interview

Interview with Ricardas Vandzinskas, CEO of Hive5

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Can you please explain the business model?

Hive5* is a P2P marketplace that offers European investors to invest in group-owned loan originators. The first loan originator on the platform is Ekspres Pozyczka which facilitates short-term payday loans in Poland and business loans directly to the loan originator itself. Soon there will be more opportunities on the way: consumer loans from other European geographies, also different types of business loans – BNPL loans, green loans, estate loans and venture loans.

 

Why is Hive5 working with fully owned loan originators preferable versus working with external loan originators?

Key reasons why owned LO’s are way more secure than externals:

  1. Team of carefully pre-selected top rank and impeccable reputation professional management only.
  2. Corporate governance and complete transparency in front of shareholders, investors and regulators. Full access to regular performance monitoring, business planning and reporting.
  3. Control over risk appetite. Our polish Loan originator uses a fully automated risk decision engine backed with advanced self-learning analytics performed over the big data pool generated from a comprehensive list of integrations. This solution eliminates the fraud, and human factor and enables us to plan and control acceptable credit risk levels.
  4. Build and manage significantly increased group equity reserves since owned loan originators contribute the most significant share in returns on investment.

 

Investors can choose between several p2p lending platforms. Why should they invest in Hive5 rather than any of your competitors? Is there a USP?

Value proposal for investors:

  • Higher investment ROI. Until 17-10-2022, the interest rates are increased by +1%.
  • Buyback guarantee and skin in the game. Firstly, our Loan originator is obliged to Buyback the loan no later than 60 days after the loan payment due date, even if the loan is late or even if the end-borrower did not repay the loan to the lender. Both loan principal and accrued interest shall be repaid in full. Secondly, all our Hive finance group entities have a corporate policy to allocate at least 10% of equity into the provision funds, which shall be used as a buffer to secure our investors’ funds in case our Loan originator faces some financial difficulties.
  • Polish consumer loans. The biggest consumer market in Europe with a stable and growing economy.

 

Ri?ardas Vandzinskas, CEO of Hive5What is the background of the team?

Team of professionals only. Secondly, by saying, “we have a team of professionals”, we mean it. For instance, Head of Operations Inga Zubanov? and Head of Marketing and Communications Karolina Staugait? worked at the second largest P2P platform in the EU. Alexey Kalevich, The Chief Technology Officer, worked at an international group of financial companies. Regarding our first loan originator, “Ekspres Pozyczka “, – all the team members have great expertise in top finance companies. For example, before “Ekspres Pozyczka”, CEO Wojtek Homan was an executive at “Provident Finance”. We love what we do.

 

You are planning to expand the lending operations into different markets. Which are these, and what criteria do you apply to select these markets?

Diversification and global scale

Finally, as every educated investor knows, the necessity of diversification; soon, investors could experience broad diversification on one platform by investing in many different types of loans. Thus, we will relentlessly diversify within two mainstreams:

1) Geographic: “hive5” will phase its expansion into three continents: Europe, Africa and Asia.

2) Products: we have launched the platform by allowing investors to choose from consumer and business loans. That is only the beginning; soon enough, we will introduce many more secured business lending products, such as Green (or sustainable) loans, Equipment leasing, Sustainable Estate loans and BNPL powered by e-commerce.

Our target EU countries with at least 10 million inhabitants.

 

The p2p lending platform is currently registered in Croatia. How do you see the regulatory aspects of the way forward?

The next step in our licensing roadmap is to receive updated and clearly defined ECSP regulatory framework guidelines, which the European Commission shall announce in November this year. Based on those guidelines, we will start application preparation for the single licence “passporting” procedure allowing the provision of crowdfunding services in the European Union and European Economic Area (EU/EAA).

We will keep you and all our investors constantly updated on this matter, as we consider it a solid extra mile of trust in front of our investors.

 

What’s your view on the economic outlook in Europe, especially regarding the countries your loan originators operate in?

In contrast to other EU countries, the economic outlook of 38 million populated Poland looks much brighter from a consumer lending perspective, even in these high inflation times. Firstly, Poland is one of the largest and fastest-growing EU economies with constantly rising purchasing power per capita. This means that before entering a turbulent economic cycle, this country and its consumers have accumulated much more buffer to absorb the downturns than the others. On top, very shortly, we will see traditional banks getting even more conservative against their current customers, which will instantly build an extra market of former prime customers. Needless to say, war refugees from neighbouring Ukraine instantly fill in the gaps in the workforce and contribute to local consumption. For us, the following months mean a heavy focus on controlling default rates when using our precision scoring engine; in simple words – more population to be scored before credit approval with adjusted risk tolerance levels.

 

What plans are on Hive5’s roadmap for the next six months?

Main KPI of Hive5* – at least 1000 active investors and 3 million EUR of the total loan portfolio by the end of this year.

Also, we will keep the promise to offer diversification on our platform. By now, investors can invest in consumer and business loans from Poland. Soon there will be more opportunities on the way: consumer loans from other European geographies, also different types of business loans – green loans, estate loans, BNPL and venture loans.

To make our platform stand out from a UX/UI perspective, we plan to implement more advanced and user-friendly features in the marketplace.

 

P2P-Banking.com thanks Ri?ardas Vandzinskas for the interview.

Interview with Boyan Kazandzhiev, Head of Operations of Iuvo Group

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Can you please give a short introduction on iuvo’s offering?

Over the past year iuvo* has been developing quite nicely, launching a new product and closing 2021 with fantastic results. A high-level overview of 2021 can be found in our blog – https://www.iuvo-group.com/de/iuvo-in-2021/. This year started strong and then the Russo-Ukrainian conflict began and changed the game for everyone. Thanks to the outstanding work done by our experienced account managers, we assured our investors in the stability of the platform and not even in a single month did we end up net negative in terms of investments on the platform. In spite of the difficult situation, we managed to onboard 5 new loan originators thus increasing the investment opportunities for our investors. They are offering a nice diversification for our investors both within the Management Financial Group (MFG) and outside. The new loan originators entered the market with high interest rates and pushed the entire market to raise their interest rates in the 9 – 12% interest rate margins. To top it all, we rebranded iuvoUP to iuvoSave – thus making it the simplified product with the highest return currently on the entire P2P market. IuvoSave is very attractive because it offers 3 different investment periods with the shortest one being 3 months and the longest – 12 months. Also in the 6 months and the 12 month product you can invest up to 1 000 000 EURO, which is also unprecedented on the market.

I understand iuvo has a new management team. Can you please introduce the team and their background?

You are absolutely correct. Iuvo always had ambitious plans and will be aiming to continue down the road of success with a new CEO, and completely new marketing and IT development strategies. Blagovest Karadzhov started as CEO in the beginning of March (you can find out more about him in our blog
Intro – https://www.iuvo-group.com/de/blagovest-karadzhov-takes-over-the-management-of-iuvo/
Interview with our CEO- https://www.iuvo-group.com/de/interview-blagovest-karadzhov-ceo-of-iuvo/ )
Our marketing strategy is aiming at drastically increasing the number of investors on the platform with different activities. It is also critical for us to increase the brand awareness of the company among the non-savvy investors. It is a tough task, but we are certain that the entire p2p ecosystem will benefit. In terms of technical development, we are aiming at some groundbreaking innovations in the P2P marketplace and we hope we will achieve them by the middle of 2023 and investors will feel them even as early as Q1 of 2023. Of course, all our endeavors are backed by MFG, part of which is iuvo.

Has the new management made any changes to the strategy of iuvo or do you continue the path as before?

As I mentioned we have revised our marketing and IT strategies to allow for rapid growth of the client base on the platform and to even better match investor expectations. P2P will continue to be our core business and the business model will also remain the same. Nevertheless, the needs of the investors show that they are interested in diversifying their investment options and we are considering how to offer different investment options, both within and out of the P2P sector.

Recently iuvo announced that the legal seat of the company running the platform will be moved from Estonia to Bulgaria. Can you please explain the reasons for this move.

Well, in short, the reasons are pretty trivial, financial and legislative. Back in 2016 Estonia was a fruitful ground in which we could flourish and develop and we are thankful for all the years we managed the platform under the Estonian legislation. Currently it is financially and operationally wiser to move out of Estonia so that we can continue to provide the highest quality of investment opportunities and service to our investor while raising our efficiency. Through all these years, the headquarters of MFG have been in Sofia, and as part of this group of companies, we believe it is time to come back home. This will lead to considerable cost saving which will help us reach the goals mentioned previously in our conversation. It is critical to point out that iuvo will not change the way it operates and there will be no changes in the investors’ experience, or the loan originators’ business practices as a result of this move to Bulgaria.

What’s your view on the economic outlook in Europe, especially regarding the countries your loan originators operate in?

We are onboarding companies from Spain, Romania, and North Macedonia. All these countries have a stable standing in terms of credit risk without any major deviations. Company wise, all new loan originators are ongoing a very thorough due diligence process. Just as a very basic example – even at the start, we start with an NDA and a verification if the person signing the NDA has actually the right to sign it and in the case of multiple owners, if they can sign individually or simultaneously, and we move forward only in the case when we have the right persons’ signature on the document. Only then do we move forward with the due diligence process, which usually if both teams are fully devoted and work in full speed will take on a month, while usually it takes around 3 months. Another example – with one of our loan originators, all the documents that needed to be signed in order to start the onboarding process, fitted in 5 boxes. Overall in Europe the inflation is rising and we are still to see how the governments will handle the winter and the rising inflation.

What plans are on iuvo’s roadmap for the near future?

Iuvo’s* roadmap is pretty straightforward – keeping the same business model without any changes, getting rid of all technical debts in the next 12 months, expanding in terms of loan originators and most importantly increasing the number of satisfied investors enjoying high levels of return on iuvo.

Interview with Mike Bristow, CEO of CrowdProperty – The Current State of P2P Lending in the UK

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What is CrowdProperty about?

CrowdProperty was set up in 2013 because we personally felt the pain of raising finance for our property projects through decades of investing in, and developing, property ourselves. The three founders have 75 years’ experience of property investing and developing between us, meaning exceptional expertise in exactly the asset class we’re lending against). So, we set ourselves the challenge of building the best SME property development lender in the market, serving the customer needs we intimately knew better.

Traditional sources of finance have failed quality property professionals looking to undertake quality property projects for years. Large housebuilders feel this pain less but there are a finite number of large sites in this country to develop. Therefore, SME housebuilders are critically important but housing output from this segment fell from one third of UK output in 2008 to just 10% by 2017.

As a country, we need to unlock the power of entrepreneurial SME developers. Whilst Government initiatives around planning and taxation help, by far the biggest barrier is funding, according to 42% of respondents from our SME developer survey last year (which was the largest ever undertaken amongst this community).

This is exactly where our deep expertise lies, where our focus has always been, and where there’s greatest pain in the market. Having now built the best lender in the market, as property finance by property experts, we work in partnership with borrowers by adding value throughout their projects, and therefore deliver a better deal for all – our borrowers, our lenders, the under-supplied housing market and spend in the UK economy.

This is all crucial for CrowdProperty lenders: quality property professionals with quality property projects want to work with CrowdProperty, which has driven £3.8bn of direct project applications. From these, we have expertly curated £100,000,000 of lending – i.e. less than 3% conversion rate – across over 240 loans and 170 projects. This is testament to our tough criteria, rigorous due diligence and knowledge that a long-term lending business is only built through quality and track record, which is at the heart of all that we do.

As others have temporarily closed to retail investors, stopped allowing withdrawals, cut interest rates, introduced lender fees or even had regulatory permissions withdrawn, we have been able to continue funding quality projects which are ready to proceed, with naturally tighter criteria. We have further step-changed our reputation in the market on the borrower-side and direct applications are now c.£200,000,000 per month, with an ever-increasing quality mix.

We believe in data transparency to best inform investor decision making (illustrated by our award-winning statistics page and independent performance verification by Brismo). Resourcing our business strongly with a team of 32 and having a non-London base gives us considerable fixed cost advantage, savings from which we’re able to invest in expertise and further development of our in-house developed proprietary technology platform.

Our proposition is underpinned by an in-house developed proprietary technology platform for efficiencies of underwriting, data analytics, workflows, payments, funding, monitoring and reporting, coupled with decades of SME property development expertise for effectiveness. We have leading third party data, raw data feeds and internal analytics benefiting from nearly £4bn of applications. Property Director Andrew Hall has over 35 years’ experience as a qualified RICS surveyor, through multiple cycles, and is the leading expert in the team that validates deals that go to the investment committee. We have developed a rigorous due diligence process through decades of hands-on expertise in exactly the asset class being lent against.
CrowdProperty is directly authorised and regulated by the FCA and an HMRC approved ISA manager.

If an investor would have invested the same amount into every CrowdProperty loan since 2018, what yield would he have achieved by now?

An XIRR of 8.15% (since launch it is 8.74%)**. We’ve now paid back £50,000,000 in capital and interest to lenders with an average rate of return of 8.74% p.a. and a perfect, 100% capital and interest payback track record.
CrowdProperty also provides a tax-wrapper for UK-based investors lending through the CrowdProperty Innovative Finance ISA, SSAS pensions and SIPP pensions, all of which are very popular and significantly enhance effective returns due to the tax shields.

CrowdProperty loans are secured by a first charge. An important factor is appropriateness of the price set during valuation. How certain are you that valuations are in line with the market?

Indeed, all CrowdProperty loans are first-charge secured on the property assets, meaning that not only are CrowdProperty loans first in line to be paid back, but also CrowdProperty is able to be in control of any recoveries action, which is often overlooked in importance.

Our first charge security exposure averages provide a strong risk / reward proposition considering the returns offered by CrowdProperty:

  • Loan to value (LTV, or initial funds release relative to RICS-assessed market value) of 59.7% (55.9% in the 2020 cohort)
  • Loan to gross development value (LTGDV) 53.6% (excluding interest) and 58.5% (including interest)

The key factor is clearly the assessment of ‘V’ (value) in the above – both current value and end-product value – plus sensitivities of this critical data point to security and stability of the project. The ‘V’ is what we scrutinise most in the numbers, especially at the moment. We appoint societal-bound RICS surveyors with a long list of appointment criteria to conduct valuations on each and every project. This report is talked through with the surveyor and then validated with both leading internal and leading third-party data sets, used as inputs to our in-house expert-led analysis of the property asset in question, with a particular focus around understanding the nuances of the property, project and local market. In parallel, we are assessing the borrower and team in terms of not only their capabilities / experience but also their ambitions, motivations and commitment to this project and their professional property journey. Furthermore, project costings are internally validated by our expert team, supported by benchmark costings and a very detailed baseline Independent Monitoring Surveyor report and through the projects themselves, drawdowns are only ever made in arrears to project progress as formally assessed by the IMS.

CrowdProperty is entirely focused on funding quality property projects being undertaken by quality property professionals serving domestic under-supplied demand in liquid markets throughout the UK at mainstream, affordable price points, where there is enduring demand.

Are property prices going up or down? What factors do currently impact the UK market and where do investors find good (free?) market data to monitor the trend?

It’s been well documented over the past few months that UK property prices are rising, pushing house prices to a record high – the average price for property in UK stood at £315,150 in October 2020. This is being driven by Government stimulus such as the short-term reduction in property purchase stamp duty, but is also set in the context of relatively low growth in the last 3-5 years, real pricing levels that are the same as many points through the last 15 years and historically low transaction levels, resulting in pent up demand for those looking to get onto the property ladder and those wishing to move up / trade down.

michael bristow crowdpropertyWe run extensive resilience analyses on both the market and our existing book at very granular levels, running both historical and theoretical scenarios. It’s helpful to reflect back on most recent shocks to the market (which are albeit driven by different macro-economic situations) and understand how trends preceding, during and after those compare to the current situation.
We look at the market in a deconstructed way, influenced by what we have seen in the past. Firstly, we think about whether there is a correction waiting to happen given recent growth. Next, we think about the outlook for supply and demand. Thirdly, we carefully watch all activity indicators and finally we ensure that our focus, lending criteria and security are appropriate to uphold the high-quality lending we offer.

We believe that this shock will not lead to the correction of excessive growth that has been long-awaited. Examining he Nationwide House Price Index since 1975, one can see that both 89/90 and 07/08 experienced long periods of housing market growth before economic shocks drove double-digit percentage declines, taking years to recover. At first glance, one might think the signs are here again.

But this is where it is also important to examine real (inflation adjusted) as well as nominal growth – i.e. taking the effects of inflation out of the nominal (unadjusted for inflation) data. Real (RPI adjusted) growth shows a very different story to the nominal picture – average real values today are 16% below the 2007 peak, have been pretty much flat since early 2015 and are currently at the same real value as in 2010 and 2005. This is a very different context to the extended periods of high growth in values that led into the 89/90 and 08/09 market falls.

The balance of supply and demand for housing is again very different to 08/09. Back then, many needed to sell (including banks who adopted wholesale repossess and sell policies) and very few could buy (given the protracted state of the debt markets which was the underlying shock) or were prepared to buy (due to long-term prospects of the debt markets holding back recovery).
Whilst the UK’s Job Retention Scheme has undoubtedly helped many households, as that is unwound, there is clearly significant uncertainty around job security and personal finances, and dwindling demand could be expected.

Whilst first-time buyers have been the driving force of the housing market for the last decade, Zoopla’s latest House Price Index suggests that homeowners are becoming increasingly active in the market. This makes sense as “equity-rich homeowners seek more space and a change in location”, while first-time buyers are being impacted by restricted mortgage availability, tighter lending criteria and growing economic uncertainty. Whilst 95% LTV high street owner-occupier mortgages aren’t back yet, in its analysis of the Prime Minister’s speech, Rightmove suggests that the government could be looking to tackle this by bringing back 95% mortgages as part of the effort to “turn generation rent into generation buy”.

On the supply-side, whilst unfortunately there will be many more probate listings this year, there will be a greater decrease in construction completions in 2020, which has been under-supplying the market for decades (part of the reason that CrowdProperty exists). As demand continues to outweigh supply, the market is seeing a 2.6% annual growth rate in UK house prices despite the economic backdrop according to Zoopla. Indeed, Nottingham and Manchester are recording annual house price growth of c. 4% alongside Leeds, Edinburgh, Leicester, Liverpool, Cardiff, and Sheffield. Rightmove’s data shows that searches across September increased 53% on average across the ten biggest cities, but there has also been an uplift in demand for smaller communities as buyers seek out larger spaces – analysts named nine areas where searches have doubled across Surrey, Somerset, Gloucestershire, Berkshire, Dorset, Kent and Suffolk which all have a population of under 11,000. Continue reading →

Interview with Matt Clannachan, VP of Product at Bondora

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Can you please give a short introduction on Bondora*?

Bondora offers a simple way to invest online. We’ve been around for over a decade and have more than 130,000 investors. This year, we announced our third consecutive year of profitability, and are on track for the fourth this year.

What is your background and when and why did you join Bondora?

I worked for two of the largest banks in the UK before joining Bondora. Traditional banking wasn’t for me. Things moved too slow and I wanted to see my work make a change. Around 3.5 years ago, I heard about Bondora by chance and decided to reach out. After speaking with Pärtel and the team, I was 100% sold on the mission. So I made the move to Estonia. I can honestly say it’s the best decision I ever made. Since joining, I’ve worked in a few different roles within Bondora, but my main responsibility is the investor product.

In reaction to the COVID-19 situation Bondora stopped originating new loans in Finland and Spain and also restricted the credit grades that are eligible for loans in Estonia. What was the reasoning for that decision?

We temporarily stopped lending in Spain and Finland as a precautionary measure. As we’re only lending in Estonia, this has significantly decreased our operating costs. Take marketing costs, for example. Marketing in one country to achieve a specific level of originations is much more cost-effective than trying to achieve the same across three countries. In a growth environment, this is not so much of a concern because you’re targeting expansion. But sustainability is our top priority. We will only change our strategy once the data is available to confirm whether we should start expanding again.

You recently capped the maximum amount that can be invested in Go&Grow at 1000 Euro per month. What is the reasoning for this and is this a direct result of the restriction to only lend in Estonia at the moment?
In other interviews stated that Bondora could just increase marketing to allocate more loans in Estonia should investor demand increase. This measure seems to contradict that.

Overall, we made this decision for two reasons: 1) Sustainability of the portfolio 2) So everyone can still invest.

And the previous statement we made remains true. We could quite easily boost the portfolio if we wanted to. The demand is there. However, we are not going to make any shortcuts regarding the quality of the portfolio. With the current global situation, it is better to be cautious and assess the data once it is available rather than target exponential growth. Hence the €1,000 net limit per investor to match our originations. As a business, we do not need to generate enormous growth in our key metrics every year to stay afloat. If we choose to decrease our originations, our operating costs decrease in line with this.

matthew clannachanWill you restart lending in Finland and Spain?

We do not have a decision regarding when we will restart activities in Finland or Spain yet.

As a result of the COVID crisis the Go&Grow product could no longer supply instant liquidity earlier this year. Instead partial payouts were enacted for withdrawals. I understand the situation is back to normal with instant payouts again, but can you please share looking back what it meant for your investors and how they reacted to this measure?

This was a necessary measure built into the product from day 1. When partial payouts were active, I read through hundreds of support tickets, social media comments and forums to try and grasp the overall reaction investors had. Most understood why we activated this feature and why it was critical to the sustainability of the product. It’s worth noting that nearly 6 months later, this has not impacted our key metrics (customer satisfaction, investments, withdrawals, referrals). Investors would not continue to use Bondora if they did not trust us and see us as a sustainable company.

A lot of questions from investors are about the buffer Bondora keeps to make Go&Grow more liquid. Bondora* in the past declined to disclose how much money there is in the buffer, can you please describe the mechanism as precise as possible? Where is the money from this buffer kept? Is it sitting in a bank account, meaning the buffer does not generate any interest?
We aim to keep the cash reserve at roughly 15% of the Go & Grow portfolio. Of course, this may change based on daily withdrawals and money received. The money is on a segregated bank account, separated from Bondora’s funds. It’s there so investors can get fast access to their money when they need it.

One point of critic several investors have mentioned is the way Bondora treats late loans for calculating the net return figures in the investor dashboard. Only the amount of the overdue instalment rate is treated as late for this purpose not the whole outstanding loan amount. Critics feel that this leads to overly positive displayed net return figures creating expectations which are later deflated once the portfolio matures and the return calculations are lowered. What is your opinion on that and are there any plans to change the calculation method?

Overall, we have no plans to make any changes to our calculation methods. I think it’s important that we’ve remained consistent in our calculations, so the returns of the portfolio over the years are comparable. Treating the whole outstanding loan amount as late would also have its limitations. It would be overly negative because it disregards the 60% (for example) of the loan that would be recovered.

Bondora* provides a lot of information and statistics. One that seems to puzzle investors frequently is the “cumulative cash on cash return graphs in the public reports sections. Some of the charted lines do not seem to reach 100%. E.g. for 36 months loans from Q3 2014 the displayed value is 91.23%. Does that mean that investors investing at that time incurred losses or how is that graph to be read?

This chart is only reflective of loans that have matured, because it shows the % of the original investment amount which has been paid back. If the loan period has matured and the % is less than 100, this does not necessarily mean that the investor’s portfolio return is negative. Typically, most portfolios are made up of a range of different loan durations from different cohorts. For example, there were very few loans issued in Q3 of 2014 with a 36-month duration – meaning this is not reflective of an investor’s full portfolio composition. We publish this graph simply to give full transparency and visualize information on the data we publish in our public reports.

Looking forward, do you expect default levels to rise on your consumer loans in Spain, Finland and Estonia in the remaining months of 2020 and 2021 as a result of the economic fallout of the COVID-19 crisis?

So far, our portfolio data does not suggest a trend of rising defaults. Again, this is why we made the decision to reduce our originations throughout the crisis period (as a precautionary measure).

How do you see the development of regulation on a European level?

My opinion is that although events this year with other smaller platforms have cast a negative light on the industry, there is a silver lining. Events like this can offer trigger expedited financial regulation due to the need for some form of consumer protection being brought into the public eye. We have always been in favour of pan-European regulation for P2P lending, and continue to work with regulators in support of this.

Is Bondora* as a company profitable?

Yes, we have been profitable for three years. We recently released our financial results for 2019 and announced a net profit of €2.3M.

What plans does Bondora have for the next year?

This year, we’ve already spent a lot of time working on building automation for internal systems and customer facing parts of the product. For example, we just released an instant-answer support site which we’re still improving (this will eventually be localized into 24 languages). We’re continuing to work on automation as a priority this year. Reason being, once the world economy stabilizes and we are ready to target growth again, we’ll be able to scale quite rapidly without any dependencies on manual processes.

Final note – Thank you to all of our investors who have continued to support us over the years. We are looking forward to when the world is back to normal and we can welcome you in our office again. Stop by if you are ever in Tallinn 🙂

P2P-Banking.com thanks Matt Clannachan for the interview.

 

Interview with Jana Mücková, Relationship Manager at Bondster

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I interviewed Jana Mücková, Relationship Manager at Bondster* (see her bio at the end of the article). By registering via this link and entering promotion code 5506 new investors get 1% cashback on all investments in the first three month.

What is Bondster about?

Bondster is one of the fastest growing fintech companies in the field of P2P (Peer-to-Peer) loan marketplaces in Europe and the very first online investment platform of its kind in the Czech Republic. Bondster connects providers of loans with retail investors. Investors (individual or companies) may invest their free funds into loans already provided by different providers. Investors can choose from different types of loans, maturity, security, providers. Investors can also see the repayment history of the debtor to whom the loan had been provided and they can also see the basic information about the debtor.

What are the three main advantages for investors?

The biggest advantage is definitely high returns on loans. Moreover, these loans are either secured (by real estate or movables) or offered with a Buyback Guarantee (in case the debtor does not repay the loan, the provider has to buy it back from the investor) which eliminates the risk for investors. Imagine your money sits in the bank account, you lose money in real terms every single day since the inflation rate is higher than the nominal interest rate on your bank deposits. On Bondster investors can earn more than 11 % on Euro investments in average. Do you know a bank that could offer you such a return?

Bondster also offers loans with unique features such as Exit from the investment or Guarantee of Liquidity. This is especially popular with Investors that are more risk averse and prefer more liquid investments. Exit from Investment means that the investor can get back the outstanding principal at predetermined points in time after the investment had been executed (after a week, month, half a year etc.) for a predefined fee. Guarantee of Liquidity allows investors to withdraw the invested amount (outstanding principal) any time for a predefined fee.

From what we have learned from our investors, our choice of Providers is really appreciated. We carefully choose our partners. Providers we cooperate with are always either well established companies in the local markets with a very good track record, or younger companies but with huge potential and experienced people with strong professional background in the management.

What are the three main advantages for loan providers?

Our partners can benefit from alternative and flexible financing we offer. In case a provider needs for example some extra funds for its development, he can upload an extra tranche of loans to our platform and receive these extra needed funds from our investors without any additional administrative burden or costs. This is a huge advantage for providers because applying for a business loan in a bank or negotiating with and raising money from big institutional investors takes much more time and is often also more expensive.

Our onboarding and due diligence process are on one hand very complex, but on the other our team is always willing to help, assist and explain and we usually manage to complete it within a few weeks.

Our team really likes challenges, and this is why we are so flexible. We always try to find tailored-made solutions.

What ROI can investors expect?

The average return on Euro investment is now 11,49 %, on Czech investment it is a bit less around 9,32 %.

How does Bondster attract, select and vet new loan providers?

… We got to the stage when the providers approach us by themselves. They learnt about us through P2P forums, blogs or influencers and realized that they can be more visible on Bondster than on other older platforms. Generally, we look for strong and established partners in the local markets or strong groups operating in several countries. We now negotiate with providers outside EU to offer our investors new opportunities for diversification.

Can you please tell us a bit about your background and the team’s background?

Well, our team has 10 members with a professional background in banking, IT, portfolio and project management, and customer care. I personally worked 5 years in banking sector which is quite rigid environment. I needed more space for my ideas. I am a kind of person that is never happy because there is always something that can be improved, right? I think I drive my colleagues at Bondster crazy sometimes because of that, but online marketplace is that kind of business that has to be always challenged and innovated to follow current trends and that is exactly why I love it.

Is the technical platform self-developed?

Partially yes, but we also outsource. The technical development of the platform is secured by one Irish company with a long-term experience in developing innovative software for banks.

How is the company financed? Is it profitable?

Bondster is fully owned by the Czech investment company CEP Invest Private Equity. At this stage, we invest all the available funds and energy into development. We want to create a platform that is not only user friendly, but also offers something extra. We want to be better than our competitors and that is why we value our investors´ ideas and appreciate their recommendations.

What were the main challenges when launching your platform?

The biggest challenge was to find the investor and a strong business partner. It is not only about the money, it is also about the expectations and philosophy. We really appreciate that we managed to attract CEP Invest Private Equity as an investor and ACEMA Credit Czech, a.s. as our strategic partner because they profess the same values. They helped us develop and also expand to foreign markets and we are very grateful for such an opportunity.  Another challenge was to find right people because here at Bondster we believe that the strength of a company is in its people.

I know that Bondster attracts investors from the whole EU. But you also have loans in CZK currency appealing to local investors in the Czech Republic. Do you observe any difference in the investment approach/attitude of Czech investors compared to other nationals?

Well, Czech investors are generally more careful, they start with small amount to test the platform and its operation. Investors from Western Europe usually invest higher amounts from the very beginning.

What are your next plans? Can you share some interesting developments that are currently in the making?

We are now preparing in cooperation with one of our European providers a limited offer of loans for 15 %. This will be launched at the end of April [April 30th]. We are also preparing new features for autoinvest and new settings of filters. The long-term goal is to launch our own mobile app for investing. During summer we would also like to launch the currency conversion for investors as we have a growing number of investors from countries outside Euro zone and we want to give them an opportunity to easily convert money through our platform. And as I said before, we would like to continue working on new providers outside EU to offer enough diversification possibilities.

Where do you see Bondster in 3 years?

Our goal is to have 20,000 investors, 60 providers and EUR 80 million of loans on the platform in three years. We would like to top up with our competitors and maybe even overcome them. It would be great if we would manage to become one of the 5 best P2P platforms in Europe. We will work on simplifying our services and innovating our platform and IT solutions to serve the best to our investors.

P2P-Banking.com thanks Jana Mücková for the interview.

Jana is a Relationship Manager, she manages an international team responsible for acquisition of new providers. She studied at two prestigious Asian universities and previously gained working experience in banking and export support. She is also a leading economist of Bondster.

 

Why has the FCA Refused the Application of Mintos and has the Decision any Consequences?

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The FCA, the Financial Conduct Authority, is the supervising regulatory body for p2p lending platforms in the UK. In Dec. 2018 it refused the application of Mintos* or more precise of a separate legal entity within the Mintos group, established for operations within the UK.

The full notice of the FCA decision can be read here. Below I outline some of the aspects. I also reached out to the Mintos CEO, who kindly answered my questions on this matter.

Before we go into the details, I want to make it clear, that the FCA decision has no direct impact on the current operation of  Mintos platform, which is headquartered in Latvia.

Mintos Marketplace Limited applied for permission to conduct a specific regulated activity (“permission to operate an electronic system in relation to lending (Article 36H RAO)”).

Reading the FCA decision there are several points that led to the refusal:

a) the applying company does not currently meet the minimal funding requirements of 50K GBP as specified by the rules (paragraphs 49-50 of the notice)

b) the head office of the applying company is not currently in the UK (51-53)

c) the FCA has doubts that the Mintos business model will be adapted adaquately to comply with the UK regulation rules (paragraphs 29-33, 35-38, 40)

d) the FCA find Mintos wind-down plans are not specific enough (41-44)

e) the FCA is not satisfied with Mintos’ understanding of the UK rules (46-48)

The decision is interesting to read. Naturally it judges Mintos solely by the formal compliance regarding the UK rulebook. Any other non-UK marketplaces seeking FCA approval can certainly learn some things from this declined application. As I stated above, it does not have any consequences for the current operation of the Mintos marketplace. It only affects any potential plans Mintos had for the UK market.

That gets us to the more interesting point: why did Mintos strive to get FCA approval still in 2018 despite Brexit? I asked Martins Sulte, CEO of Mintos, and here are his answers:

1) What was the intention of Mintos to set up the seperate UK entity and apply for permission at the FCA. Was this related to offering IFISA products and possible tax advantages for UK investors?

The intention is to connect to our marketplace loan originators originating loans in GBP in the UK and offering those loans to investors from the UK. We believe that the UK can become a self-sustaining marketplace where local investors are able to fund loans originated locally in the UK.

2) Considering that the application was pursued still as recent as July 2018 (point 29), this is an interesting move in light of Brexit, with several UK fintechs going the other direction to secure a continued presence in the EU. Any comment?

We view the UK market as a separate market that has the UK specific regulatory environment when it comes to crowdlending. Our intention is to create a largely self-sustaining UK marketplace that serves both UK loan originators and UK investors. In that light uncertainty caused by Brexit plays less of a role. It is important to note that each and every country has their own approach to regulating crowdlending, which means that for instance having the FCA permissions for working in the UK would not really affect our operations in other countries, even in EU. Only when the European Commission’s proposal for a regulation on European crowdfunding services providers come into place we might see that licenses are passportable across the EU and then in that light, the Brexit certainly would more of a consideration. For now, we have to look at each country separately.

3) Is the announcement of the application for an e-money license a reaction to the upcoming decision by the FCA?

No. E-money licence and UK permissions are very different licenses.

4) Do you think that any of the assessments the FCA made, will be relevant for the Latvian regulator once the Latvian regulation is finalized?

I don’t think so. Each country has its own approach. The UK has a rather specific approach. When we talk about Latvian regulation we also have to take into account that it will cover only investors and loan originators in Latvia. Once the Latvian regulation is finalized we will still have to look at each country separately. Us having a necessary license in Latvia will play a little role when considering our operations in, for example, Mexico, South East Asia or Russia, or even in other countries of EU.

 

Martins added: ‘This was a formal Financial Conduct Authority (FCA) decision on Mintos’ application for operating in the United Kingdom submitted by the Mintos Marketplace Ltd (a separate legal entity within Mintos group that was established for operations in the UK). The application was submitted almost two years ago. In these two years, our business model has evolved, our team has expanded significantly and we have gained major business results on a European and global level that defined our position as a leader in the market of investments in loans. The application for necessary permissions to operate in the UK doesn’t affect our daily business and the future development of Mintos, and the rejection of the application is nothing that can, nor will, affect our business operations in other countries.

The UK has different and specific legislation, and the FCA notice serves us as valuable feedback for adjusting our processes and procedures to fit the UK specificities. At the moment, we are in no rush when it comes to entering the UK market, as we are all aware of the many uncertainties regarding the Brexit issue. Anyway, our growth and expansion goals are unwavering, and entering the UK market will remain in the scope of our interest. We will continue working with our legal and regulatory advisors and will take into account the FCA’s feedback when considering our next steps with respect to the UK.’