Continuing with the series of interviews in this early 2020, we want to bring into the spotlight one of the fastest growing P2P lending platforms in these first months of the new year, and a company in which we are personally increasing our positions: we are talking about the only platform from the Czech Republic we have in our portfolio: Bondster.
Today we have with us Jana Mücková, Bondster CEO, thanks for coming to TodoCrowdlending.com!
ES – Spanish: Esta es la versión original en inglés, pero pulsa AQUÍ si prefieres leerla traducida automáticamente en español 😉
1 – First of all, for all our readers that still are not familiar with your platform… What is Bondster? and what do you offer to investors interested in investing in P2P lending?
(JM – Bondster): Bondster is one of the fastest growing fintech companies in the field of P2P (Peer-to-Peer) loan marketplaces in Europe and the very first online investment platform of its kind in the Czech Republic. Bondster connects providers of loans with retail investors. Investors (individual or companies) may invest their free funds into loans already provided by different providers. Investors can choose from different types of loans, maturity, security, providers. Investors can also see the repayment history of the debtor to whom the loan had been provided and they can also see the basic information about the debtor.
Bondster can offer a vast variety of benefits to its investors.
The biggest advantage is definitely high returns on loans. Moreover, these loans are either secured (by real estate or movables) or offered with a Buyback Guarantee (in case the debtor does not repay the loan, the provider has to buy it back from the investor) which eliminates the risk for investors. Imagine your money sits in the bank account, you lose money in real terms every single day since the inflation rate is higher than the nominal interest rate on your bank deposits. On Bondster investors can earn more than 13 % on Euro investments in average. Do you know a bank that could offer you such a return?
Bondster also offers loans with unique features such as Exit from the investment or Guarantee of Liquidity. This is especially popular with Investors that are more risk averse and prefer more liquid investments. Exit from Investment means that the investor can get back the outstanding principal at predetermined points in time after the investment had been executed (after a week, month, half a year etc.) for a predefined fee. Guarantee of Liquidity allows investors to withdraw the invested amount (outstanding principal) any time for a predefined fee.
From what we have learned from our investors, our choice of Providers is really appreciated. We carefully choose our partners. Providers we cooperate with are always either well established companies in the local markets with a very good track record, or younger companies but with huge potential and experienced people with strong professional background in the management.
2 – I noticed that you recently achieved a very important milestone in terms of volume (1 billion crowns, which is approx. 40M euros financed) and you are getting close to 10.000 investors already… what do you think about your growth in 2019 and what do you expect to achieve in 2020?
(JM – Bondster)
We are delighted to see that we are becoming not only the leader on the Czech market, but also an internationally recognized online investment platform. Our big competitive advantage lies in the buyback guarantee and the possibility to start investing with as little as one hundred crowns (5 euros). We want to offer more security to our investors as compared to traditional P2P concepts.
We would like to reach the level of 10,000 investors on the third anniversary since the foundation in May and double the number of loan providers we work with in 2020. It is an ambitious plan, but we can only overcome the breakeven point at certain volumes and we want to continue to increase these. In January our investors invested in loans on Bondster 90 million crowns, and we expect this trend to continue in the coming months.
3 – One of the things we investors enjoy most in a marketplace like Bondster is the ability to diversify in many loan types coming from different loan originators from different countries, which is something you already offer… what new functionality, partners and upgrades can we expect from Bondster in 2020?
(JM – Bondster): This year we are preparing the currency conversion that would be implemented directly in the investment account, which will be quite interesting for Czech investors who do not want to convert their money into euros at expensive banks. We are also preparing the secondary market, which is one of the things we lack on the platform. Also, we are going to be launching a completely new and innovative web, which will simplify many things for our investors. We would like to continue working on new providers outside EU to offer enough diversification possibilities.
The long-term goal is to launch our own mobile app for investing.
4 – This is a question that several members of my community have asked me already: when are we going to be able to enjoy Bondster in Spanish?
(JM – Bondster): As much as we would love to please our Spanish speaking investors with having Bondster in Spanish, unfortunately, right now we don´t have the capacity to create another language mutation as we are preparing a whole new highly innovative and intuitive websites.
Definitely, this is something that we are planning in the future. Our Spanish client base is growing and certainly, we are motivated to talk to them in their mother tongue.
5 – Many people are increasingly concerned about regulation and due diligence processes of the platforms they invest in, and not so many of us are familiar with the regulatory framework of Czech Republic, can you tell as more about the regulation that applies to P2P lending platforms in Czech Republic and the Due Diligence process you carry out to choose and monitor your Originators / Partners?
(JM – Bondster)
Part 1: Regulation that applies to P2P lending in Czech:
Well, all new sectors usually operate in the grey zone, at least at the beginning. The reason for that is that the laws are simply implemented very slowly and they do not keep up with the fast changing environment the fintech belongs to. We are currently in the situation when we would not mind if there is some regulation in the sector as it would simply bring some rules for all the players and would level up the competition. I am positive that the P2P investment sector needs more transparency and rules to squeeze out the shady platforms because right now these platforms (such as recently failed Kuetzal or Envestio) go out of business sadly only after investors lose some money.
Part 2: Due Diligence process you carry out to choose and monitor Partners:
All loan providers are carefully assessed by our internally-developed methodology. First, there is a preliminary scoring stage. It starts by collecting necessary information which is then used to perform a financial analysis of the company and to assess the quality of its credit portfolio (quantitative analysis). If the company passes the preliminary scoring, the analysis carries on, if not, the provider is rejected. In the next stage (qualitative analysis), we focus on assessing the environment in which the company operates: the country; how it manages risks – where we look at how its scoring model works, for example; the company’s profile and its structure. Last but not least, we look at its business plan. Based on this information, we assign the company our internal rating.
We perform quarterly, but also more detailed annual monitoring of all our providers. In both cases, we want to see an updated credit portfolio and financial statements. We ask them about recent changes that could somehow affect the company’s operations. These are for instance changes in regulation, way of financing or court proceedings. We also keep an eye on legislation changes and current developments on the political and economic scene. As for the annual monitoring, we carefully analyze especially the final accounts. Based on the monitoring results, we then increase or decrease our exposure to the particular provider or, in the last resort, can even discontinue our cooperation with them.
6 – Almost finishing, what are your thoughts about the possible impact of COVID-19 (coronavirus pandemic) in the P2P lending market in general and the effect on Bondster business more specifically?
(JM – Bondster): The situation changes almost every day, the governments all around the world implement strict measures, that would have felt unreal only a few weeks ago, to protect its people. It is inevitable that the global economy would be hit hard and we would need to live with the consequences of this crisis for months to come.
The first P2P platform was established in 2005 in the UK and it not only survived the last financial crisis in 2008, it has been existing and operating until today. Of course, there is a certain level of correlation with the credit markets and we have to expect the increase of the default rates. Investing into P2P loans is risky, there is no one who would claim otherwise. We are very open about this and we point it out also to our investors and call upon them to diversify with one ultimate goal – to eliminate the risks as much as possible.
If we look back, during the crisis in 2008, it turned out that the investors lost their trust towards the traditional banks and the alternative ways of investing got very popular instead.
I believe that every experienced investor is fully aware of the risks and understands that every risk is also a big opportunity. Bondster has two types of clients – investors and providers (loan originators). Investors usually at times of crisis decrease their investments, but banks and non-banking sector on the other hand cover the shortages of incomes and profits or the need for additional funds. When the demand for the funding increases from the side of loan originators, then the price of funding = interest rate on the P2P investment loans will increase as well, which will ultimately attract the investors to start investing again in order to get higher yields. It is the well known economic law of supply and demand that works on every marketplace and Bondster is no different.
7 – Anything else you would like to share with our TodoCrowdlending Community?
(JM – Bondster): I would only like to thank you for all your work and effort you invest in the TodoCrowdlenging website and its community. It is very important that there are influencers such yourself that educate the investors and bring more light into P2P investing. We especially appreciate your efforts towards Spanish-speaking investors as we see the growing number of them on our platform. Big thanks to you!