Projects

Project Review: FintruX Network

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FintruX Network (FTX) | Coin Review |

Overview

FintruX is a blockchain based platform providing a peer-to-peer (P2P) network for marketplace lending where users within its platform can obtain loans up to 6 figures. They will make the lending process easier for borrowers and gives lenders more security and assurance. The project is aiming to provide a solution for the underserved market of start-ups and SMEs.

What Problem does FintruX solve?

Most P2P lending platforms still lack transparency and aren’t truly P2P as they use an intermediary to handle the transactions. Utilizing blockchain and smart contracts on the Ethereum network will allow FintruX to create a true P2P lending platform that will offer advantages to both the lender and the borrower. This provides a level of efficiency that is not achievable with today’s lending marketplaces. However, better efficiency is only one of many benefits the FintruX platform has to offer.

If we consider FintruX’s target market, SMEs and Startups, there are three major issues when it comes to loans. Small businesses do not have access to loans when they most need it, if they get a credit from alternative financing sources, the interest rate is generally too high, and SME creditworthiness is challenging to ascertain, and thus lenders are wary of investing. FintruX’s platform enables businesses to establish global trust, secure digital credit, and have control over interest rates and payment terms. It provides a way for businesses to secure financing with their vendors, ensuring they have the cash capital to grow their company. With this solution, FintruX is removing the necessity of third-party lender participation. Instead, lenders will be companies or individuals providing services and goods towards their clients (borrowers).

Fees, intermediaries, and paperwork can make the process of taking a loan expensive and time consuming for both parties. Besides Transparency and fairness, lower transaction fees, fast and efficient funding for borrowers, risk-reduced investing, no upfront cost to lenders, fully automated and efficient process for lenders, FintruX allows for other significant improvements in the lending process:

  • A non-cash form of contract conclusion which enables creditor and borrower to determine the terms of a smart contract in accordance with their wishes and draw up a list of conditions that confirm fulfillment of obligations by the seller.

  • There’ll be a decentralized rating system where both parties can review each other after they’ve done business, this will allow both parties to view any previous transactions that have been made and check that the loans have been repaid on time.

  • The platform will have a simple process and charge a percentage in their own token. This allows for a simple and efficient business model and therefore low fees for all parties involved.

  • In the process of secured settlements, the platform makes payment in favor of a seller only upon submission of properly executed documents that fully meet the requirements of the smart contract.

  • The possibility of changing the terms of the transaction; changing the conditions or rejecting the transaction can only be by mutual consent of buyer and seller.

  • Reliability of settlements under the transaction exists, regardless of the financial condition of borrower and lender on the settlement date.

  • If the transaction for some reason does not take place, funds will be fully returned to the creditor.

  • By utilizing Ethereum smart contracts, it will be easy to provide a fully verifiable history with no risk of anything being fraudulently altered.

Furthermore, FintruX uses credit enhancements to neutralize its user’s credit risk if they are lending money. If a problem or payment default occurs, FintruX will provide insurance to cover the potential loss. With this risk reduction, investors can have peace of mind while borrowers can enjoy lower interest rates. FintruX offers four levels of protection to its lenders:

  • Over-Collateralization: This protects 1 out of 10 bad loans by holding 10% of each loan.

  • Third Party Guarantors: Users can participate on the platform as guarantors for their selected loans. You can choose the compensation packages, risks, and cover the losses in the event of a default.

  • Cross Collateralization: The 10% that’s held back from every loan is placed in an insurance pool that covers each loan within that class.

  • FintruX Reserve: 5% of the tokens that are saved will be used as a last resort for default loans.

Product and Vision

Reducing risk while increasing efficiency, as well as transparency and trust, is the primary goal of this project. Let’s go through the FintruX process from the perspective of both, the lender and borrower, to get a deeper understanding of the user experience of FintruX

Lender

Lenders will usually be people who have a certain amount of money saved or earned, that they don’t want to spend on anything over a period of time. They decides to invest it in a P2P loan, and sign up to FintruX.

  1. They select two separate credit decision packages (these differ in interest rates, risk levels, etc.) of varied risk profiles to break up (split up) his funds. The packages also provide the recommended reputable fraud, identity, and credit scoring agents.

  2. They pay the fees for each package in FTX.

  3. They sign a power of attorney for FintruX Network so that the lending transactions can be executed on their behalf.

Borrower

Borrowers are usually small businesses who need to borrow money. They make a request, seeking an unsecured loan from FintruX. Let’s assume a company needs $50.000 for a marketing campaign. Knowing that there is a 10% holdback as over-collateralization, the company will request $55.000.

  1. They read the company’s parameters, which informs them about the interest rates, the installment process, and in how many installments they can repay the entire borrowed amount.

  2. After answering a few questions, they are pre-approved. When the company is satisfied with the optimal interest rates, they complete a credit check with a scoring agent designated by the package they have chosen.

  3. They pay the equivalent of $1 in FTX transfers to the identity and fraud agent and the equivalent of $2 in FTX transfers to the scoring agent.

  4. They select a preferred lender.

  5. The identity and fraud agent collect some relevant information and complete the process of due diligence as well as documentation.

  6. An open-source smart contract is automatically generated.

  7. The borrower then confirms the loan and transfers the borrowed amount (here $55.000) within the specified time.

The borrower is now indebted to repay the borrowed $55.000 in 24 monthly installments. $50,000 is transferred to the companies bank account, while $5.000 is sent to the suitable cross-collateralization pool so the default/credit losses can be covered. If they repay their loan within the specified time, they will be entitled to get the $5.000 back.

This is a simple, yet efficient and also secure process. Fees are kept to a minimum, and the smart contract is taking care of most of the transaction. Holding back a certain amount that is only paid out if the borrower meets the requirements, is another basic control mechanism which has proven to be very useful in other business models. Simplicity is the key here, and I want to stress, that a platform doesn’t have to be super technical and complex to succeed. While this simplicity makes FintruX vulnerable to competition and copycats, it also makes it very easy for their customers to understand the process behind their loan and the business model behind FintruX. The platform will charge a small fee on each loan that is made and a small service fee for each action that is performed on the smart contract.

Team

The FintruX team is based in Singapore, seems strong and experienced. The advisory committee of the project consists of seven more people who also play a lead role when it comes to decision-making in the project. The team is quite strong. I only note the lack of influence of economists or rather people with a business background, as the team is focused around strong engineers.  Business partners include Microsoft, Enterprise Ethereum Alliance, Robocoder Corporation, and Cynopsis Solutions. There are some big names on that list, which should bring more legitimacy to the project, for investors but also for new clients and partners the project tries to acquire.

Let’s take a look at the founding team.  The CEO and Founder is Nelson Lin. Nelson pioneered online credit adjudication for the asset-based finance and leasing industry in Canada as mentioned in the book ‘Unstoppable’ published 2014 by Beth Parker and endorsed by the Canadian Finance and Leasing Association (CFLA). He has over thirty years of experience delivering numerous custom enterprise applications to global organizations such as J.P. Morgan, AT&T Capital, etc. The CMO and co-founder is Conrad Lin. Conrad is the Director of Business Development at Robocoder Corporation. Prior to this position, he was a Web/Database Application Developer & Marketing Advisor for NeighbourLink North York.  The CTO is Gary Ng. His experience includes 25 years as a seasoned architect in the financial sector. Gary is highly skilled in all major programming languages and computing platforms. Scalability and security is his focus, as well as delivering cost-effective solutions.

Tokenomics: What is the FTX Token?

The FTX Token is used to power the FintruX Network and works as a way to reward or get rewarded for cooperation in the marketplace. It is an Erc-20 Token. Borrowers and loan specialists pay a transactional charge in FTX to use the FintruX platform. There are four scenarios explaining the use of the token in the white paper:

  • Scenario 1: No guarantor: FintruX receives FTX tokens as a matching fee from both borrowers and lenders, generating demand for FTX.

  • Scenario 2: Protected by the guarantor: Guarantors receive incentive pay in FTX Tokens, further generating demand for FTX.

  • Scenario 3: Collateralization pools go up 10 times in value over the term of the loan: in this case, investor losses will be covered by cross-collateralization pools, denominated in the same currency as the loan currency. The FTX token does not have any additional functionality in this scenario.

  • Scenario 4: Guarantors fail to deliver their promises AND there are too many bad loans: In this case, 5% of all FTX tokens are reserved to cover these overflow losses if all previous cascading credit enhancers fail unexpectedly.

Thus, FTX tokens will accumulate on FintruX’s balance as platform fees. Growth in the token price will occur if infrastructure demand exceeds infrastructure supply. 85.000.000 FTX of a total supply of 100.000.000 FTX are currently in circulation, pretty standard token metrics, but what’s interesting is the token distribution during their ICO. 75% were sold to the public. The remaining 25% were split between the team (10% and locked for 12 months), collateralization reserve (5%), and FintruX reserve (10%). The FintruX reserve is used to reward advisors, early adopters, bounty programs, and to provide liquidity if needed.

Growth potential and Roadmap

Currently, P2P lending is a recognized financial instrument with excellent development potential. According to PricewaterhouseCoopers, eight out of ten banks expect to create strategic partnerships in the next 3-5 years with P2P services and digital money transfer platforms. According to Foundation Capital’s forecasts, the volume of the world market for P2P-lending will reach $1 trillion by 2025. In the white paper, the founders cite a more reasonable assessment by JP Morgan, which is $150-490 billion by 2020.

FintruX is planning to operate in a rapidly developing but highly competitive market which has an active group of leading companies already. Objectively, each of the companies operating in the market has its own distinctive advantages. FintruX has the following features in this context:

  • Working with smart contracts on blockchain.

  • Access to cryptocurrencies.

  • A developed mechanism for the mutual provision of loans.

Simplicity in their operations, security, trust, and strong marketing will be the critical factors for the success of FintruX. Given the substantial amounts invested in project infrastructure, the team and a good potential for growth, marketing could have been stronger.  However, this is likely going to change, as the team is going to scale the platform after (and leading up to) its rollout in Q2 2019.

Conclusion

P2p lending platforms are in a tough position currently. We will need to see more from the project going forward, to really judge, if FintruX will be able to succeed in the future. There are many risks involved with P2P lending and the regulations surrounding it. Nevertheless, getting rid of the middlemen fees that often makes lending and borrowing costly, is without a doubt a very basic concept but one with huge potential. If the project manages to overcome current hurdles and find ways to form a clear USP, which from my perspective, they currently don’t have, this could become a huge success. Everything looks genuine, and there are no red flags, the company has a definite plan that could cut its place in the lending market.

FTX scored 51 out of 76 Points in our evaluation program.

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