P2P (Peer to Peer) financial industry is active with new type of work as Financial Services Commission (FSC) is looking into allowing transfer of rights to collect principal and interest.
According to industries, LENDIT recently launched a beta version of ‘LENDIT Market’, which is a market where people can buy and sell rights to collect principal and interest of bonds that are being repaid.
This indicates that investors’ rights to obtain principal and interest can be liquidated just like ABS (Asset Backed Securities). Sellers can improve cash flow by selling their bonds while buyers can purchase bonds with relatively short expiration date. Another advantage of LENDIT Market is that it allows small investments under $4.45 (5,000 KRW).
Only personal investors who invested into more than 100 bonds through regular investment or automatic investment can use beta version of LENDIT Market.
During a survey from last September, LENDIT came to a conclusion that ‘liquidity’ is the primary issue that needs to be improved and has worked on development of LENDIT Market. It had carried out a close beta service of ‘LENDIT Market’ for a month starting from the 8th of last month and launched a beta service of LENDIT Market.
“We launched a beta service of LENDIT Market on the 18th.” said a representative for LENDIT. “We do not have an official launching date of LENDIT Market yet.”
Service for trading rights to collect principal and interest within P2P financial market was first introduced by 8Percent in 2015. At that time, 8Percent only operated a beta service. FUNDA also looked into launching a corresponding service in 2017 when most of products had expiration between 12 and 18 months.
MOUDA, a P2P company specializing in medical industry, launched ‘MOUDA Market’ that buys and sells rights to collect principal and interest this year. MOUDA wanted to close the gap between lenders and investors as lenders want to pay back principal and interest in installments over a long period while investors prefer short-term investment products. Due to P2P products not allowing funds to be taken out halfway, investors face liquidity problem as expiration becomes longer.
Change in FSC’s stance towards transferring rights to collect principal and interest gives possible opportunities for corresponding services to flourish. It was not easy to regulate rights to collect principal and interest within P2P finance as this concept is different from that of traditional stock industry.
FSC is planning to clarify the concept of rights to collect principal and interest as it revises laws related to P2P finance this year.
There were discussions regarding rights to collect principal and interest during a public hearing that took place on the 11th with financial authorities as arrangers.
Yoon Min-seop, who is a research member of Korea Consumer Agency, presented ways to allow investors to transfer rights to collect principal and interest during his presentation on ‘Major Issues Related to Legalization of P2P Loans’.
“South Korean courts have yet to clarify whether to look at rights to collect principal and interest as investment contract securities or loans.” said Koo Bong-seok who is an attorney from Kim & Chang Law Firm. “South Korean Government needs to clarify whether to look at these rights as securities or bonds.”
Staff Reporter Ham, Jihyun | goham@etnews.com