INTAINMARKETS — DIGITAL MARKETPLACE FOR STRUCTURED FINANCE
Intain’s digital marketplace for structured finance will bring transparency, efficiency and trust to asset backed financing by building upon the success of INTAINADMIN, with tokenized issuances on blockchain.
PROBLEM AND THE CURRENT SOLUTIONS
In structured finance, multiple parties work off their own systems thus creating siloed ‘truths’ across lender, issuer, servicer, rating agency, trustee and the investor. As these parties reconcile data through excels over emails, structured finance transactions become inefficient, non-transparent and error-prone.
This multi-trillion-dollar industry, with spending in the tens of billions of dollars on intermediation and transaction expenses per year make deals below $100M unviable.
Loan pools have been tokenized for investment as a possible solution. However, can the token, representing investment in the offering, trade in isolation from the underlying asset? The complexity and inefficiency in structured finance lies in what has been left off the chain.
So how to trust the token?
No wonder institutional investors have kept a distance from all the 15–20% APY tokens.
INTAIN — MARKETPLACE AND ADMINISTRATION ON BLOCKCHAIN
With INTAINADMIN , Intain has already brought the servicing and administration of structured finance on blockchain, with many deals across various asset classes and multiple structures. All key functions are integrated and automated.
The loan pool is verified by a custodian, in her role as a verification agent, with the help of artificial intelligence (AI). The data from the servicer (loan tape) is mapped to a master template (master loan tape). Smart contracts automate the payment waterfall and trigger events for auditability. Investors can get a view into every single loan behind the tokens in their portfolio or get on-demand, real-time insights into the underlying assets, across deals.
With the success Intain has had in bringing administration of structured finance on-chain, Intain is now taking the next step by completing the end-to-end process from digital issuance to investment using tokenization on blockchain.
Let us understand this with an illustrative example.
Issuer uploads loans and collateral details of 5000 loans along with associated documents for verification. (Upload)
Issuer can filter these loans based on various criteria. We filter based on FICO scores, tenor and amount to now have 1000 loans. (Filtering)
A pool can be created from a subset of these loans. (Pool Creation)
So, now we have Pool Alpha with 800 loans.
Issuer chooses a verification agent to verify these loans.
A custodian in its role as a verification agent, completes an artificial intelligence-assisted review at fraction of the cost and in less than a tenth of time taken currently. (Verification)
Pool Alpha with 790 verified loans is on the INTAINMARKETS blockchain. These loans are mapped to an investment bank for structuring and underwriting (Mapping)
Remaining 10 loans can be replaced or the Issuer can proceed with these 790 loans. These are now mapped to an investment bank for structuring and underwriting.
This pool is structured to create a deal with multiple tranches and terms. Here we assume that Pool Alpha is now structured into Deal Alpha with Senior, Mezzanine and Junior tranche. Each tranche will be represented by an ERC 20 token. (Issuance)
Investors can review the offering documents, drill down into individual loans and invest online into one of the three tranches. Monies are transferred to the Issuer net of fees. To begin with, these tokens will be yield generating but not trade-able with no access to a secondary market. (Investment)
As the servicer collects monthly payments, the status is updated. Servicer data is mapped to a Master Loan Tape which is based on the best practices for that asset class, including standards set by European regulator, ESMA. This is automatically reconciled with actual collections. The payment waterfall and trigger events for Deal Alpha are coded as ‘smart contracts’ which are software programs that automate transactions on a blockchain. (Administration)
Hence, the payments to the investors in each tranche are calculated and monies are transferred to their ‘wallet’. Which can be a self-custodied or designated third party.
Investor has real-time access to this data and drill down into each payment for each loan, or analyze his portfolio based on loan performance parameters like default rates, borrower characteristics like FICO scores or collateral data like state of property. (Analytics)
This data is also available to the rating agency for surveillance purposes. Or other agents such as Asset Managers or Auditors. (Monitoring & Surveillance)
INTAINMARKETS is built on Avalanche blockchain, which, with its subnet architecture, allows Intain to have a permissioned environment for selected institutions. Transactions are done through conversion of US Dollars to USDC stablecoin. USDC is 100% backed by cash and short-dated U.S. treasuries. Other than at the moment of transaction on the blockchain, no institution will be required to hold USDC and there are no returns offered by Intain for holding USDC.
DEFI AND INTAIN APPROACH
In a DeFi landscape where asset-backed financing is characterized by two tranche structures, with off-chain administration and reporting on Discord channels, the diversity, quality and transparency of investment is limited. Below are some of the sample structures being administered on-chain by Intain, which give an idea of the structuring possibilities with INTAINMARKETS.
Thus, INTAINMARKETS ensures an integrated and seamless structured finance transaction, at significantly reduced costs. Risk mitigation is achieved with the highest level of data integrity, immutability and auditability ensured through the blockchain. The e nd result is a lower cost to raise capital for the issuer and better risk-adjusted returns for the investor.
- BY INSTITUTIONAL ISSUERS, FOR INSTITUTIONAL INVESTORS
- MULTI-TRANCHE STRUCTURE AND
- LIBRARY OF SMART CONTRACTS WITH
- NODES FOR KEY INSTITUTIONAL INTERMEDIARIES
- ADMINISTRATION BASED ON COMPLIANCE FOR TRADFI SECURITIES
What we won’t offer is APYs that are 2–3X of what is available in the real world today, because the principles of finance will not change just because something is on blockchain. But, what we guarantee is greater transparency, higher efficiency and enhanced trust, where an issuer will find a 10M issuance viable and investors will have access to quality investments.
