Month: April 2016

A Look At My Current Bondora Portfolio

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In October 2012 I started to invest into p2p lending at Bondora. I periodically blog about my experiences – you can read my update from Dec. 2015 here. Over the total time I did deposit 14,000 Euro and withdrew 13,380 Euro.  So as you see I cashed out an amount almost equal to the amounts I deposited. The good news is that I still own 705 loan parts with an outstanding principal of 10,362 Euro at an average interest rate of 23.74%. Of these 6,355 Euro are in current loans, 1,004 Euro in overdue loans and 3,003 Euro in 60+ days overdue loans. The reason that I still have such a large loan book despite cashing out nearly as much as I paid in, is that I reinvested nearly all interest and principal repayments from 2012 till 2015.

Bondora shows a net return of 24.6% for my portfolio. In my own calculations, using XIRR in Excel, assuming that 30% of my 60+days overdue and 15% of my overdue loans will not be recovered, my ROI calculations result in 17.0% return.

Let’s look how my remaining portfolio is distributed by several criteria

Bondora portfolio by country

Chart 1: My portfolio by country

Bondora Portfolio by rating

Chart 2: My portfolio by rating

Bondora portfolio ditribution by loan purpose

Chart 3: My portfolio by loan purpose

Recent developments

A lot has changed in the past four months. With the introduction of new regulation in Estonia, Bondora now prefunds all loans and also keeps a stake in the loans (‘skin in the game‘). Manual bidding on loans is not as straightforward as previously because now investors can make bids, which are not binding until allocation happens. This leads to situations were say 155% of the loan amount has been bid for, but the allocation has not happened yet, because some of the bidding investors have not enough cash in their account to match their bids and those bids that are sufficiently funded don’t add up to 100%. Furthermore Bondora gives bid preference to bids with larger amounts. If at allocation time bids with enough cash add up to more than 100%, then the bids for higher amounts will succeed, while the smaller amount bids will be rejected.

Continue reading →

FintechNorth

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Earlier this week, I was at the FintechNorth event in Leeds, UK. A very well organized, small conference with about 150-200 attendants. After a welcome from Adam Beaumont, founder of aql and a chairman address by Dan Rajkumar, CEO of p2p lending marketplace Rebuildingsociety, who co-organized the event, Chris Sier, director of FiNexus gave a very interesting presentation on the current state of the fintech market and the economic context.

fintechnorth venue in Leeds

Very interesting event venue in former Salem church. Beneath the glass, that Chris Sier is standing on there is the server farm of Aql’s datacentre.

Chris Sier put forward the provocative thought that we are at a cusp of a new banking crisis [in the UK] because of the rise of peer to peer lending. His argument is that the rising market share of p2p lending marketplaces will take away that much working capital from the banks that it will critically diminish the ability of the banks to create credit.

Applied futurist Tom Cheesewright than gave his assessment of the current state of digital innovation, saying he is still optimistic but not as bullish as he was a few years ago on the prospects of fintech and digital transformation.

Another very interesting presentation was ‘The future of lending’ by Richard Carter, the CEO of Nostrum Group, which provides digital lending technology to banks, finance companies and brands (one of their clients is Lendable). He thinks that the biggest gamechanger could actually be that a company like Paypal, Facebook or Amazon starts to make lending offers to their customer and thereby makes use of the size of their existing customer base, the trust these customers have into the brand and the vast amount of data these companies have collected on their customers which will benefit them in the assessment of the credit risk.
He showed a chart with portfolio balances of unsecured loans in the UK (Lloyds 9.6bn GBP, RBS 8.9bn GBP, HSBC 8.9bn GBP, Santander 5.5bn GBP, Barclays 4.9bn GBP, Zopa 1bn GBP). He expects to see totally different names on that chart in the future.

After the lunch break James Sherwin Smith presented Growth Street, a company that offers overdrafts to SMEs. One aspect he mentioned was that all talks with banks about collaboration opportunities so far led nowhere. The banks are unable/unwilling to understand that they need to regain the trust of their SME customers (‘only 13% of SMEs trust their bank to act in their best interest’).

Markus Simson of Ziraff and Tiit Pekk of Codeborne gave some fascinating examples of the efforts to digitize a whole country: Estonia. I was aware of the great progress before, but I find it striking over and over when I hear tidbits about what it means for everyday life. E.g. 99% of state services are online. Tax declaration takes 3 minutes now, but that is considered too long, therefore the next step is to make it ‘zero click’. 98% of medical prescriptions are handled online, no paperwork. Only marriages and divorces are still conducted offline. Wonder about the latter – too messy?
Tiit claims to be able to setup a new mobile bank (including all regulatory compliance, KYC, AML, card services) within months. Continue reading →

Merger Between a P2P Lending Marketplace and an Equity-Based Crowdfunding Platform

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In Germany Kapilendo and Venturate announced they will merge. Kapilendo is a p2p lending marketplace offering loans between 30,000 and 2.5M Euro to SMEs for loan terms of 1 to 5 years. The minimum amount for investors is 100 Euro. Investors are not charged any fees. Kapilendo was launched in 2015 and recently gained some publicity, when it succeeded to fund a 1M Euro, 3 year loan to first division soccer club Hertha BSC in 10 minutes. This loan has an interest rate of 4.5%. So far loans listed at Kapilendo were in the range of 3.1% to 6.5% interest. Kapilendo uses Fidor as transaction bank to originate loans.

Venturate is a small equity-based crowdfunding site, launched in summer 2015.

FinLab, owner of Venturate will also invest an additional amount to foster further growth of Kapilendo. After the transaction FinLab now owns 25.1% of Kapilendo.

German Bank Commerzbank Plans to Launch Own P2P Lending Marketplace Within First Half of 2016

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Informed sources told P2P-Banking.com that German Commerzbank plans to launch an own p2p lending marketplace called ‘Main Funders’ in the first half of 2016. The marketplace aims to connect SMEs seeking funding with investors. The name ‘Main Funders’ is a wordplay as ‘Main’ is the name of the river passing through Frankfurt, where the bank has its headquarter. The service is developed together with Main Incubator, the fintech incubator of Commerzbank. Currently all relevant domain names for Main Funders just redirect to the frontpage of Main Incubator. Commerzbank registered a trademark for ‘Main Funders’ in January 2016.

It remains to be seen whether this will be a full fledged marketplace, that also handles all transactions, or more a business initiation facilitator. A short mention in the 2015 annual report of Commerzbank uses the term ‘peer-to-peer-lending-plattform’ to describe Main Funders.

Under German regulation only banks can fund loans. To comply with this all existing p2p lending companies in Germany partner with a transaction bank which originates the loan and then sells the proceeds (repayments and interest) to the investors. So far a handful of small specialised banks were involved in these transaction. Commerzbank would be the first large German bank to enter the space and also the first bank to build an own platform.

Interview with Robin Buschmann, CEO of Giromatch

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What is Giromatch about?

Giromatch promises its customers “Better Banking Together”. We are a Direct Lending platform and offer our prime retail borrowers a complete digitized loan process at top rates. For investors we offer in this low yield environment a complete new asset class, namely the Deutschlandportfolio. What previously has only been accessible by banks, is now available to everyone – investing into a diversified prime loan portfolio and achieving an attractive return while keeping risks at a manageable level.

What are the three main advantages for investors?

The first great advantage for investors is that they get access to this new asset class at no costs. Secondly, the investment into the Deutschlandportfolio is automatically diversified. This is being achieved by a matching algorithm that optimizes each investment. The third advantage is the security-pool. Giromatch deposits a certain amount of each earned euro into the security pool in order to build up a security cushion for investors.

What are the three main advantages for borrowers?

The advantages for our borrowers result from the digitized loan application process. The loan application can be finished online in less than 10 minutes, no matter if you access Giromatch from home or mobile. A second advantage is the instant loan term confirmation without registration. After one enters all credit relevant facts, we show a customized rate, which we try to stick to as long as the input data was correct. A registration is not necessary in order to get a customized quote. A third advantage is our technology driven approach during the data verification process. A borrower does not need to send us documents proving the credit history. All we need from the borrower is a temporarily login into his/her current account, such that we can instantly confirm the credibility. Nevertheless, we think the most important advantage are the low rates we offer, which is only possible due to our digitized and cost-saving structure.

What ROI can investors expect?

Robin BuschmannThe ROI depends on the portfolio the investor chooses. We provide two different maturities. The shorter-term Deutschlandportfolio runs for three years and has an estimated gross return of 3.60 % p.a. Investors who choose the portfolio with the investment period of five years can expect a gross return of 4.00 % p.a. Due to our strong credit checks we anticipate no more than approximately 1% losses p.a. post recovery due to expected defaults.

How is your company funded?

We were able to inspire several business angels from the financial industry for our seed funding round. Hence, we were able to not only fund the company but also to win many important contacts in the financial industry. Prior to the seed round we invested our own money and money from friends and family. And we were granted an EXIST scholarship by the Bundesministerium für Wirtschaft und Energie (BMWi). Continue reading →

My Finbee P2P Lending Portfolio after 8 Months

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In August 2015 the new p2p lending marketplace Finbee launched in Lithuania. Finbee finances small unsecured consumer loans. The CEO told me that they meet all borrowers in person and that these are mostly looking to refinance other debts at higher rates, which they have paid in accordance to schedules punctually over months or years. Typical interest rates for investors are in the range of 20% to 32%. The platform is still very young, but recently loan volume picked up and Finbee crossed the milestone of 1M Euro loans financed since launch.

I started small and deposited only 50 Euro right after launch to test it and gain first hand experiences. Only two months ago I started depositing more and right now my deposited total amount is about 1,550 Euro.

The auction mechanism

Finbee lists all loan request and investors can bid either manually or via autoinvest (autolend). There is an auction period for each loan with investors underbidding each others in an reverse auction, meaning the interest rate will sink once the loan is filled. A pecularity of Finbee is, that each investor with a winning bid gets the individual interest rate he made the bid on, meaning there is no uniform lending rate for investors in the same loan (this is different from the way most other platforms handle reverse auctions, where usually all investors with winning bids get the same rate which is set at the highest winning rate at auction closing).

Finbee Loans
Loan requests at Finbee. The ones with the green button at right are open for bidding. Auction periods are initially set to 14 days but then reduced to 48 hours, once the loan is 100% filled by bids.

This auction mechanism often causes a mad rush in the last 5 minutes. Lots of bids are made right before closing and it is usual that the top closing interest rate drops 3-5% in these last minutes.

This is aided by a mechanism abbreviated ‘ARBU’ (Automated Response to Bumbed-off Underbids). Investors can enable ARBU to make lower bids on their behalf, once their original bid is outbid. The mechanism is quite configurable in selectable settings, but the catch is that it will not make more than 5 lower bids per loan. This led me to do quite a bid of configuring and experimenting with my settings. I also changed my strategy from multiple smaller bids on the same loan (e.g. 5 bids at 20 Euro), to now just 1 or 2 bids per loan at 30 to 35 Euro.

My strategy

In the first months I have just observed what is happening on the Finbee marketplace. Since February I go for the riskiest loans, risk category ‘D’ and sometimes ‘C’ with the highest loan amounts and the highest interest rates. I do all bids manually and have ARBU enabled with my settings, which I tweaked quite a bit. If I have multiple successful bids in one loan I try to sell some of the loan parts on the secondary market at premium in order to reduce the concentration. On the secondary market only current loans, that have made at least one repayment, can be sold. I also try to sell my late loans on the secondary market, but that means I have to wait for them to turn current again before I can sell them. Continue reading →