Banco BNI Europe Starts to Lend on Multiple P2P Lending Platforms

Banco BNI Europa was launched in July 2014 as a digital-only bank in Portugal. Banco BNI Europa says it aims to challenge the traditional banking sector through strategic partnerships with fast-moving fintech businesses to launch new products allowing the use of the most advanced technology in terms of risk analysis, consumer experience and rapid entry into the market.

Today Banco BNI Europe announced it will start lending on Fellow Finance.

‘Modern banks expand and grow by partnerships. Fellow Finance enables and offers an easy access to invest and lend in Nordic and Central European consumer and SME loans through its platform. Through their investment account at Fellow Finance, Banco BNI Europa is able to diversify their balance sheet investment into Finnish and German loans easily and cost-effectively. This is an example that banks don’t need to set up their own expensive operations on ground but can effectively enter markets through marketplace lending platforms. It is also an example how banks can also utilize the presence of FinTech among their core business’ says Jouni Hintikka, the CEO of Fellow Finance.

‘Investing via Fellow Finance in consumer and SME loans offers us a great opportunity to easily expand our operations and we are very satisfied with the analytical and professional approach of Fellow Finance in credit intermediation’ echoes Pedro Pinto Coelho, Executive Chairman of Banco BNI Europa.

Last week BNI Europe announced it will fund German SME loans through Funding Circle. According to Pedro Pinto Coelho, Executive Chairman of Banco BNI Europa, ‘an investment in German SME – the staple of European economic stability – is a highly attractive asset class. And Funding Circle is the professional partner that convinced us with their risk assessment and credit analysis. …’.

To date Banco BNI Europa has struck fourteen fintech partnerships with European fintech leaders across the continent. The bank had 141 per cent growth by the end of 2017 taking its total assets above €500m, and cited its focus on ‘innovative products’ as an explanation for the improved performance.

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.

Marketplaces Step Up Incentives for Investors

Currently there is an increase of promotions by p2p lending marketplaces in order to acquire and activate retail investors. Cashback offers are more frequent and Funding Circle is giving away iPads to investors that will invest at least 20,000 GBP during the Funding Circle spring promotion. Investors welcome these added benefits, but for marketplaces it is a fine line to walk. They want to grow originations, but risk that investors will expect getting extras and might hold back further investments until the next offer is made.

Funding Circle Spring Promotion
(Image source: Funding Circle)

LendingRobot Adds Functionality to Invest into FundingCircle US loans

3rd party service LendingRobot today announces a partnership with Funding Circle in the United States, expanding the reach of LendingRobot’s automated investment technology beyond consumer loans and into small business lending.

Through the integration, individual investors using LendingRobot can set automated investment strategies for Funding Circle’s marketplace based on an extensive set of loan filtering criteria, and leverage the unified platform to manage their investments across multiple marketplaces, including Funding Circle.

“Introducing Funding Circle to the LendingRobot family of platforms demonstrates that our algorithmic investment strategies are extensible beyond consumer credit,” said LendingRobot CEO Emmanuel Marot. “The growth of peer lending as an investment vehicle is naturally encouraging an increase in the number and size of focused, vertical marketplaces. What we are building with this partnership is a unified view of all the major aspects of peer lending for investors, …”. Continue reading

Funding Circle UK Moves To Fixed Rates, Ditches Auctions

Funding Circle LogoBritish p2p lending marketplace Funding Circle introduces a new model today. All new loans will be issued at fixed interest rates set by Funding Circle. Coming right after Funding Circle’s fifth anniversary, and 792 million GBP originated in loans to SMEs, the step to discontinue auctions is a major change in the way the marketplace operates.

Spokesman David de Koning told P2P-Banking.com that there were major drawbacks associated with the auction model for borrowers as well as lenders. Borrowers lacked certainty of the final interest rate until the auction period was over which led to some of them cancelling their loan application. Investors on the other hand experienced cash drag and sometimes had to make multiple bids to ensure they participate in the loan they wanted.

Funding Circle new rates

Under the new model Funding Circle will set the interest rate based on risk band and loan term. There will be 3 different rates for each risk bank. De Koning pointed out that the introduced model is not completly new for Funding Circle, as Funding Circle did already use fixed rates on property loans and on the US market of Funding Circle. Asked whether he expects loans to close instantly as demand could be higher than loan supply, he said he could certainly see loans to close quicker than before. The long term goal envisioned is that in future borrowers may pre-approve a loan before it is listed and it could close instantly once filled. Continue reading

Will Funding Circle Expand Into Europe?

Note: The following is a synopsis from an Funding Circle investor event in London yesterday. I did not attend, therefore it is based on notes that attending investors have published.* I selected only some aspects from these notes, that I found interesting, so the following probably omits many topics from the meeting and is by no means complete.

Funding Circle confirmed that it has been investing own money (approx. 760K GBP) in loans on the platform. So far none of these loans have been sold on the secondary market.
Property loans were a new area for Funding Circle. To get it started Funding Circle used cash backs to incentivise investors. So far institutional investors have not invested into the property loans but this is likely to change soon.

Funding Circle sees retail and institutional investors as equally important for their lender mix in the future. Cashbacks are expected to be reduced in future as they were more important when new markets were introduced than now.

Funding Circle is working on improvements on the website and in communication to better meet the expectations of investors. The risk model is performing increasingly well over time. They also capture and monitor data about borrowers that they reject, watching for CCJs and other credit events.  This has enabled them to develop a more complete model, and ultimately enabled them to launch the E risk band.  E borrowers are people that they would previously have had to reject, but now they understand them well enough to feel they can accurately model the default risk.
Personal Guarantees are factored in to the risk banding process, and also considered in the manual underwriting stage; they do make an assessment of the “value” of the PG, but it’s aggregated amongst lots of other stats to produce an overall ‘score’.

In collections Funding Circle has  reduced their late rate (percentage of loans making late repayments) from 1.4% to 0.7% since they brought the function in house.
The recovery rate is currently at 20p/£1, but this is skewed by the vast volume of loans being made; Funding Circle expect this would be at c. 43p/£1 if the loan book was frozen.

Funding Circle produced a tool, for MPs, prior to the 2015 election, to show what businesses in what constituencies were borrowing what, from whom (and presumably, by extension, risk bandings etc).  This tool will be made available to investors via the Funding Circle website soon. Continue reading