Are Banks and FinTechs Shifting to The Originate-To-Distribute Model?

SINGAPORE - Feb. 24, 2020 - PRLog -- In the past few decades, Banks have remained key players in the process of transferring funds from lenders to borrowers and vice versa. Recently, FinTechs have revolutionized the system, albeit not matching the scale in banks. With numerous changes in financial systems around the world, it's important to direct our focus towards an important phenomenon: the substitution of the originate-to-hold model for the originate-to-distribute model.

What Are the Originate-To-Hold and Originate-To-Distribute Models?
Here's a brief overview of each model.
Originate-To-Hold Model:
With the Originate-To-Hold model, lenders (that is banks and non-banking organizations) make loans and hold them through maturity. Under this model, lenders don't sell these loans to investors or other financial institutions.

Originate-To-Distribute (OTD) Model:
In the OTD model, the originator of a loan sells it to third parties through securitization (the process in which illiquid assets- through financial engineering- are converted into securities).
The OTD model holds significant potential in creating an efficient risk-sharing tool, in the global financial system.

Relationship between the OTD Model and The Subprime Crisis: As lending practices shifted towards the OTD model, originating banks lowered the conditions attached to their screening and monitoring activities.

Trade Finance and the Originate-to-distribute model.
What role can TradeFinex Network play?
What's Tradefinex Network? Tradefinex network is a peer to peer decentralized platform in which trade finance originators ( banks and non-bank investors) can transact or trade assets.

TradeFinex Network offers a De-Centralized way to manage letters of credit and electronic presentations. Buyers, sellers, banks, and carriers can electronically exchange letters of credit, electronic bills of lading, insurance certificates and other trade documentation over a decentralized Blockchain network.

Why adopt XinFin Blockchain Network?
Blockchain has immense potential in addressing issues in trade finance through its ability to reduce processing time, enhance automation, promote fraud prevention and eliminate documentation. All this is accomplished whilst boosting transparency, security, and trust. The XinFin Blockchain Network replaces the PoW consensus algorithm (Proof of Work ) to a stake based consensus algorithm network that has a KYC enforced MasterNodes. This makes XinFin Blockchain Network a more institution-grade blockchain network.

Current status of Trade Finance Network: Currently, the Trade Finance Network has more than 20 Million worth Trade Finance instruments that are available for distribution to the bank and non-banker funders.