Cross-border peer-to-peer (P2P) bitcoin lending platform BitLendingClub, is looking to disrupt the growing lending industry with a unique model that should oust bad players while providing a better framework for "good borrowers."

The Bulgaria-based startup integrated with the Boost VC accelerator program in February, and is looking forward to demo day on May 7, where the team will be presenting its product to an audience filled with influential VCs and industry leaders.

Speaking with Cointelegraph, co-founder and CEO Kiril Gantchev, shared his excitement to be one of the 25 startups selected to integrate Boost VC's Tribe 5, as well as his ambition to provide greater efficiency to a trillion dollar market that is ripe for innovation.

BitLendingClub logo

The right incentive

BitLendingClub, which works under a 'Dutch auction' system that consists in letting borrowers choose the interest rate that matches their requirements, charges fees from loans that have been repaid.

The particular element allows BitLendingClub to have "an extra incentive to provide a better framework for good borrowers to repay their loans and bad borrowers to be selected out as early as possible," and enables the startup to differentiate itself from other existing services that would essentially provide an infrastructure for borrowers and lenders to meet while relieving themselves from other responsibilities.

This model was especially chosen to incentivize users on repaying more loans rather than funding more loans, Gantchev said. He explained: 

"Charging a fee up front actually comes out of the lender's pocket, not the borrower.

Ultimately, what drives growth in our space is the abundance of good borrowers, so structuring our fees to be aligned with the core action, which defines a good borrower, makes sense."

According to him, charging an "up-front" (closing) fee makes sense in the standard banking system, where the underwriting process is more expensive. With the Bitcoin protocol though, both the costs of transferring value and underwriting have gone significantly down.

While the co-founder admits that this model carries more risk compared to other platforms, he remains confident:

"We do take a bit of a hit on the revenue side, but in the long run we're going to have a more stable platform, which will end up paying for itself."

Co-founder and CEO Kiril Gantchev

The next catalyst

The P2P lending industry is still in its infancy, but holds the promising potential of enabling any individual in the world to gain access to funding and banking services.

Not only is it expected to disrupt an industry that applies fairly unfavorable and discriminative conditions to borrowers, it is also believed to be "the next catalyst for growth in the Bitcoin ecosystem."

Gantchev concluded:

"The lending space is a trillion dollar market per year and it's full of inefficiencies: most borrowers across the world have a difficult time securing a loan, and when they do, it's usually with a high interest rate and a number of unfavorable conditions. It's ripe for disruption and we're in the right place to be the disruptions."

Launched in May 2014, BitLendingClub currently ranks as the second largest platform with a total of US$3.2 million worth of loans from 65 countries.

BTCJam, which has been operating since September 2012, is leading the market with an approximate total of US$11 million worth of loans from 115 countries.

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