Today, Cloud Lending Solutions, a cloud platform for marketplace lenders unveiled CL Exchange. I spoke to Snehal Fulzele, CEO of Cloud Lending Solutions to learn more about this new product offering. CL Exchange is a marketplace where online lending companies can source borrowers and also trade loan applications among other lenders on the marketplace. This will benefit both borrowers as well as the platforms. Many investors on the platforms are aware of the fact that 90% of loans are rejected for various reasons.
If a platform decides not to underwrite a loan, they can put it on the CL Exchange for other platforms to have a chance to bid on that borrower. The use-case is not just aimed at going down the credit spectrum either. Many platforms offer loans to a niche market and all platforms have unique underwriting models. For instance, an otherwise perfect borrower applies for a loan for $12,000, but the online lender only loans up to $10,000. If the borrower has opted in, they can receive an offer from another originator. The borrower benefits in two ways. First, they benefit from being funded instead of a simple decline, which offers a much better customer experience. Second, they receive the lowest possible interest rate as multiple platforms can bid on the rate they will receive.
The platforms benefit from getting access to a new customer acquisition channel. In addition, the customer application is no longer wasted as the original platform will receive a piece of the origination fee if a different platform decides to underwrite.
The new product will remain in beta for the next 3 months, but then will be released for other online lenders. Cloud Lending Solutions hopes to have 10 online lenders participating within 3 months. The objective for the private beta is to make sure that the compliance and technology is ready for scale. CL exchange will not just be available for existing customers and allows for API integration with other online originators. Snehal noted that there is significant interest from platforms and they have been talking with Prosper. Besides providing a new marketplace for loans, Cloud Lending will provide a predictive analytics tool that can predict how well the loan will perform if a platform decides to extend the loan to the customer.
CL Exchange may become a great solution to the customer acquisition problem that many players in the industry face. This product has no doubt been born out of that challenge. We could see new entrants affordably access customers and look at data points to determine if there are other opportunities to underwrite loans that for instance aren’t approved from the likes of Prosper or Lending Club. Despite the perhaps low initial volumes on the exchange, this is something that will be good for the industry and as it scales, it could have a massive impact.