that it has closed a $ 63.4 million (75.9 billion won) Series C funding round led by Bain Capital with participation from Goldman Sachs. Returning investors include CLSA Asia loan arch and 500 in the world.
The latest funding brings the total raised by PeopleFund to approximately $ 83.6 million (100 billion won) since its inception in 2015.
The C-Series will support the hiring of AI engineers and secure alternative data to advance their credit scoring algorithm. PeopleFund will also strengthen its machine learning-based credit scoring system, which is one of its main differentiators, which provides a quantitative scoring model (for credit scoring), a qualitative scoring model and a model. demand forecasting (for quasi-primary borrowers).
PeopleFund wants to tackle the structural problem involving the risk of high interest rate loans in the near-prime lending industry and offer more personalized financial products to sub-prime and near-prime borrowers through its technology platform based on data, said the CEO and founder. Joey Kim told TechCrunch.
“Over the past six years, we have focused on proving the performance of our data-driven risk management technology, which is the essence of consumer credit,” said Kim. “Our mission is to become the No.1 player in the Korean non-bank lending market to provide better lending options to average Koreans that banks do not serve.”
The fundraising event comes five months after PeopleFund received regulatory approval from the South Korean Financial Services Commission (FSC) to register with the government.
In early June, only three Korean P2P lenders out of 41 applicants obtained FSC licenses to legally operate the business: PeopleFund, Lendit and 8 percent. The FSC said it would continue to review the other candidates.
South Korea passed the world’s first digital lending law, “The Marketplace Lending Act,” in August 2020 to regulate market lenders and protect P2P consumers. The new law allows the approved P2P lending start-up to operate as a financial institution authorized to lend, raise capital from international and national institutions and provide lending referral services to its clients.
The number of lenders in the market in Korea increased from 237 to 102, between August 2020 and May 2021, according to its annual report in 2020.
PeopleFund, which connects borrowers with lenders to enable lending, grants loans at an average interest rate of 11.25% per annum, about 3-4% less than other non-bank lenders. Borrowers close to the premium are not qualified for bank loans and therefore have no choice but to resort to non-bank lenders like credit card loans (or savings banks), said Kim.
What sets PeopleFund apart from other competitors is the industry’s lowest default rate, managed by its own alternative credit rating system and with strong risk management capabilities, Kim said. PeopleFund claims to have managed over $ 1 billion in loans as of October 2021, with a default rate of 2.06%.
Another differentiator is its credit scoring system optimized for medium interest loans based on approximately 480,000 registered credit customers on its platform. PeopleFund built a Credit Rating System (CSS) 4.0 for near prime borrowers to provide more affordable mid-rate loans to borrowers, who use the funds to refinance existing loans from other second-grade lenders. rank. Refinancing loans represent 66% of its total loans, he added.
Kim said her clients include blue chip borrowers as well as individuals and institutional investors who expect a 7-9% return on investment per annum (pre-tax). Its lenders are primarily retail clients of the company through its partnership with Kakao Pay.
“For individual and institutional lenders, we offer diversified lending opportunities at an average annual rate of return of 6-9%. For borrowers and lenders, [our] The AI-driven, data-driven underwriting process has been at the heart of its competitive advantage, which has outperformed other non-bank players by a 3-5% gap in terms of loss rate, ”said Kim.
PeopleFund targets South Korea’s traditional personal loan market, estimated at around $ 67 billion, according to the company.
The company, which accounted for about 57% of the personal loan market share of the P2P lending market in October, hopes to generate profits in 2022, Kim said.
“While the major online lenders in the United States have reached billions of dollars on lending platforms such as Reached and SoFi, Korea’s online lending is just getting started, said Tim Chae, managing partner of 500 Global who has been involved in every fundraiser since the roundtable. “We firmly believe that PeopleFund will become a clear winner with its proven track record, accelerating technological innovations in the non-bank lending industry in Korea. “