Auxmoney Expands Into SME Loans

Auxmoney lgoAuxmoney, the largest German p2p lending marketplace, today starts financing SME loans. In the past Auxmoney focused on consumer loans of up to 50,000 EUR. Now loan amounts will get much bigger. Auxmoney will finance SME loans from 10,000 to 750,000 EUR at APRs between 2.7% and 11.9% depending on credit rating. Available loan terms range from 6 to 60 month. Applying companies will have to submit accounts and a list of otstanding debts. Unlike most banks Auxmoney says it will not require a director’s guarantee.

Under German law (KWG) a transaction bank is required to formally originate the loan. For the SME loans Auxmoney will cooperate with Solarisbank while continuing to use SWK Bank for the consumer loans.

In 2018 Auxmoney financed 551M EUR in consumer loans, which were funded by both retail and institutional investors.

SME loans have not been an easy market for German p2p marketplaces in the past. Lendico was bought by ING Bank and in my view the growth figures of Funding Circle Germany (which came into existence by Funding Circle buying Zencap) are far from impressive so far.

Auxmoney operated at a loss of 5.5M EUR in 2017 (the latest year for which accounts have been published), but CEO Raffael Johnen says the company has reached break-even.

Johnen is confident that the platform technology and the amount of data available for credit scoring will give Auxmoney a competitive edge.

Auxmoney Now Stands for 0.5% of the Market of German Consumer Loans

German p2p lending marketplace Auxmoney announced that it has facilitated 551M EUR in consumer loans in the year 2018. Up 74% compared to 2017. Approximately 73,000 loans were financed. Figures published by the German Central Bank Bundesbank give the total volume of consumer loans in Germany in 2018 as 105.7 billion EUR (page 2, column 3). This figure does not include credit card debt and overdrafts. That would mean Auxmoney now stands for a market share of roughly 0.5% of the market.

CEO Raffael Johnen stated ‘While the major German banks are in crisis mode, the leading German fintechs are always setting new records, and with our continuously strong growth, we are the first p2p lending marketplace to catch up with medium-sized banks in Germany.’ (translated to English from the German original of the quote).

(Sources: Company press release, Finanz-Szene)

 

ProSiebenSat.1 Sells Shares in Auxmoney to Lexington

German media holding ProSiebenSat.1 has sold its stake in German p2p lending marketplace Auxmoney to new investment fund Crosslantic Capital, in which Lexington Partners is the majority shareholder. This is part of a package sale of shares in 16 startups. ProSieben investment company Seven Ventures will hold a minority stake of 24.5% in the new fund.

The shares came from an investment in Series D of Auxmoney (held through Seven Ventures).

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