One of the growth areas in the global financial sector is peer-to-peer lending - direct loans carried out between people online, which cuts out the bank as middleman. This exists also in Israel, and, recently, a new player, Blender, entered the market. Blender was created through an interesting and surprising connection between the Aviv family, best known for its real-estate activity, and former Israel Discount Bank (TASE: DSCT) CEO Giora Ofer. Blender’s official launch was today, after having been operational for a few weeks. Nearly NIS 7 million has been invested in establishing the venture thus far, the vast majority of it by the Aviv family.
Blender is a web platform that connects lenders and borrowers, and offers borrowers lower interest rates on average than the banks, and lenders significantly higher interest than savings plans (albeit with greater risk). The more attractive interest rates are possible because there is no bank acting as middleman. Loans of up to NIS 30,000 may be taken via Blender.
“Today, in order to take a NIS 30,000 loan, you need to undergo an absurd process, at the end of which you pay crazy fees and interest rates. There is no reason for this to continue today, when the world is simpler, and everything is available online. We have grown accustomed to ordering food and clothes easily online, and there is no reason that the same should not be the case with everything having to do with money,” said Blender founder and CEO Dr. Gal Aviv today, at the press conference held by the company in Tel Aviv.
Simple, cheap systems
Gal Aviv, son of Aviv Group Chairman Doron Aviv, is a 32 year old with a PhD in nanophysics. He built the system along with two other physicists who joined him. “We developed technology that renders bank workers, bonuses and bureaucracy obsolete,” said Aviv, who went on to say that the company’s aim is to reach a portfolio worth a few billion shekels.
The banking side of the partnership comes from Ofer, who served as CEO of Discount Bank until five years ago, and who established the Lahav investment fund. The connection between Ofer and the Aviv family came about when Ofer rented offices for his fund in the Moshe Aviv towers in Ramat Gan. Ofer was introduced to the idea at the beginning of the year, and decided to join in. The investment in the venture was carried out through the fund’s management company, not through the fund itself.
It is not inconceivable that we will see Blender collaborating with one of the banks, which may join as an investor in the company, despite the competition. Today, Bank Leumi (TASE: LUMI) acts as a trustee for Blender’s funds, and sources inform ''Globes'' that Leumi took interest in the venture, and even considered investing in it directly. As of now, no known talks are underway between the sides on the matter, but it is possible that, in the future, Leumi or another bank will join in the venture as a shareholder, or as a lending source, like any regular Blender customer.
The interest rate is shekel-based, and is not variable or linked to anything, in order to prevent a situation in which interest payments rise suddenly. “The simplicity and transparency of the process are important to us,” said Aviv, who noted that the interest rates range between 4% and 9%.
Although the average interest rates are low in comparison with the banks, one should take into account that fact that, unlike the banks, where grace on a loan may be requested, at Blender, the practice is far less acceptable, due to the assumption that, for a loan of up to NIS 30,000, the customer should find a way to pay it back. The primary solution the Blender offers in cases of repayment difficulty is a recycling of the loan.
Blender does not assume credit risk, and therefore it does not take interest payments. Blender’s revenue comes from fees: NIS 200 or 2% from borrowers, and 1% from the total repayment from lenders. Other than the platform itself, Blender provides operating services, ongoing tracking and billing, including in cases in which the borrower encounters financial difficulties.
Published by Globes [online], Israel business news - www.globes-online.com - on October 20, 2014
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