New bid allocation model at Bondora
Bondora’s new bid allocation model levels the playing field for investors
Marketplace lending is becoming a mainstream investment choice. However, as the investor base grows, so does the competition for loans.
Originally, if a loan received too many bids (overbid), Bondora would rank the bids based on size. Unfortunately, this method made it difficult for investors with smaller bids to get the loan. Some investors got their entire bid accepted while others were left out. Now, they are changing the bid allocation model to be more inclusive to all bidders.
They will no longer rank the bids based on size. Instead, they will proportionally distribute loans among all investors trying to buy them. In short: All bidders will get a piece of the loan. This way everyone – big and small investors – will get access to the same loans.
Here’s an example of how the new system will work: A borrower requests a €1,000 loan. Several investors bid a total of €2,000. As a result, each investor who made a bid would have 50% of their bid accepted. This way each investor would be able to get access to all loans they want, albeit sometimes for much smaller amount they wanted.
This bid allocation model implementation will be automatic and requires no action from investors. Bondora will be removing investor ranking on 20th of April . However, please note that minimum investment size setting in the API and Portfolio Manager will become obsolete with this change.
Initially, there will be an absolute minimum investment size of €1 in order to facilitate investment level calculations using the current technology. Over the coming months Bondora will however be rolling out a new infrastructure that allows fractionalizing loans to much smaller units making the proportional distribution even more precise.