MoneySwitch has developed a Feeder Pool(s) / Master Pool model where all assets are aggregated in a single location (enhancing liquidity and diversification), but individual lenders have the potential to choose between different risk and reward options.
The Master Pool is where all assets are aggregated. Lenders which deposit directly into the Master Pool will earn interest from any lending activities.
Lenders which deposit directly into a Feeder Pool will have their assets aggregated into the Master Pool, but will have a lower risk and reward profile relative to Master Pool lenders. This is determined by a Feeder Pool's Scaling Factor. The Scaling Factor is immutable, so when a Feeder Pool is created it can't be changed.
A Scaling Factor of 40, means lenders will earn 40% of the interest-rate relative Master Pool lenders. In return they will be exposed to 40% of the default-risk relative to a Master Pool lender.
By creating different Feeder Pools, with different risk and reward profiles, MoneySwitch can cater to lenders with different risk profiles. In addition, it is possible to offer large institutional lenders their own Feeder Pool.
The Feeder Pool(s) / Master Pool model is designed to be highly scalable. A large number of Feeder Pool(s) can be created (no limit on the exact number) whilst remaining cost efficient.