Investing in Loans
Invest in loans issued by alternative finance companies.
Summary
In the heart of Loanstream business is sophisticated software running over complex financial math models. The platform was built in Omertex entirely and from scratch within a series of milestones.
Collaboration in numbers
Budget
$25 000 - $40 000
Periods of engagement
3 months
Team size
3
Client’s location
Estonia, EU
About the customer
Loanstream is a fintech company based in the Baltic countries and specialised in investing in consumer loan portfolios. The company is run by its two founders, each having more than 15 years of experience from various segments of the financial services industry. The founders reached out to us with a task of developing a software investment solution aimed to allow investing in loans issued to individuals and businesses by non-bank financial institutions.
What our customer expected to get:
- The clients were looking to get an MVP of the platform to showcase it to potential investors.
The MVP features:
- Processing the most popular loan type - personal installment loans;
- Process API requests;
- Calculate amortization schedules;
- Reflect payments and associated income in accounts;
- Record loan events;
- Send notifications (very informative ones with complex built-in logic);
- Generate human-readable MS Excel reports about the operations completed;
- Send reports by email.
*The MVP version of the product doesn’t presume the user's presence.
**The MVP version of the product doesn’t require UI.
Project objectives
The main difficulties of the project were the following:
- The full-product we were going to build appeared to be extremely huge, complex and complicated. We didn’t see the full scope of tasks.According to our assumptions the sum required to deliver the whole product may lay somewhere between 400k-1M USD. We knew that the main question for the client was “Does it make sense to invest into this software platform insofar as will we be able to return the money we invested in its design (software architecture design) and development”? To answer this question we offered a solution our clients were fine with. Check it out in Solutions sections.
- The second thing we realised ( during the discovery phase ) was that around 40-50% of the whole product cost falls on its financial math model that processes all data. The math model components should be able to process at least the following types of loan products:
- “classic” consumer installment loans;
- mortgages;
- secured/covered cashflow injection;
- uncovered cashflow injection;
- equipment finance i.e. leasing;
- vendor equipment finance i.e. forfaiting or factoring;
- fleet funding and fleet management;
- invoice financing i.e. factoring.
Together with the client we had to choose either to create the model in house from scratch or buy a ready-made solution. There were several offers to buy a ready-made solution from 250k to 700k USD.
- The third was that there were no business processes established before the client reached us. So when designing the software, we had to foresee and take into account business processes that did not exist at the time. Thus, we had to design them together with the client.
Solutions
Even so, our client was looking to get a quotation from us to make an investment decision: whether they will invest in software development or not. So we had to come up with a solution that will help us to provide the estimation of the budget required to build the whole product.
To resolve this objective our business analysts conducted a session with the client to gather information about the client's business. Then they decomposed the business processes, and identified the main service type that was “a consumer installment loan”.
This was already something we could work with. We saw a defined task where we could estimate the cost of developing the mathematical model for this type of loan and the cost of the software development itself.
Our offer to the client
So we got back to Loanstream and offered them an MVP that will be able to process those 20% of investment product types that make up 60-70% of all sales.
During the 1st month we clarified and described:
- Parameters of every type of loan;
- Indicators of financial settlements;
- Credits/loans repurchase schemes.
Based on the data collected, we:
- Developed a mathematical model for the first version of the system;
- Described reports content and their structure;
- Clarified and described requirements to the system administrator dashboard.
During the 2nd month we developed and delivered a test version of the system (MVP).
The data collected on the analysis and MVP development stage allowed us to provide Loanstream with a very accurate cost estimate of the whole math model and software development.
Technologies applied
To fulfill all the set tasks, we used the following techs.
Front-end:
Angular, AWS Amplify
Back-end:
NodeJs, Serverless, AWS Lambda
Database / Storage:
PostgreSQL, AWS S3
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