Interestingly, both banks and non-banks can benefit from OTD-based business models, albeit for slightly different reasons.
In the case of banks, the strongest advantage relates to their usual requirement to hold capital against assets. Since CrossLend enables banks to derecognise their assets, those banks are able to earn a servicing fee on loans without the need to hold any capital against them, which in turn also frees them to underwrite a greater number of profitable lending activities.
Non-banks on the other hand, mainly fund loans through shareholder funding and/or warehouse facilities. The latter in particular are not only potentially very expensive and a slow path to securitisation or direct sale of the portfolio, but also often fail to bring additional investment on board – instead simply providing the initial funders with an exit. CrossLend’s solution helps fund future origination and therefore more origination.