Hi, my name is Thomas Edwards and I’m the Marketing Director at Debexpert.
In previous episodes of the Debt Club podcast, I talked about why we use auction mechanisms, as well as what types of auctions are available on the Debexpert online platform. Today, I'm going to talk about what online debt trading is, as well as mention some of the important details of online debt selling that you just need to know.
Online debt trading is a rather general concept that combines two different business models.
Let's call the first one the “classified ads model.” Let's say you have a debt portfolio that you want to sell. You find a broker and they put up an ad with the description of your portfolio on their website. It's just like classified sites where many of us sell junk we don't need. However, there are two weak points with this model.
The first weak point is that it takes a lot of effort for debt buyers to find your portfolio in the depths of the Internet. To find it, every debt buyer has to visit dozens of broker’s sites every day and locate specific sections which post descriptions of debts for sale. There are many of these sites, each having different structures, and debt buyers don’t have time or available employees for this. But let's say one potential buyer sees your portfolio. This is where we come to the second weak point. Given that this is the only debt buyer for your portfolio, they get to offer you the price they want. They don’t care if that price is below market. It's exactly the price they are willing to pay. What do you do in this situation? Either agree or wait until some other buyer happens to browse one of the broker's sites and stumbles upon your portfolio. Who knows how long it could take for a deal to happen like this?!
There is a second model of online debt trading. It can be conventionally called “the auction model.” This model has many undeniable advantages.
First, there are no problems when it comes to finding a portfolio. Buyers don’t have to visit dozens of sites every day - they only need to visit one place where dozens of portfolios are posted for sale. Each of us knows that there are millions of videos on YouTube. So, by going to YouTube you can find what you need with a high probability, right? You don’t need to look for something you want visiting thirty other little sites. It's the same thing here - buyers know that they can always find the "right" portfolio on websites like Debexpert, so they visit them regularly and keep it at the top of their list In addition, the platform iis interested in attracting buyers to take part in the auction, so it constantly informs buyers about new portfolios.Meaning, it will be quite difficult to miss your portfolio.
The second advantage has to do with competition among buyers. In previous episodes, I talked about why we use auction mechanisms as a way to sell portfolios in the first place. It is the auction that forces buyers to compete with each other and pushes the price of the portfolio up. As a result, the portfolio owner gets the true market price. Today, there are 250 companies from across the country registered as buyers on Debexpert, which is a very large national network of debt buyers willing to purchase any portfolio. Competition doubles or even triples the initial price of a portfolio.
The third advantage has to do with time. Usually, it only takes two weeks between the time a portfolio is published on Debexpert and the time a deal is made. For many sellers, a quick and guaranteed sale of a portfolio is very important. As I said earlier, there are many advantages to the auction model. Mainly, the transparency and security of the deal, as well as the variety of tools to analyze the portfolio and the deal itself.
Online open auction sales is the most modern method of selling debt portfolios which guarantees sellers and buyers a high speed of transaction and a fair market price.
So, now you know what online debt trading is all about. In the next episode, I'll talk about how we protect data and why that’s so important.
But that's all for now. Best wishes from Debexpert.