BUSINESS PROPOSITION
After the financial crisis, regulators realized the need of making the financial system more solid and increased capital and liquidity requirements for financial institutions, reduced leverage ratios and strongly strengthen banks’ internal risk management procedures and regulators’ supervision.
While this has succeeded in increasing financial system resiliency, it has limited lenders’ capability to lend. Euler Hermes, the credit insurance company, estimated EU SMEs already lacked € 400bn of loans before the current crisis, which has strongly exacerbated the need. This is an issue for policy makers because the loan market is the backbone of our economies having a real impact on financial inclusion, on resiliency of the whole economy and on transforming our economy promoting digitisation and sustainability.
LoanXchain is a secondary loan marketplace where lenders (banks, specialised lenders, digital lenders) can cooperate with institutional investors (funds, insurances, family offices) to finance the economy and its transformation to a digital and climate-neutral world by sharing risk and reward of loan investments. It solves the problem of the loan market no longer able neither to spur growth in the real economy, nor to finance the transition to a sustainable future.
LoanXchain builds on the concept of making investment opportunities available to European savers. According to Deloitte, savers’ appetite for loan investments is strong and investments will reach € 1.3trn by 2023 worldwide. Nonetheless investment funds have limited capacity and capability to source and invest in loans due to limited staff and no branches to reach SMEs and families.
Thanks to new technology LoanXchain enables lenders and investors to directly cooperate in financing the real economy. LoanXchain is a secondary loan marketplace, which enable lenders to easily share risk and reward of loan investments with investors. As a result, lenders can increase lending and profitability, while investors can indirectly leverage lenders’ network of branches and customers to originate new investments.
The main benefits are diversification, liquidity, and increase in loans offering while making each transaction more transparent, faster, and less expensive. It is a win-win cooperation, which also benefit the whole society thanks to easier access to credit, improve financial inclusion and reduced risk of credit crunches.
BUSINESS DETAILS
LoanXchain is the first multilateral marketplace for performing loans fully digitized and based on blockchain. It directly connects lenders and investors in a single marketplace, industrialising and digitising participants’ interactions, cutting the need for middlemen and intermediaries and increasing market liquidity and transparency.
In addition, building on our vision of openness and cooperation, LoanXchain is also a technological platform that provides access to an ecosystem of value-added services (VAS) offered by leading partners which further enhance platform capabilities.
The core element in the platform is the loan, which is a digital representation of a loan asset in the balance sheet of a participating institution.
LoanXchain is based on two pillars:
- Standardisation: the data tape used in the platform is derived by ESMA single loan templates, which provides an EU-wide common language
- Management of single loan position: each loan is a specific asset in the platform, which can then be easily bundled in a portfolio
The platform has five main components:
- Depot, where sellers and servicers upload loan data and run data quality checks
- Warehouse, where sellers and buyers can manage their loan portfolio and perform analysis
- Market, where sellers and buyers can launch buy/ sell auctions and place offers
- Institutions, where institution ID cards are shown
- Transaction, where sellers and buyers exchange contracts and ownership
TECHNOLOGY
LoanXchain is a B2B web platform with an open and easy to integrate architecture and that communicates through the internet using encrypted communication.
The platform has been created with the following technological features in mind:
- Full loan lifecycle on blockchain with tracking and recording of all major events
- Strong use of established open-source technologies
- Modular design allowing to leverage best aspects of each tech deployed
- System integration with legacy systems
- API integration with value-added services and fintech solutions
The platform strongly leverages the distributed ledger Corda (specifically created for the financial markets) in the data layer to record:
- Loan lifecycle: payments, default, restructuring and all the other relevant credit events
- Marketplace data: auction and transaction data
- Participant data: institution ID card
The usage of Corda ensures:
- Immutability of loan data
- Complete, exhaustive, and verifiable tracking of loans
- Safe and certifiable transactions thanks to smart contracts
- Interoperability with other distributed apps in the R3 network
MARKET ESTIMATE
LoanXchain is a B2B company that provide services to financial institutions. The target customers are European lenders (specialized credit institutions, regional banks, challenger banks and fintech lenders), which may have limited capital and liquidity making loan disposal a necessity, and European institutional investors (credit funds, insurance companies, family offices and global banks), which have abundance of resources to invest, but are struggling to find enough investment opportunities.
The addressable market has a very relevant dimension, with a total of € 4.6 trillions of loans originated (ECB 2020 data). We estimate the serviceable available market (SAM) using Thomson Reuters 2018 data on loans transacted in EMEA. The resulting estimate is a market of € 1.2bn loans transacted at the EU level. Finally, considering our geographic presence, our network of partners, and the network of the team member, we set Italy as initial target market, thus our serviceable obtainable market (SOM) is the Italian share of it, which is about € 100bn.
GO-TO-MARKET AND TRACTION
At present our effort is mainly focused on Italian consumer loans (market size: € 75bn per year) and more specifically to salary-backed consumer loans (market size: € 8bn per year).
LoanXchain has already performed extensive activities in the market and since its first pilot transaction with Deutsche Bank and Banca Mediolanum (https://www.loanxchain.com/en/press-first-pilot-transaction-le-village), we are now working on the sale of multiple portfolios for a total of tens of millions of euros.
More details on our sales funnel in the deck attached to the candidature.
