To see the new notes listed on the Mintos primary market, investors can toggle a switch on the upper left side
Screenshot May 25th, 2022, click for larger view
Initially there are notes from the loan originators Eleving Group, CashCredit and Sun Finance listed. Notes for more loan originators will be added as soon as they have published the required prospectus.
Clicking on an ISIN brings up the detailed information about the loan set. Most of the offered information mirrors that available for claims, but there are some new parameters, e.g. ‘sink factor’
Screenshot May 25th, 2022, click for larger view
Investors have voiced questions and concerns around the shift from the claims to the notes product. Mintos has adressed common questions in this Q&A. One of the most discussed aspects is that Mintos is required to withhold 20% taxes. This amount can be lowered for residents of these countries as soon as they submit a tax residency certifacte from their tax authority to Mintos.
Despite all communication efforts by Mintos it seems an uphill battle. On the German forum in a recent survey 55% of respondents answered that they will stop investing at Mintos as a result of the introduction of the new notes. Another 24% are unsure about it. Similar sentiments can be read on the Czech forum.
If investors will suit the action to the word this might impact Mintos origination volumes in the coming months. Some investors might switch to competing platforms with similar offers, e.g.
Lendermarket* (Creditstar loans, up to 15% interest rate, 1% Cashback when registering through this link)
It will also be interesting to see if there is an impact on the discounts on the secondary market for claims, as investors might try to sell claims before the secondary market sunset for claims on June 30th. If investors do not wish to hold claims to maturity there might be increasing supply outweighting demand and therefore offered YTMs might rise until June 30th.
The long announced and several times postponed Mintos Notes product will finally launch on May 25th, Mintos* said yesterday. The notes are financial instruments and issued under the new investment firm license Mintos received last year. For each loan originator there will be a seperate prospectus (see example). Mintos mentions safeguarding of investor funds and notes under MIFID II requirements and increased transparency as investor benefits.
Until 30 June, investors can buy and sell investments via claims on the Secondary Market as usual. Then, from 1 July onwards, investors will be able to buy and sell Notes only, as a result of regulatory requirements.
The transition will mean two key changes for investors:
As the claims cannot be traded from July 1st onwards on the secondary market, investors will have to hold any claims in their portfolio to maturity
Mintos is required to deduct withholding tax depending on the investors country of tax residency and applicable double taxation treaties
The transition will mean a major change for the marketplace that could either stiffle or empower Mintos growth. I expect that many investors will shy away from investing in very long term claims on the primary market in the remaining 7 weeks. Also buyer demand on the secondary market will likely decrease for the claims on long term loans. Potentially this will lead to offers with rising discounts before the trading of claims ends on June 30th.
There is some hesitation voiced among investors regarding the upcoming notes due to the withholding tax and surronding paperwork to claim possible reliefs and reductions (Mintos has announced that it will publish more information on the details). Mintos might try to offer some incentives in order for investors to take the leap and embrace the new product. I also imagine that Mintos will step up investor marketing again, once the notes product has launched. Already Mintos is taking a lot of effort to communicate and explain the coming changes via blog articles and newsletters.
This disruption might also increase the trend of loan originators setting up their own, unregulated investor marketplaces in other jurisdictions than Latvia.
Breaking news: p2p lending platform Mintos* will run an equity crowd on british equity crowdfunding platform Crowdcube. Mintos states ‘As far as startups go, Mintos has raised very little capital so far. We have grown to become the market leader in continental Europe largely fueled by our own revenue. We see a huge market opportunity ahead of us, and to accelerate our growth and develop new products we are raising money. Our fundraising round includes both venture capital and crowdfunding. ‘.
No details regarding the amount to be raised or the valuation have been shared yet. The pitch is set to go live in late November
Not only the stock markets, but also the p2p lending sector is heavily impacted by the current coronavirus situation. In this article I’ll try to give an overview of what’s currently the situation.
I watched the Mintos* live webinar on the current situation for the past 90 minutes. Some screenshots of the slides shown are at the end of this post. About 800-900 Mintos investors were watching and I think they highly appreciated the time and effort Mintos took to communicate. CEO Martins Sulte spent over 45 minutes answering questions. And there are a lot of questions investors have in times like these.
My take is, that the biggest trend we saw in p2p lending in the past week is the hunger for liquidity. Both on the investor side as on the loan originator side (on those marketplaces that work with loan originators).
105 German investors participated in a poll I ran over the past two days. Of these
11% say they increase their p2p lending investment, to buy and profit from loans that are available at (large) discounts on secondary markets
3% say they are increasing their p2p lending investment for other reasons
30% reinvest as usual
26% are withdrawing money as the want to reallocate it to the stock money
20% are withdrawing money as they think the risk is too high
So even in this small, non-representative poll nearly half the investors are saying they are withdrawing money.
How that impacts the p2p lending marketplaces can be observed exemplarily on Mintos* :
loans on offer rose and still rise sharply both on the primary market (900,000 loans) and on the secondary market (1.7 million loans)
as many investors scramble to exit, this is only possible for them if they offer extreme discounts on the secondary market (the highest discount for current loans on offer is currently -20.1%, resulting in YTMs of 30% and higher for the buyer)
The volume of newly financed loans on the primary market has tanked
Interest rates offered on the primary market rise (current maximum 21.1%, Mintos even had to adapt the range the slider in the UI could show), together with cashbacks on offer and there are also measures to tie in capital longer.
In the current situation most investors in the discussion seem to assume that elevated risks come by the potential inability of borrowers to repay the loans, due to economic downturn. That may well be, but would impact the yield mid- or long-term (weeks or months). In my view there are two very short-term risks that many investors overlook:
The currency risks for many Mintos loan originators: Many have issued loans to borrowers in weak currencies like RUB, KZT or GEL, but need to pay Mintos investors in EUR. The sharp change in exchange rates could pose major problems for the liquidity of the loan originators.
Many loan originators were growing fast and required constant cashflow to finance their lending and operations as they were not yet profitable. Some were even leveraged. External refinancing might be very hard to impossible to obtain in current market conditions (see for example investors reaction on trading of the Mogo Finance bond). And as said the volume financed on Mintos primary market is slowing. Again this could pose liquidity problems to originators.
An industry insider I spoke to said he would expect at least 2-3 loan originators to fail short term. CEO Sulte acknowledged in answering the questions on the webinar that “not all” could be expected to make it in the current situation, pointing to the large number of loan originators active on Mintos.
The two cited short term problems are especially a concern on those p2p lending market places that operate with loan originators. Of course the investors are also withdrawing increased amounts on “classic” p2p lending marketplaces like Assetz Capital, Bondora, Ratesetter and Zopa, but this poses no short-term risks to the stability of these marketplaces in my view.
The platforms have reacted by four ways: communication, temporarily suspending borrower repayment requirement (especially SME loans, e.g. Linked Finance, October, Neofinance* ), and stepping up marketing and increasing interest rates:
Bondora* runs a raffle for investors which can win a BMW, minimum investment 1 EUR required.
Lendermarket* has increased interest rates from 12 to 14% and offers 2% cashback for any investment increase
In June Mintos* introduced the Invest & Access product which was designed to make it as easy as possible for investors to invest on Mintos. You can read my article about the introduction here. One main aspect offered was that it promised high liquidity, which came with the disclamer ‘you should be able to access your money anytime under normal market conditions’. Another restriction was that this applied only to current loans, so with a typical portfolio of about 20-30% lates, investors could cash out about 70-80% of the portfolio fast.
I doubt that many investors observed the “under normal market conditions” part of the offer. And those who did, probably saw it as a theoretical definition, rather than a real possibility.
Well now, 6Â months later, we observe the first time Mintos Invest & Access have left the ‘Normal market conditions’ state. Investors requesting withdrawals from their Invest&Access account since Friday report they received only part of the requested amount so far (about 700 out of 2000 Euro here; and 780 out of 9800 Euro here; there are further examples known to me.). Several investors expressed surprise that they could not cash out current loans fast. Cashouts requested up toÂ Thursday are reported to have been completed as expected
The cause of course is that the liquidity of Invest&Access is dependent on Mintos being able to sell the loan part of investors wanting to cash out to other investors.
On Friday around noon, the Central Bank of Kosovo announced that it had revoked the licenses of Monego and Iute Kosovo loan originators which both had loans listed on Mintos. In the afternoon many investors sold loans from those originators through the Mintos secondary market until Mintos suspended the trading of these loans around 5:04pm (CET). Following these occurences this seems to have for the first time on Mintos created higher cashout demands than requests for investing on reinvesting on the Invest&Access product and this is why some investors are seeing partial/delayed withdrawals currently. It is unknown whether the I&A product has a buffer to soften the impact of such cases, but it seems not (or it has been depleted in this instance)
Edit to clarify: the Invest&Access product behaves as described in the small print, it is just that some investors seem to have different expectations and gauged the associated risks differently. Investing in p2p lending is a high risk investment.
I’ve contacted Mintos for comment on the current liquidity situation of I&A but have not yet received a reply.
If you are an Invest&Access investor and want to cashout, you might not be aware that you have the option to normally list the loans on the secondary market. Therefore if you want to skip the invest&access selling queue (which I assume exists), you can just list your loans. Offering 0.1% to 0.2% discount might be sufficient to sell them. I am not advocating this, just informing you that it is possible to try that.
European p2p lending services are growing. And yields of 10+% are achievable on some of the platforms. This attracts international investors. But if you are a US resident, you may have made the experience that you cannot register on some marketplaces. This is mainly due to KYC (know-your-customer) and AML (anti-money-laundering) requirements, which get more complicated if the client is outside Europe.
I have asked many of the European p2p lending marketplaces, whether they accecpt US residents and US companies as investors.
Here is an overview of 5 services (sorted aplphabetically) that do allow US investors. I have not provided a review for each of the service as the article would have gotten too long, but you can easily find news and reviews by entering the company name into the search box on the upper right of this blog.
On some platforms you need a bank account in the European Union. In most cases Transferwise* borderless or Revolut* will help (while technically e-money accounts, they function pretty similar to bank accounts) and do not charge any monthly fees. They are both very useful for currency conversion (Revolut is better). On Assetz Capital the currency is GBP. On the other marketplaces it is EUR. Mintos has additional currencies. Transferwise borderless is available in all US states except Hawaii and Nevada. Revolut* is currently rolling out the service in the US.
Mentioned new customer cashbacks were correct at the time of the publication of this article. If you are reading the article at a later time, it may have changed. A current list of cashback offers is here.
Assetz Capital* is a marketplace for UK SME and property development loans. The liquid ‘access’ products offer 4.1% to 5.75% interest. Other product types offer higher rates. US investors are welcome. UK bank is account required – see notes above. US companies are eligible, but verification might take longer than for individuals. Expect 1-10 days for company registration.
Assetz Capital cashback for new investors: 50-250 GBP (dependent on investment amount; minimum 1000 GBP). To get it just register using this link: Assetz Capital registration and start lending
Bondora* is an Estonian p2p lending marketplace for consumer loans. The highly liquid Go&Grow product offer yields 6.75%. With other products higher yields of 10+% are achievable. US investors need to be accredited investors to use Bondora. A bank account in the European Union is not necessary. US companies are eligible to invest. Bondora recommends that interested US investors and companies contact them at firstname.lastname@example.org or by phone at +44 1568 6300 06 (during business hours, Mo-Fr: 9â€“17 EET) to check eligibility and clear any questions concerning registration.
Bondora cashback for new investors: 5 EUR, to get it just register using this link: Bondora registration and start lending
Estateguru* is an Estonian marketplace for property loans. Typical interest rates are 10-12%. US residents are eligible, if they have a bank account in the EEA (European Economic Area) – see notes above. US companies can invest, if they have a bank account in the EEA.
Estateguru cashback for new investors: 0.5% (1% in October) cashback on all investments in the first 3 months. To get it just register using this link: Estateguru registration and start lending
Flender* is an Irish marketplace for SME loans. Typical interest rates are around 10%. US investors and US companies are eligible.
Flender cashback for new investors: 5% on all investments in the first 30 days after signup. Register using this link Flender registration and start lending
Mintos* is a Latvian p2p lending market place. A wide range of loan types is offered. The fairly liquid ‘Invest&Access’ product currently promotes around 8% rate. Yields of 10+% are possible with manual and autoinvest.
US investors and US companies are welcome. A bank account in the EEA (European Economic Area is required) – see notes above.
Mintos cashback for new investors: 1% cashback on all investments in the first 90 days. To get it just register using this link: Mintos registration and start lending
The article was updated on Nov. 21st as Estateguru has meanwhile changed its position saying that Revolut or Transferwise are sufficient now to satisfy the requirements on a bank account in the European Union.
P2P lending bears high risks, including total loss of investment. This article is not investment advice.