What is mozzeno about?
mozzeno is a Belgian fintech founded in December 2015. We have just launched the first digital platform to enable private individuals to participate indirectly in the funding of loans to other private individuals. Loans are granted by mozzeno, acting as a regulated lender. mozzeno then finances or refinances these loans thanks to the issuance of Notes (financial instruments).
What are the three main advantages for investors?
- Investors can expect higher returns compared to deposits or saving accounts in Belgium (currently close to 0%).
- mozzeno performs a strict selection of borrowers and eases the diversification of investor’s portfolios.
- Investors can benefit from a ‘PROTECT guarantee’, covering between 60% and 100% of the loan outstanding amount and up to 3 unpaid instalments, in case of default.
- Investors can choose between manual or automated (re-)investments, with very granular selection criteria to match their risk appetite and investment preferences.
What are the three main advantages for borrowers?
- Borrowers can benefit from competitive market rates, proposed dynamically based on their assessed risk profile. This cost of credit can also be further reduced, thanks to a specific incentive we put in place. Borrowers repaying systematically on time over the loan period are getting a part of the origination fee back on their bank account at the end of the loan term.
- Interests paid by the borrowers are benefitting to other people like them, not to banks or other financial institutions. An increasing number of people are sensitive to these sharing economy principles or simply open or looking to financial solutions outside of the traditional banking system.
- The loan application process can be completed fully online and digital. Even the loan agreement can be signed digitally thanks to eID. If the borrower chooses the proposed digital options, the whole process can be done without any paper on any side (borrower and mozzeno).
What ROI can investors expect?
Investors are building their portfolio of Notes themselves, picking up underlying loans manually or thanks to automated investment profiles. The selection can be made based on criteria like the loan purpose, the risk class, the maturity, or more advanced criteria like net income, housing status, professional status… Hence, the return an investor can expect really depends on the type of investment strategy he will follow. As an average we target to provide 3% before tax, the maximum expected return is about 5,79%.
Is the technical platform self-developed?
Absolutely, we started the development of the platform internally in November 2015, in parallel of the regulatory track. From the beginning, the ambition has been to develop a highly modular, scalable and multi-lingual platform that can be leveraged for other sharing economy use cases, under our own brand or through white-labelling. mozzeno services, mother company of mozzeno, develops such a B2B business model, and can provide a range of existing modules (eKYC, digital boarding, transaction orchestration, scoring…) to other financial players, as well as co-develop complementary modules with them.
What credit rating / credit history data is available on Belgian consumers and how reliable is it?
There is a very high concern for the risk of over-indebtedness and for retail consumer protection in Belgium compared to other EU countries. There is no developed pay day loan or subprime business, as the interest rates and maturity are capped and the lending activity restricted to regulated lenders. These regulated lenders have the obligation to register all granted loans (mortgages, personal loans, credit cards, credit lines, overdrafts…) to the Central Individual Credit Register managed by the National Bank. This database also includes information on defaults. As a regulated lender, mozzeno is contributing to this CICR and has access to this market-wide credit history database (positive and negative sides).
As a consequence of this market specific, there is no other established credit bureau. With regards to credit rating, we have developed our own scorecard with a specialised company, we continue to further develop it, and we also benefit from the well trained scoring of our credit insurer.
How is the company financed? What background does your team have?
The company has been initially founded and funded by my partner, Xavier Laoureux, and me. Xavier has a master in Law, has worked more than 10 years in digital marketing strategy for agencies like TBWA. I have been working 15 years in the online payment business, namely for Ogone and then for Ingenico ePayments. Tom Olinger, former CFO of a mid-size Belgian bank, has joined the management team in April 2016.
Some fintech business angels and W.IN.G (a Belgian seed fund) have taken part to a seed round in Q2 2016. A further funding round should take place in the course of 2017.
Can you please describe the p2p lending regulation in Belgium?
Well, actually p2p lending as such is forbidden by law in Belgium. On one hand, the European prospectus law has been adapted locally very strictly, preventing individuals to raise funds publicly, even through an intermediary platform. This means that a borrower candidate cannot invite other people publicly to lend him money. On the other hand, one needs to be a regulated lender to grant loans and to get access to the Central Individual Credit Register. There is a new regulation as from November 2015, this regulated lender status now being supervised by FSMA.
Our regulatory model is then two-sided. We were the first Belgian regulated lender approved by the FSMA as per the new regulation, and this allows us to grant loans for Belgian residents. We also published a base prospectus, also approved by the regulator, allowing us to issue Notes on a continuous basis. These Notes are the financial instruments subscribed by the investors, similar to bonds, and mimicking the repayment behaviour of the underlying loan.
mozzeno is the first p2p lending service in Belgium. Compared to other European countries Belgium had to wait long for a p2p lending marketplace. Is regulation the cause for this, or are there other reasons?
The complexity of Belgian regulation is obviously the main reason. This so called banking monopoly made a ‘simple’ direct model for peer2peer lending completely impossible in Belgium and a few previous attempts have failed for that main reason. Our indirect model copes with this complex regulation and the operational model of the platform has been thought to be as close as possible to p2p lending from a user experience perspective.
Having said that, Belgium also remains typically a complex market due to the different languages and cultures as well the limited size.
What is the reaction / the viewpoint of banks, if you talk to them about p2p lending?
We have discussed with the main Belgian banks over the past 2 years, and the initial reaction was scepticism due to the complex regulation and the required regulator green light still ahead of us at that time. Now that we have the required regulatory agreements and that we are live, we are seeing diverse reactions, either enthusiastic or defensive. This is of course too early to draw any conclusion on this. We are, on our side, convinced that both models are complementary, and open to share views and discuss with banks and other lenders. We have applied to the relevant industry associations to foster such exchanges.
What was the greatest challenge so far in the course of launching mozzeno?
Certainly the complexity of Belgian regulation, with regards to p2p lending, and the time needed to define and set-up the required structure, with first discussions with the regulator as from March 2015. While we understand and agree with each of the requirements, questions and challenges we have faced so far, it is fair to say that this is not always compliant with a startup agenda.
Which marketing channels do you use to attract investors and borrowers?
For borrowers, we are planning to use mainly digital channels, with the best mix possible between natural, earned and paid traffic sources. For investors, beside the same digital channels, we plan to organise roadshows and meet investors physically to build trust in the platform. We will respectively orchestrate the marketing effort based on the demand/supply balance.
On both sides we also intend to set-up member-get-member programs.
Is mozzeno open to international investors? Do you plan an international expansion?
As most businesses starting from Belgium, an international expansion is integrated in the plan from day 1, due to the limited size of the domestic market. On the investor side, our main commercial focus at launch is on Belgian retail investors, but we can technically accept retail and professional investors from EU today. Our prospectus can also benefit from an EU passport, for countries in which we will target a real commercial focus on retail investors. On the lending side, regulations are not harmonized at EU level, so our internationalisation strategy will be a mix of partnerships with assets originators and own expansion, based on opportunities.
Where do you see mozzeno in 3 years?
We see mozzeno as becoming a trusted and representative player in Belgium, having a footprint in some other EU markets, either through partnerships or under our own brand. With mozzeno services, white-labelling our technology has also a great place in our plans (innovative scoring systems, platforms for the sharing economy, seamless digital boarding processes…), with expectations to partner with the most ambitious fintech, insurtech or traditional players, helping them in their launch or digitalisation roadmaps.
P2P-Banking.com thanks Frédéric Dujeux for the interview.