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.
Mintos* will launch a new product offer called Invest & Access tomorrow. It was already unveiled and presented at the P2P Conference in Riga on Friday. Before I write about it watch the video below for about 10 minutes with Mintos CEO Martins Sulte explaining Mintos Invest and Access.
the video should autostart at the right point. If not it is at 2:29:22
The new offer makes it super-easy for investors to invest and automatically diversify through a very wide selection of loans. Mintos does that by investing the money in all loans on the platform that carry a buyback guarantee and are from originators that are at least 6 months on the platform. Mintos promises that investors will be able to cash out easily (subject to market demand) instantly, saying investors don’t need to bother about handling the loan selling on the seondary market. Mintos does that by selling the non-late loans to other investors.
The investor can still see how the portfolio he holds is composed on an overview page. One important aspect for the market dynamics on Mintos marketplace is that Invest & Access will invest before the autoinvests.
Mintos is cleary aiming to make it easy for new investors that don’t want to spend much time thinking about the investment and optmizing yields by giving them the average yield by just one click. The Invest & Acesss page will show the weighted average interest rate, which at the time I saw that page was showed as 11.98%. But the figure will change and update as market conditions fluctate and as the FAQ says it is not guaranteed.
One important point in the FAQ/footnotes is that the ‘instant access’ only applies to current loans. That means if the investors has e.g. 15% late loans, that would mean that he gets only 85% as instant withdrawal and for the remaining 15% has to wait until either the loan is bought back by the buyback or becomes current again (I suppose in that case the investor could trigger another cashout).
Investors can runs both Mintos Invest & Access as well as the existing autoinvests, should they which, but in that case Invest & Access would use any available cash the investor has first, therefore I would guess that there are rarely any funds left for the autoinvests to use.
My Opinion on Mintos Invest and Access
Mintos clearly offers a product that makes it as easy as possible, lowering the entry hurdles especially for new investors. And as Bondora Go&Grow* shows there is a high demand by investors for simplified products. Statistics published by Bondora show that in April 2019 63% of the new investments in that month where conducted via the Go&Grow product, which is constantly gaining over the other investment methods Bondora offers. Other examples are the Access products offered by British Assetz Capital*.
Looking at it from the perspective of an investor that is a little more experienced and willing to spend a little time Invest & Access does not seem an attractive offer. By definition it offers the weighted average interest rate.
By setting up own autoinvests at Mintos, keeping a good diversification and foregoing the highest risk, investors can currently achieve about 13-14% yield on Mintos. So if they would instead use the new product they would have about 2-3% lower yield, and have actually less control on which originators they invest in. An important point to consider, is that the value Mintos shows you, is the average interest rate, NOT the expected average yield. The yield will be significantly lower than the interest rate as Mintos will include buyback loans from originators with long grace periods or originators that do not pay interest income on delayed payment. Excatly those are typically avoided when investors configure their own autoinvests.
And concerning the argument of liquidity. Mintos is very liquid anyway. Without using the new product it is no problem to liquidate a portfolio within a few minutes toÂ a few hours it just depends on the price. Sure you might have to offer a discount. Maybe depending 0.2%-0.6% on average. But that is a small price if you had the higher yields before.
So would I recommend using Invest & Access over the ‘traditional’ way of setting up own autoinvest? There is one use-case I would. If an investor wants to invest very short-time (for whatever reason ‘parking’ money) for less than say 120 days, than it is worth considering.
In my opinion on why Mintos launched the new product, there are actually two reasons:
there is demand for a simplified product and this new product shall satisfy that
the new product will help on the sales site for attracting and onboarding new orignators. Originators that can only offer rates that are below the average interest rate on the Mintos platform so far were hard to sell. With Invest & Access they will be just part of the bundle and automatically sold (once the originator has been on the platform 6 month)
That brings us to an interesting point. How will Mintos Invest & Access the market dynamics? The big factor here is that Mintos Invest & Access happens BEFORE autoinvest and manual investment. There are already (even before launch) speculations and fears of investors that it might bring down interest rates or ‘force’ them to use the new product to avoid cash drag, but I think it is much to early to make any prediction what might be the outcome. But I sure am curious what this will do to the activity on the Mintos marketplace.
What are your opinions on the new product? Please share them in the comments. Thx.
P.S.: The following interview with the Mintos CEO was recorded just before the announcement of the new product, therefore it does not cover Invest and Access – but it has a lot of information on the current state of Mintos.
I covered my p2p lending portfolio periodically over the past 12 years in this blog. The following report is a snapshot on how it is composed right now (May 2019) and which strategy I will take for the next months. As you can see below I aim for a widespread diversification (over different platforms as well as geographically) of my p2p lending investments.
Mintos* is my biggest position. I run a trading strategy on Mintos. Mintos gives my net annual return as 15.1%. Calculating it myself based on the deposits and withdrawals I get a XIRR value of 24.8%. The cause for the huge discrepancy is that Mintos does not account correctly for the cashback of the campaigns. I heavily traded, when Mogo ran a campaign. For example I invested in new Mogo loans that were offered with a 2% cashback on the primary market, nearly instantly sold them with 1.8% discount on the secondary market and pocketed the cashback. Rinse and repeat.
I am satisfied with the current degree of diversification over loan originators in my Mintos portfolio. The bulk of my investments is in loan terms between 3 and 30 months at interest rates ranging from 13% to 15%. The lower interest rate loans are usually only held temporary as part of my trading strategy.
For the coming month I plan to keep my Mintos* investment at roughly that amount, reinvesting the paid principal and interest. New investors registering via this link at Mintos, get 1% cashback on amounts invested in the first 90 days. Mintos is currently not accepting UK investors.
My second largest p2p investment is on Irish SME loan platform Linked Finance.
Diversification achieved is good. The majority of my loans have interest rates between 8% and 11%. Most loan terms are 2 or 3 years.
I “collected” 7 loans in default (double dip on the golf loan). But 5 of these had repaid more than half the principal before they want into the default state so the principal in default sums up to only 270 Euro. My self-calulated XIRR value is 6.4% if I totally write off the amounts in default and 7.1% if I assume that half the amount in default will be recovered. I plan to slightly increase my Linked Finance* portfolio in the next months. Linked Finance is not offering any cashback or bonus rewards for new investors.
Bondora is my third largest and oldest (still running) p2p lending portfolio. I started in 2012. My self calculated XIRR value is 16.6%. A yield that high is not achievable nowadays anymore. My portfolio profited heavily from the first years when interest rates were typically 28% to 34%.
I am currently investing into Estonian A and B loans using these autoinvest settings. I have used these settings unchanged for 11 months now and it is running totally hands-off with no maintenance required.
On Bondora* I reinvest the bulk of my repayments and occasionaly withdraw some funds. New investors registering on Bondora using this link get a 5 Euro sign-up bonus.
Ratesetter Australia* is my fourth largest p2p investment and also one of my youngest. I started in August 2018. My XIRR value self calculated in AUD is 9,1% if I include the 75 AUD sign-up bonus and 7.4% if I do not include that.
My money is mostly invested on the Ratesetter 5 year market at an average rate of 9.2% (that is after fees but before withholding tax).
In the past months the interest rates have dropped considerably therefore I am parking some funds on the 1 month market or invest them on the 3 year market.
I am reinvesting all repayments at Ratesetter Australia. If rates go up again I plan to do that on the 5 year market, otherwise I’ll settle for the 3 year market. It is a little complicated to register as a non-resident, but I have described how I managed to sign up as a European here. New investors can earn a 75 AUD promotion bonus by investing 2,000 AUD or more in our 3 year Income or 5 year Income lending markets before 31st May 2019. Achieving that requirement in time will not be easy, even if you start directly.
The fifth largest position of my p2p portfolio is invested at Iuvo. It is running hands-off and does not require any maintenance.
I continue to reinvest all repayments. Iuvo pays new investors a very generous cashback of up to 90 EUR. For more details and how to get it see the cashback overview page.
After I completely exited Lendy in last autumn, baltic Estateguru* is now my largest platform for property secured loans. I don’t use the autoinvest. Instead I periodically login and manually invest into a new Estonian loan secured by a first rank mortgage.
I mostly reinvest all repayments. New investors get 0.5% cashback for all investments in the first 90 days, if they sign up using this link.
I used to have a larger portfolio at finnish Fellow Finance but I did not want to go below 12% for 4 star Finnish consumer loans therefore I started withdrawing funds last year. In January the sale price collections paid tor Finnish loans dropped from 70% to 53% which reinforced my decision to exit.
I am running down my portfolio on French SME loan marketplace October. With the low interest rates and rising defaults (6 out of 52 loans) in my portfolio the risk reward ratio is not for my taste anymore.
New investors signing up on October using this link* can get 20 EUR bonus (200 Euro minimum investment)
Not p2p lending but investing in startups. I am a huge fan of Seedrs*. Investing in startups is of course even higher risk than investing in p2p lending. Nevertheless I went ahead and built a big Seedrs portfolio over the last years. Snapshot:
P2P Conference Riga
I am looking forward to be at the P2P Conference in Riga* which is less than 4 weeks away. The conference is reasonably priced (enter promotional code P2PEARLYBIRD40 for 40% rebate) and Riga can be reached with cheap flights from many European cities. BTW, Riga is an interesting town, if you have not been there yet you could combine the conference with some sightseeing.