Juan Carlos Flores
Co-Founder And Director General
Doopla
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Insight

Peer-to-Peer Lending Platform for the Middle Class

Tue, 05/22/2018 - 10:37

Innovative deployment of technology can empower users, says Juan Carlos Flores, Co-Founder and Director General of Doopla, a Mexican peer-to-peer lending platform that took a different tack from its fintech peers by focusing on a segment often neglected by its competitors: the middle class. “Our value proposition focuses on reducing interest rates through the use of technology and the empowerment of the middle class.”
Unlike other fintech players that offer solutions geared toward financial inclusion, Doopla is the world’s first peer-to-peer loan platform to offer an innovative payroll deduction solution. “According to data from the National Commission for the Protection and Defense of Users of Financial Services (CONDUSEF), those who ask for a MX$10,000 (US$510) loan from traditional financial institutions pay an average annual interest rate of 63 percent,” says Flores. “We do not think that is fair. Providing a loan to a payroll client should be even more economical, given that financial institutions do not accumulate collection expenses. Yet, interest rates remain extremely high.” Inequality is highlighted by the fact that savings accrue an annual average of only 3 percent in interest.
Building on the premise that loans to the middle class are extremely expensive, Flores says Doopla focused on reducing this cost asymmetry. “Our clients pay an annual 18 percent interest rate on their loans, while our investors receive a net annual return of 15 percent. Doopla only charges a 6 percent fee to successful applicants over the total amount funded.”
In addition to a lower cost, Flores says that other factors differentiate Doopla from its competitors, including banks or other peer-to-peer loan platforms. “One of the most important differentiators is user experience. Whenever you go to a bank to obtain a loan you need to go several times because there is always something missing.” Doopla’s platform is designed to avoid this, he says. “You just need to fill out an online application on our website and in 24 hours you will know whether the application is approved or not. The next step is to obtain funds from our investors. On average, a MX$20,000 (US$1,000) loan is resolved in less than five hours.”
Doopla’s payroll deduction scheme means the platform has an overdue rate close to 0 percent. But Flores estimates that this number will likely increase to 2 percent as the company grows its client portfolio. “Around 30 percent of the loans we have authorized are done through payroll deduction. Our goal is to increase this number to 50 percent by the end of 2018 and reach 80 percent in 2020,” he says. The company signs agreements directly with companies so their employees can access this benefit. “Most of the companies with which we have agreements are medium-sized businesses with about 500 employees. However, in 2017, PwC became a client. To finalize this agreement, we had to undergo a strict due diligence process but the deal generated trust in the market and we have been attracting more clients as a result.”
Flores says Doopla has been well-received. It has over 300,000 registered users, of which 90 percent are loan applicants and 10 percent are investors. However, he says around 70 percent of investors are recurrent. “The minimum required investment is MX$2,500 (US$129), but our average investment is MX$25,000 (US$1,290). Every month our investors receive a capital payment as well as interest on their investment.” The challenge Doopla now faces is attracting more investors but rather than focusing on individuals, Flores is trying to lure bigger investors. “The idea is that around 50 percent of Doopla’s investment will come from sophisticated investors, such as family businesses and investment funds.” He is confident that the platform’s successful results and the company’s transparent and strict underwriting processes for loan origination and corporate governance will help it convince these big investors of the platform’s potential.