“We are delighted to announce the addition of two key states today, which we believe will help drive more individual investors to our platform,” said Lending Club CEO Renaud Laplanche. “Our marketplace gives investors unprecedented access to consumer credit as an asset class, and empowers investors to diversify their investment across hundreds or thousands of loans. We are thrilled to be able to bring this access to investors in Texas and Arizona and appreciate the work done by the state regulators that allowed this to happen.”
What is Twino about?
TWINO is a peer-to-peer lending platform that connects investors with some money they could lend and borrowers who need some money for making their dream come true — buying a new car, covering tuition or medical costs, for travel and leisure, renovating their house or starting a business etc. The money is lent without a pledge. This is a chance for borrower to get a loan with a lower interest rate than a bank or the various short-term loan providers would offer, while the investor can make direct investments without institutional intermediaries and receive a higher return on his investments.
What are the three main advantages for investors?
First and foremost, it is as chance to get significantly higher return on your investment than in a bank. Our financial solution allows omitting complicated financial operations that require high administrative expenses; therefore, it is possible to provide the service for a lower cost.
Secondly, so far, TWINO has been the only company in European market to offer opportunities to invest into consumer loans with buyout guarantee that completely minimise the risk of investor.
Finally, you do not need to meet face to face or sign heaps of documents to become a TWINO investor — you can save yourself the precious resource of time! You can live anywhere in the world and become a TWINO investor, you physical location does not matter. All the investor has to do is to e-mail a scanned ID document to prove his identity.
What are the three main advantages for borrowers?
The Latvian households similarly to the ones elsewhere in Europe are victims of the frozen economy after the crisis. If they want to make a larger purchase but can not put money aside from their monthly income, they have two options. They can borrow the money in a bank, but very often banks are not willing to credit these people due to strict crediting terms or they can get a short-term loan with very high interest. This is why TWINO is almost the only way of borrowing money with reasonable interest.
The borrower can fulfil any of his needs with the money, including investing in his future — paying for tuition or essential assets or even starting a career in business or a investing in a start-up, thus supporting the local economy. It is very topical people living in the countryside regions and to those, who cannot access bank loans and cannot get a short –term loan with low interest.
Finally, borrowers should not be afraid that they will not be able to evaluate their borrowing capacity adequately — TWINO has an experienced team that evaluates every borrowing request separately according to the rules of the Consumer Rights Protection Centre and they follow the progress of giving back the borrowed money. If the TWINO team sees that the borrower has encountered unforeseen difficulties, we look for solutions together with the client. This means that you must not be afraid that you will not receive consultations and help just because this is a financial technology. The TWINO team members are ready to help you any time by providing consultations and looking for solutions together with you.
Out investors earn roughly 10-20% per annum. Of course, this can fluctuate depending on their investment amount.
What is the background of the company running Twino?
Finabay is an innovative online finance company founded in Latvia almost 7 years ago. It is also providing short-term loans and has developed its services in Poland, Czech Republic, Russia, Poland, Georgia and Denmark. This year it will launch its services in Spain
Is the technical platform self-developed?
Yes, the technical platform has been developed in Latvia by the experienced FinaBay IT Solutions Team.
What has been the greatest challenge so far in the course of launching Twino?
Currently the greatest challenge for TWINO is explaining what a peer-to-peer lending platform is to potential investors and borrowers. While this sector has been active in various European countries for almost 10 years now and it has lent 4.5 billion EUR to customers from 2012 to 2014, it is still a new service in Latvia and the Baltics. However we have to admit that this is not a burden, because peer-to-peer lending platforms are rooted in the economy of sharing, and through such peer-to-peer platforms it proves itself as a functioning model of economy — not only does it affect the well-being of individuals, it has a potential to stimulate the economy of regions and even countries. Continue reading
Thanks to Companies House filings of British Companies are available to the public fee-free now (previously there was a small fee to access documents). This is a huge plus for equity crowdfunding as interested investors can check past filings of the pitching companies (provided the company was not founded very recently).
This also allows anybody interested to check how many shares the founders, employees and investors of the top UK equity crowdfunding platforms Crowdcube and Seedrs hold. And in order to save you the time to search yourself, P2P-Banking.com provides the direct links to the documents below:
- Shareholder list – as of Sep 10th, 2014
- Articles of Association – adopted July 16th, 2014
- Last accounts filed – up to Sep. 30th, 2013
- Shareholder list as of March 16th, 2015
- Articles of Association
- Last accounts filed– up to Dec. 31th, 2013
Both companies had pitches in the past for themselves, offering part of their equity on their platforms to interested investors.
The way bidding works at p2p lending service Ratesetter will change on June 24th. Ratesetter informed investors
Currently your money is re-invested at the higher of “Your Rate” (i.e. the rate you have specified) or “Market Rate” (i.e. the rate that is worked out daily at RateSetter looking at the whole market). Once re-set to Market Rate it stays at that rate which resulted in some scenarios where your money could be sitting at Market Rate unmatched when in actual fact your specified rate was lower.
From 24th June, your money will simply be put on the market to be re-invested at your specified rate. Simple as that.
It is worth saying that if the highest borrower bid at the time of your re-investment is higher than your specified rate, your money will be matched at that rate.
So, we hope that you can now use the “Your Rate” functionality to better control the rate at which you re-invest. One way of looking at it is that is like a floor – you will get at least your rate, or the best borrower bid if that is higher.
There has been some discussion among investors what this means and what actually changes for investors. The way I interpret it (but I am not even a Ratesetter investor) is that the market rate will become less important as Ratesetter could advice the borrower at what rate his loan request would match instantly. Since many investors will not micro-manage their set rate and only login occasionally it will lead to a broader distribution of interest rates set as ‘Your Rate’ and thereby reduce volatility. E.g. should interest rates move upward on the market (for whatever reason), unchanged ‘Your Rates’ at lower levels from earlier times will delay and slow the rise (provided they have unused cash from repayments in their accounts).
But let’s hear opinion of actual Ratesetter investors in the comments, please!
When German p2p lending startup Finmar tried to register their logo as a trademark they were in for a negative surprise. The trademark office in 2014 forwarded them a 500 page objection filed by the FINRA (Financial Industry Regulatory Authority) which complained that the design of Finmar’s logo to closely resembled FINRA’s logo which was already protected by a European trademark filed in Madrid. Given the similarity of name and logo FINRA feared that there is a risk that both are confused.
Finmar was flabbergasted but tried to reduce the damage. They negotiated with FINRA that Finmar would change its logo but could keep its name. Finmar designed a new logo (see above), revoked the old trademark application, submitted a new one and exchanged the logo on the website and in all social media channels. In total this dispute took Finmar more than 15 months to settle.
Swedish crowdfunding marketplace Fundedbyme today announces that its partner Alix Global Sdn Bhd, was awarded one of six coveted licenses to operate equity crowdfunding in Malaysia. Malaysia is the first South-East Asia country offering equity crowdfunding licenses. The license allows FundedByMe to start operations in the new market.
The announcement follows careful deliberations by the Malaysian Securities Commission, which closed submissions for licenses in May 2015. The license comes under Section 34 of the Capital Markets and Services Act (2007), by the Malaysian Securities Commission. It will permit the selected platforms to help privately owned businesses raise money from a spectrum of investors – including institutional, accredited, and retail investors – with limitations placed on non-accredited investors.
“We’re extremely excited to be one of the few platforms selected by the Malaysian Securities Commission today, which is a first for the region, and marks a historic moment for Malaysia and the crowdfunding industry. As a business-building crowdfunding platform, we together with our partners Alix Global are thrilled to help build this fast-growing industry of which empowers businesses through crowdfunding,” said Daniel Daboczy, CEO and Co-Founder of FundedByMe. Continue reading
When was the last time you stood in a long line outside your bank branch, patiently waiting to deposit money into your savings account? Imagining a scene like that seems ridiculous at a time with near-zero interest rates in an increasingly large number of developed countries.
But there where you would least expect it, in the Fintech world of fast-moving bits, some startups actually are imposing measures to throttle influx of investor money in order to balance it with borrower demand. Welcome to p2p lending (short for peer-to-peer lending). The sector is experiencing tremendous growth rates. With attractive yields for investors some platforms struggle to acquire new borrowers fast enough for loan demand to match the ever-rising available investor demand.
One challenging factor is deeply ingrained in the business model of p2p lending marketplaces: once a new investor is onboarded and found the product satisfactory, he is most likely to stay a customer for years to come and reinvest repayments received and maybe the interest also. On the other hand the majority of borrowers are one-time customers. They take out a loan typically just once. While it may take years for the borrower to repay that loan, in most instances there is no repeat business for the marketplaces. So the marketplaces have to constantly fire on all marketing cylinders to win new borrowers in order to keep up and grow loan origination volume.
This has sparked some outside of the box thinking, e.g. the partnership of Ratesetter with CommuterClub to win their loan volume, which is in fact mostly repeat business.
Winning investors has been relatively easy for many of the p2p lending services in the recent past. Investors are attracted typically through press articles or word of mouth. One UK CEO told me he never spent a marketing penny ever to acquire investors.
But what happens on the marketplace, when there are so many investors waiting to invest their money in loans, but loans are in short supply?
- If the marketplace does nothing or little to steer it, then those investors that react the fastest, when new loans are available, will be able to bid and invest their money. This is the situation e.g. on Prosper, Lending Club and Saving Stream.
- The marketplace has some kind of queuing mechanism. This is typically coupled with an auto-bid functionality. Examples of this are Zopa, Ratesetter and Bondora.
- The investors are competing during an auction period by underbidding each other through lower interest rates. Examples of p2p lending services with this model are Funding Circle, Rebuilding Society and Investly.
- The marketplace can lower overall interest rates to attract more borrowers while the resulting lower yields slow investor money influx.
The UK p2p lending sector is eagerly awaiting the sector to become eligible for the new ISA wrapper. Inclusion into the popular tax-efficient wrapper will attract an avalanche of new investor money to the platforms.
“That’s going to be a challenge for the industry,” said Giles Andrews, CEO of Zopa. “Once the dates are worked out, the industry will need to plan for that together, and we may have to do something we have never done before, which is to limit the supply of money. It’s not good to have people’s money lying around [awaiting new borrowers] or to lower standards of borrowers.”
So there is some speculation that UK p2p lending services could impose temporary limits on new investments.
The investor viewpoint
The aim of the investor is to lend the deposited money easy and speedy into those loans that match his selected criteria/risk appetite. Idle cash earns no interest and will impact yields achieved (aka cash drag).
For the retail investor none of the above mentioned mechanisms are ideal. The “fastest bidder wins” scenario means he would either have to sit in front of the computer most of the time or be lucky to be logged in just as new loans arrive. The queuing mechanisms are disliked as they can prove to be very slow in lending out the funds and can be perceived as nontransparent (see the lengthy and numerous forum discussions on the Zopa queuing mechanism). Underbidding in auctions does provide the chance to lend fast, but at the risk of setting the interest rate too low and this requires a strategy and can also be time consuming. Continue reading
Table: P2P Lending Volumes in May 2015. Source: own research
Note that volumes have been converted from local currency to Euro for the sake of comparison. Some figures are estimates/approximations.
*Prosper and Lending Club no longer publish origination data for the most recent month
Notice to p2p lending services not listed: Continue reading