Following the launch of the infrastructure for the Canton Network in July, applications continue to go live across the ecosystem, including LendOS. LendOS has developed a syndicated lending platform that can deliver value today, and is ready for tomorrow.

Managing and administering syndicated loans requires constant communication and interaction between agent banks, borrowers, and the syndicate of lenders during the loan’s lifecycle. Financing large infrastructure is creating unprecedented demand, with the global syndicated loan market expected to grow from $1,018.7 Bn in 2021 to $3798.4 billion by 2031. 

This interview explores how LendOS has created a launchpad for innovation, starting with a smarter data model for the industry.

Smarter commercial lending 

Deep knowledge of syndicated loan market complexities helped LendOS founders John Olesky and Josh Herrera identify - and address - a foundational flaw. Market participants couldn’t access, share, use or fundamentally trust the data that sits at the very core of each transaction. Inefficient processes, impeded by inaccurate data and manual interventions mean operational pain for participants in the lending lifecycle, and the higher capital costs that come with that uncertainty. With Daml and Canton, LendOS has created a new foundation for the growing syndicated loan market that aims to go beyond just solving time-old reconciliation challenges in the market. By unlocking the power of consistent, automatically validated data, and simplifying how systems for syndicated lending are maintained and upgraded, LendOS is creating the baseline for smarter commercial lending today, and the platform for future innovation.

What were you seeing, and where were the challenges?

There’s been a lot of innovation, from using blockchain for issuance and syndication to connecting systems through market platforms, or using standard messaging. When we realized those initiatives haven’t always been successful or fully delivered on their promise, we started asking why.

First, some initiatives focused on integration with the thousands of individual systems housed within the different participant organizations. But those systems of record rely on technology that is often decades old, and the business logic is usually layered into the code, making any kind of change to the code really difficult. Upgrade processes are long and maintenance is costly. 

Second, even if everything is successful, data is fragmented and often incomplete or inaccurate. There’s no one source of truth as every organization separately pulls data from the loan agreements. Even within the same organization, different departments were constantly reconciling. Across agents, lenders and borrowers there was no appetite, or clear path to sharing relevant data more broadly because the trust in that data, let alone how it was shared, simply wasn’t there. As the market grows, this data problem only increases.

We realized that building any kind of automation on top of flawed, untrusted data was a non-starter. We believed that the market deserved more choice than the incumbent systems that transformation initiatives are still attempted to be built around today.

Josh Herrera,
President and Co-Founder, LendOS

So where did you start and what did you want to achieve? 

We had to tackle the root cause: the data problem. We wanted to choose the right technology and make a fresh start, not just come up with a better solution to the problems we were seeing. 

We created a data model using Daml that allows us to capture all the different data elements and then use smart contracts for the business logic. Once a loan is originated and syndicated, we capture all the loan data from the credit agreement. We take data in any form, pull it through our framework and validate it. Once the data is digitized, it can be accessed, shared and used without constant reconciliation. It also allows every component of the lifecycle process to be managed on a distributed ledger using smart contracts – regardless of how the original loan was created. 

Our first goal was to build an agency platform that would allow an administrative agent to capture all the details, maintain the core register of lender positions and activities, and communicate with all parties. Now that we’ve done that, it’s clear that the solution we’ve built is much larger and more flexible than we anticipated. Trusted data is the gateway to so much more. 

Can you give us some examples? 

Beyond creating a new data model for the asset class, we took a different approach to using the capabilities of Daml and smart contracts. We’ve created an enterprise software solution that can be shared as a package, or a ‘pod’, that can be deployed in minutes - this gives you both your node to securely synchronize data across systems, and the software and data models out of the box to start transforming loan servicing processes. 

In practice, this means an organization can maintain a single trusted data source but clone that data and make it available locally to other geographies. Different areas have low latency access to the data - they can query and use it, with permissions that range from read only, to interacting with it. The smart contract building blocks we’ve created simplify all the middle and back office processing and communication needed for the ongoing administration of a syndicated loan throughout its lifecycle. And by using the software, this data can also be shared across multiple parties, without needing to be reconciled. 

What we’ve found is that Daml and Canton can act as an accelerant within our client’s organizations. If you think about it, large companies are their own networks. With LendOS, data can go wherever it needs to go, and be used by different groups in different ways – without affecting its integrity or availability.

John Olesky,
CEO and Co-Founder, LendOS

Reporting is simplified, decision making is faster, and transaction breaks become a thing of the past when there’s no need to collate or rationalize data from different systems. 

You mentioned the difficulty of working with older technology. How does LendOS address that? 

Given the fragility and fragmentation of older software, we decided early on that market participants shouldn’t have to install new software or deeply integrate their systems with LendOS. That’s often a deal-breaker. Instead we made APIs core to our system, rather than an add-on. This makes it easy for users to access and interrogate the data, with the assurance that it’s always accurate and synchronized with the Canton protocol. Furthermore, they can be confident that their data is secure and private, because of Daml and Canton’s granular controls and permissions. 

Flexibility was also core to our design so that we can meet market participants where they are today and also provide a bridge to the future. Regardless of whether a loan is digital-native, on blockchain or not, it can be serviced using distributed ledger technology for the rest of its lifecycle once we’ve captured the data and business rules. This creates incredible efficiencies in what’s traditionally been a very manual, labor-intensive process. 

In terms of the technology itself, our clients each get a separate instance of our software; however, we are able to deploy updates very quickly. In a recent test, we deployed three brand new, full production instances of our applications to different parties in six minutes – and we think we can do it faster.

Of course, clients may wish to use our software to interact with one another or connect to a central infrastructure, and we are happy to work with them on their preferred approach.

Tell us more about using LendOS as a bridge to future needs. 

We believe the future is distributed so we’re preparing for that even as we help our clients transform within today’s market environment. When you can trust the data, it’s no longer a requirement to design services using a single paradigm. The future will allow for the use of the best paradigm to solve each challenge. We simply believe that the biggest ones will be solved using a distributed paradigm.

Daml and Canton have positioned us well for an environment where we eliminate the latency and risks of reconciliation, but layer in trusted validation, both at the individual organization level and also at the market level. We’ve also joined the Global Synchronizer Foundation, so that we can participate in the governance and collaborate with the organizations delivering the Canton Network’s decentralized infrastructure enabling us to be among the first to bring that innovation into our lending solutions.

Ultimately we see the chance to finally achieve the long-sought modernization of the syndicated loan markets. We’ve taken a different approach and solved problems in a completely new way using Digital Asset’s technology. LendOS has not only addressed the data problem, it’s eliminated many of the core issues facing the syndicated loan markets with a solution that’s easy to access and use. 

Find out more about LendOS at https://wwwlendos.io