Aegon to Invest 1.5 Billion EUR in Auxmoney Loans; Leads 15M Series E

Dutch insurance company Aegon, international provider of life insurance, pensions and asset management, intensifies relationship with leading German p2p lending marketplace Auxmoney. Aegon plans to invest 1.5 bilion (!) Euro into p2p consumer loans issued by Auxmoney within the next 3 years. This is a stunning amount for institutional investments in the European p2p lending sector.

Aegon also leads the new 15 million Euro Series E funding round for Auxmoney. This financing round is being topped up by existing shareholders of Auxmoney.

Aegon the Netherlands, Eric Rutten, who will join the board of auxmoney, comments: “With innovations along the entire value chain of credit and its highly sophisticated and techdriven
methods of risk assessments and scoring, auxmoney is another strong case for Aegon to drive innovations in the financial industry for the benefit of society.”

Raffael Johnen, CEO and co-founder of auxmoney, says: “This investment is a strong signal for the entire FinTech industry in Europe and beyond. Through our efforts to provide capital to millions more people, we have emphatically made the case for a more inclusive financial system. Auxmoney is an impactful and sustainable FinTech leader in Europe, and we will continue to make a difference in the banking and finance landscape.”

Johnen continues: “Aegon’s funding commitment will enable auxmoney to onboard banks that are looking to expand and improve their loan offerings to clients through auxmoney’s
marketplace. We are looking forward to supporting more bank partners in serving their clients even better.“
Johnen adds: “When we first launched auxmoney, our vision was to empower customers who had no access to credit products. Today’s funding commitment from Aegon will enable
us to expand our offerings of highly competitive all-digital loans at all levels of the credit spectrum.”

The partnership between Aegon and Auxmoney started in 2015.

Auxmoney management

German P2P Lending Market – Short News

We last reported on Lendico refocusing on SME loans instead of consumer loans in Germany. Sinces then there is more negative news. Sources say that Lendico was in talks with Spanish bank BBVA, but failed to close a financing deal. In December several employees left the company. Lendico said that these were normal fluctation and that the Lendico group has more than 100 employees.

Documents accessed by P2P-Banking.com show that the largest (by loan volume) German p2p lending marketplace Auxmoney made an operating loss of 13.1 million EUR in the year 2015 (compared to 8.48M loss in 2014). This was before receiving Series D funding in early 2016.

Funding Circle CE, Berlin, the German division of Funding Circle closed 2015 with an operating loss of 9.45 million EUR (compared to 2.83M loss in 2014).

Germany seems to be a very hard market for p2p lending companies to crack. Interest rate levels for consumer loans are very low compared to other markets. banks are competitive. And there is no significant amount of credit card debt that can be refinanced. P2P Lending marketplaces cannot offer better interest rates, they need to find other competitive advantages. And customer acquistion costs to win borrowers through online marketing channels are high in Germany.

While Lendico never published monthly origination volumes, Auxmoney and Funding Circle CE stopped making monthly figures available early in 2016. The latest publicly accessable figures were 10.6 million EUR new loan originations for Auxmoney in January 2016 (ranking in Top 6 of Europe’s marketplaces) and 0.8 million EUR for Funding Circle CE in June 2016.

German retail investor perception sentiment towards Lendico and Funding Circle CE is critical. Investors discuss whether Lendico is still active developing the business and rant (1,2) about information quality of the Funding Circle CE interface. Another sumup by a German investor on Funding Circle CE.

Funding Circle has said that it will use part of the funds of the recent 100M US$ round to consolidate its position. It will be interesting to see if this results in higher activity in Germany as they announced to concentrate their continental focus on the Netherlands and Germany while stopping to issue new loans in Spain.

Discussion Paper on P2P Lending Published by Deutsche Bundesbank

The central bank of Germany, Deutsche Bundesbank, has published a discussion paper on the role of p2p lending in the consumer credit market written by Calebe de Roure, Loriana Pelizzon and Paolo Tasca. The study analyses data of German p2p lending marketplace Auxmoney.

Research Question

In recent years, we have begun to observe the growth of the internet economy, which has progressively led to “crowd-based” platforms and the direct matching of lenders and borrowers. Via peer-to-peer (P2P) lending platforms the decision process of loan origination is given into the hands of private lenders and borrowers. This paper investigates how the P2P lending market fits into the credit market and specifically aims to answer the following questions: Why do retail consumers look for P2P financial intermediation? Are the interest rates charged by P2P lenders in Germany higher than those of banks? Are P2P loans more risky than bank loans? Are internet-based peer-to-peer loans substitutes for or complementary to bank loans?

Contribution and Results

The paper shows that loans channelled via P2P platforms involve higher interest rates than loans channelled via the traditional banking sector. They are also riskier than those of banks. However, when adjusted for risk, the interest rates are comparable. Moreover, analysis of the different segments of the bank credit market and P2P lending shows that, after having controlled for interest rate and risk differences, the bank lending volumes are negatively correlated with the P2P lending volumes. Our finding suggests that high-risk borrowers substitute bank loans for P2P loans since banks are unwilling or unable to supply this slice of the market. Continue reading

Auxmoney Raises Series D from Seven Ventures

Auxmoney Logo 2016Auxmoney, one of the oldest German p2p lending marketplaces, has completed a Series D round with Seven Ventures as lead investor. The specifics were not disclosed, only that Seven Ventures along with Index Ventures, Union Square Ventures und Foundation Capital invested a double digit million Euro amount. Seven Ventures is the investment arm of ProSiebenSat.1 Media SE, which operates large TV channels in Germany.

Raffael Johnen, co-founder and CEO of Auxmoney stated: „The partnership with ProSiebenSat1 is an important milestone on our path to change the public awareness for p2p lending in Germany. We will make a big step towards our goal to enable access to loans for more people. The raised capital and the better access to TV advertising will help us to make p2p lending part of everyday life of millions of people.” (original quote in German; own translation)

Auxmoney trippled loan volume in 2015 compared to 2014.  As of January 31st, 2016, according to numbers on file with P2P-Banking.com, the company had originated 441 million EUR in loans since launch, with a monthly loan origination volume of 10.6M for the last month on file (January 2016).

Auxmoney management
Auxmoney management

German P2P Lending Service Auxmoney Raises 16M US$ Series B

German p2p lending service Auxmoney completed a 16M US$ series B round, financed by Foundation Capital, joined by Partech Ventures and Scott Bommer, alongside existing backers Index Ventures and Union Square Venture. Index Ventures and Union Squre Ventures already invested in the Series A in the end of 2012.

Auxmoney was founded in 2007, and has originated 94.4 million EUR in p2p loans since.

The proceeds will be used for auxmoney’s ambitious expansion plans, by further enhancing the Düsseldorf-based lending and investment platform and expanding the company’s 60-strong team.

auxmoney CEO and co-founder Raffael Johnen said the investment marked a tipping-point for peer-to-peer lending in Germany, with the market set to go mainstream. “We are about to witness a major shift in consumer behaviour towards peer-to-peer loans. As clear market leader in Germany, auxmoney is right at the forefront of this development,” he said. “With our new partners on board, we are ready to turn crowdlending into an integral and mainstream element of Germany’s consumer finance landscape.”

Auxmoney Now Sets Interest Rates Based on Own Score Classes

Auxmoney introduced a major change to the way interest rates are set. Instead of letting borrowers select the interest rate they are willing to pay, p2p lending service Auxmoney sets interest rates based on self-computed credit scores starting today. Auxmoney says it uses over 300 factors to grade borrowers either AAA, AA, A, B, C, D, E or X. The model now resembles the models Lending Club and Prosper use to set interest rates. In an earlier article I had compared different models p2p lending services use to set interest rates.

Near-term I expect borrower demand to rise due to this change since for most borrowers interest rates will be lower. However lower interest rates will lessen attractiveness for lenders and probably reduce funding percentage (in the weeks before this change approx. 30 to 40% of loan request got funded).

(via P2P-Kredite.com)

Auxmoney Changes Display Rules for Credit Scores

P2P lending service Auxmoney changed its TOS today. Auxmoney will make display of pulled credit scores mandatory (there are 3 score types obtained from different bureaus). In the past the display of credit scores was optional and borrowers could decide, if they want them in their listing. In fact borrowers could decide to remove credit scores from their loan listing should they consider a low score to hurt funding chances.

In practise only loan applications with displayed scores had realistic funding chances in the past – over 90% of the funded loans had at least one credit score information (see chart). But this is still a positive step, offering more transparency for lenders and allowing easier comparision of the over 2,000 open loan listings.

Auxmoney Raised 12M from Union Square Ventures and Index Ventures

As reported earlier German p2p lending service Auxmoney completed a series A round in the end of 2012. Today the company disclosed that Union Square Ventures and Index Ventures participated in that round and invested 12 million US$. Together they hold 21,8% of the Auxmoney ownership.

Both VC have made previous investments in p2p lending companies. Union Square Ventures invested in Lending Club and Funding Circle. Index Ventures invested in Funding Circle.

CEO Raffael Johnen told P2P-Banking.com: “We are happy to have won Union Square Ventures and Index Ventures as investors. Both have comprehensive experience with online marketplaces nad their expertise will help us to accomplish our plans to grow”. Johnen plans to use the raised amount to continue development of the technology. Furthermore he want to increase the staff (currently about 30). Main goal of Aumxoney is the growth of the loan volume.

Auxmoney Changes Business Modell; Raised Series A

Documents available to P2P-Banking.com show that German p2p lending service Auxmoney raised a series A round in the end of 2012 from 2 companies. The new investors now hold 21.8% of the shares, the 3 founders Philip Kamp, Raffael Johnen and Philipp Kriependorf hold 40.4% of the shares and the remainder is held by various seed investors (mainly from Austria and UK). The volume of the Series A round was not disclosed. In fact the round itself was not announced in public.

Yesterday Auxmoney did change its business model. In the past Auxmoney approach was subject to continued criticism (see also), because Auxmoneys largest fee income came from listing fees that every applicant for a loan had to pay. And with 80-90% of applications not funded, many critics felt that this model was unfair to the borrowers.

New fee model

Since yesterday Auxmoney charges borrowers a transaction fee for funded loan applications, but no more listing fees. This is in line with fee structures used by most major p2p lending services. Lenders pay a 1% transaction fee on successful bids.

No more auctions

In the past Auxmoney used a mix of loan listings that closed when they reached 100% funding and loans with reverse dutch auctions. In future all loan listings run for a maximum of 20 days and close immediately when they reach 100% funding. Raffael Johnen, co-founder of Auxmoney told P2P-Banking.com:  ‘Lenders told us, that when they had bidded, they wanted to be sure to have invested in the loan part and disliked when they were outbid in  the course of the auction‘.

New interface

Auxmoney also redid parts of the user interface and the dashboard for lenders. Johnen promised faster and more transparent information from the collection process. Continue reading