GDR: Using Technology to Crack the 'Trust But Verify' Challenge in Marketplace Lending

May 17 2016 | 11:29pm ET

Editor’s note: Marketplace lending has been among the fastest-growing segments of the alternative asset space. However, as illustrated by the recent travails at peer-to-peer company Lending Club, the rapid proliferation of lending platforms and an influx of institutional investors into the sector has led to more than a few growing pains. The team at Delaware-based company Global Debt Registry aims to alleviate some of them, utilizing cutting-edge technology to provide independent asset certainty and validation services across entire portfolios of loans in real time.

Company name: Global Debt Registry (“GDR”)
Location
: Wilmington, DE
Website
: https://globaldebtregistry.com/

Fintech Sector(s):Marketplace lending, loan validation

Elevator Pitch: GDR aids investor confidence as the only true loan validation platform for consumer lending, digitally validating 100% of accounts in a portfolio of loans against trusted third party data sources. 

Year Formed: 2007

No. of Employees: 15

Stage: In Revenue

Notable investors: Large Private Equity Fund

Tell us a bit about your company and what it does?
Global Debt Registry (‘GDR’) focuses on developing technology that helps investors better manage the investment risks associated with marketplace and consumer lending. We style ourselves as a “CarFax for Investors” in the loan space, providing a new suite of independent asset certainty products, anchored on loan validation, that address real-time problems such as disbursement verification, double pledging of loans, etc. Our role is independently validating that the people behind a loan actually exist, that the funds were actually disbursed to them, etc. 

How is GDR different than other companies in the same space?
Currently, a portfolio of online loans is typically verified manually by back up servicers, accounting or law firms, a time consuming and expensive process with no reference to external sources of credit information. Investors are thus left to rely on the reps and warranties of MPLs with limited balance sheets and history, and not much else. GDR uses technology to independently "validate", as opposed to verify, an entire portfolio with trusted external sources, in real time.

What is your revenue model? How will the company make money?
GDR’s economic model is generally transaction based, and charges investors per account for the greater confidence they gain in the assets they are funding. There are three core moments at which our service is key: When an investor (such as hedge fund) is purchasing a portfolio of loans, when you’re going to securitize a group of loans, and/or when you require ongoing monitoring of a loan portfolio. Our technology helps alleviate the pain points currently associated with all three. 

Who is your target market?
We work with marketplace lenders, warehouse lenders and investors in the space, helping them better analyze the underlying loan level data with GDR’s third-party validation system. We are aimed at anyone in this industry faced with the “trust but verify” dilemma posed by current marketplace lending practices. Investors like hedge funds should not be expected to have the kind of expertise necessary to handle these tasks – the validation, securing the reams of personally identifiable information associated with these loans, etc. - but they should have access to experienced experts who can. That’s GDR’s goal – to be that partner.

How big is the opportunity?
Marketplace lending has grown at a rapid pace over the past 5 years, with Morgan Stanley citing that the market could surge almost tenfold to $260 billion in 2020. As this industry continues to see massive growth, both in the number of lending platforms and hedge fund investors in the space, GDR will provide the risk infrastructure and loan validation that investors are searching for today.

Why are you and your team capable of succeeding?
GDR is comprised of a group of extremely experienced senior bankers. We’re led by the former president of Citibank Online and have a team of senior executives from American Express, Bank of America and Barclays. The management team includes experts in consumer lending, risk, financial technology, data security and compliance. We’re early stage, but experts in handling personally identifiable information, and we understand consumer lending and the loan process from origination to sale. In contrast to other fintech startups that are perhaps 10% finance and 90% tech, we’re half and half – a significant background in financial services coupled with cutting-edge technology aimed squarely at addressing what we believe is a major unmet need. 

What is GDR’s next target/milestone?
GDR is working on solving the core problem of duplicate collateral pledging, validating a loan in question is 100% clean and free of issues. Ultimately, once participation in our platform is wide enough, we want to provide provenance tracking of loans so there is never any doubt about the particular details. In fact, we think such capability will be central to the development of a functioning secondary market, since it will deliver the kind of confidence in the asset class necessary.

Can you tell us one unusual fact about your company?
Our origins are in validating charged off receivables – i.e. debt, when sold into the secondary market. We are only firm of our type to be on the VISA Global Registry of Service Providers, and are certified PCI-DSS compliant, which is a very high bar of protecting personal information.


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