Yahoo Launches “Tanda” — A Peer to Peer Savings and Loan App
This week Yahoo Finance launched a new mobile app that offers a twist on peer to peer lending and investing. Dubbed “Tanda,” the app connects users and places them into groups where each participant makes monthly payments toward a combined pot. Then the lump sum is then awarded to one individual each month on a rotating basis, meaning each group member will receive the money they contributed back at some point.
If you’re unfamiliar, Tanda takes its name from the Latin American term for a rotating savings and credit association or ROSCA — a concept I was actually introduced to in The Unbanking of America. Typically these associations are formed by friends or relatives but the app opens the idea to a larger group (although users can also set up private tandas in the app). As mentioned the basic ideas behind tandas is that a set number of members each contribute a set amount of money every month. Then once a month the pot of funds is given to one person in the tanda using a predetermined rotating schedule. Under this arrangement those earlier in the tanda schedule typically use the money as a loan while those later in the rotation can use the tanda to grow their savings.
As far as Tanda the app goes, these loans versus savings components are amplified by charging fees to those earlier in the rotation and rewarding the last person in the circle. Currently Yahoo takes 8% of the first position’s payout and 7% of the second’s while the user in the last position gets a 2% bonus on their payout. Another important aspect of apps like Tanda and peer to peer lending in general is trust. To help with this Yahoo has not only enlisted Dwolla to help vet users — with sign-ups requiring both a valid I.D. and a U.S. bank account — but has also implemented a trust score system. Users can increase their trust scores by making one-time contributions while late or missing payments will obviously deduct from their scores. Higher trust scores will enable them to join tandas with higher pots and give them the ability to select earlier tanda positions.
Speaking to TechCrunch, Yahoo’s Head of Media Business and Products Simon Khalaf, said the reason they wanted to develop the app was to help people who might find themselves in tough financial situations. As he explained, “13 months ago, a national outlet reported 46% of our nation can’t come up with a $400 emergency expense.” Despite the fees Tanda will charge to users in the first and second positions (which to be fair are still lower than they would likely be charged on a payday loan or credit card), the app does have to potential to help with that problem first by essentially offering lump-sum loans and secondly by encouraging users to get into the habit of saving. In that aspect, Yahoo certainly has a strong idea in bringing the tanda concept into the 21st century by putting a FinTech spin on it. Tanda is now available on the Google Play store and Apple App Store.
Also published on Medium.