In 2022, in a world plunged into the most absolute uncertainty, few are the options that an investor has to try to find value in a vicious context where inflation erodes your capital day after day.
In this challenging environment, some platforms naturally wither away while others keep on fighting despite the adversity. And so far, 2022 has been a very interesting year for Lendermarket, one of the fastest growing platforms in these past months and one particular market player that is becoming one of the biggest actors in Europe, with very few platforms ahead in terms of monthly volume… All of this while dealing with its own hurdles and challenges.
Today we have with us Endrik Eller, Lendermarket CEO with a vast experience in the Fintech industry -being the Co-founder of several companies and previous Product Manager in Estateguru- as well as an avid investor-.
1 – Welcome to TodoCrowdlending, Endrik!, before anything else, probably the first question that pops up in my mind right now is, setting aside your position as Lendermarket CEO and based on your vast experience as an investor, is it now a good time to invest in Consumer Loans, seeing all the world developments in the past few months?EE
Hi Jesús, first of all, thank you for having me!
I think it’s always a good time for investing. The dependency of people relying on different financial services is growing every day. Lending is part of these financial services and the amount of people having access to credit is growing. So, should you be part of a growing market? Of course, you should be!
Now if we are looking at consumer lending in particular then this sector is considered to be slightly more fragile to unexpected times. And I can certainly agree with you that the next 6 months ahead heading into winter in the EU could be slightly unexpected due to the general high inflation and particularly the increase in energy prices.
But, will it affect the business of consumer lending companies? Yes, it might affect them, and that’s the time to pay a particularly close look to different LOs and their resistance capabilities to these uncertain times. So knowing and understanding the businesses of particular lending companies is something to spend some effort on. Try to see the historical performance, management, risk position and potentially approach and debt management procedures is all to be considered.
2 – What do you think are the best-suited assets to resist the incoming financial storm, both inside the crowd investing niche (consumer loans, business loans, real estate backed,…) and outside (i.e. stocks, bonds, gold, crypto…)?EE
First of all – the financial storm is something that we amplify all in our heads. You can take decent steps in protecting yourself against uncertain times so it might not be such a big storm after all.
I would start by having a decent amount of liquid assets that I can use in case of an emergency. That is a minimum of 2-4 months of minimum monthly expenses. Historically it was a good idea to keep it in cash but due to inflation, I would keep all of that in strong P2P platforms that yield 10%+ annually and have it rolled over on short-term loans in order to get out in case of personal emergency.
Then I would keep myself in assets as much as possible. Rental real estate has proven to be good protection against inflation. If you have an opportunity to buy a rental property using a loan then that’s perfect. Your outstanding loan will go cheaper every day through inflation, your real estate value will most probably appreciate more due to inflation and you benefit from regular cash flow.
You have to be careful here though – reprices in many areas are at all-time highs… so check how the current sale prices are performing and if you feel they are in decline then rather wait a bit to make your purchases.
In addition to real estate, I believe current stock prices also provide good protection against inflation in the nearest future. I would avoid high-risk tech stocks or funds related to that. Instead, having a few decently priced mature tech companies as single stock positions and the rest in a strong index fund is something that I believe will beat inflation in the nearest future.
3 – In this context, what is the value proposition that Lendermarket offers us as investors? what is also in your opinion your differential value compared to the competitors?EE
At the current moment, we have a great offering for our investors, our short-term loans are yielding double-digit returns and as I already said – I trust keeping a big part of the liquid funds in the platform myself as a protection against inflation.
In addition to that, we plan to bring new lending companies to the platform very soon that offer great diversification outside of the EU. There are not that many platforms that currently accept new LOs and I think this makes our offering more attractive as we grow.
4 – With a market in which all-time leaders such as Mintos start to lose their dominance, there is definitely going to be a race to become the new king of P2P investments. Taking into account your impressive growth both in volume and users these past months, Is Lendermarket ready to go even further and claim the throne for itself in the future?EE
I’m very grateful for the big players and platforms who have been around for several years. There has of course been a certain level of aspiration in terms of their success. What they have done by creating this new category of investment opportunities and building an international investor base can’t be undervalued.
However, I personally believe that the future of P2P financing will not look entirely the same as it has been so far. The majority of the product offerings will have to evolve. The platforms that best understand the market needs and are able to seize the opportunity will be the ones that take the lead in terms of most assets under management. Is it going to be Lendermarket? I do hope to be part of that and be positioned as the preferred and most trusted platform in the industry.
5 – Now, let’s change the pace for a bit and talk about a few questions brought up by my community, being the first one of the liquidity issues of Creditstar which affected the pending payments of this Originator in Mintos… Speaking bluntly, how bad is it and what are the chances it affects us as Lendermarket investors?EE
Creditstar’s pending payment issue on Mintos had no negative effect on Lendermarket’s loan offerings issued by Creditstar. It has also been reported that Mintos and Creditstar have reached an agreement and the issue has already been resolved.
As Creditstar prepares for its next growth phase, it relies on the historical performance of its P2P funding. As a result of the unexpected decline in P2P investments following Russia’s invasion of Ukraine, Creditstar struggled to find alternative sources of funding for loans to which they had already issued credit lines.
Even though Creditstar’s usual funding activities – bonds and P2P – continue to grow, the growth has been slower than that of the Mintos platform. Nonetheless, Creditstar’s portfolios are performing well and default levels are at an all-time low. A 24 million Euro bond issued by Creditstar was also successful at the beginning of June, where over 75% of subscribers opted for the 36-month term, illustrating the company’s confidence in its long-term prospects.
Ultimately, we can say with certainty that Lendermarket investors will see Creditstar’s interest rates remain high for at least three to six months, so we encourage those who can to do so.
6 – And the second, let’s talk about regulation. In a context in which most platforms are shifting towards a regulated framework in light of the new EU crowdfunding directives, what are the plans of Lendermarket regarding this?EE
Our business is not yet regulated, but we are working hard to change that. Currently, we are in discussions with the FSA in Ireland about becoming an authorized crowdfunding service provider under the EU Regulation by October 10, 2022.
The licensing project has been in the works for about ten months and currently, we are waiting for further instructions about the next steps from the regulator regarding the submission of our application this month.
There has been a significant change in the crowdfunding landscape since the first platforms appeared over a decade ago and as with most financial technologies and offerings, they get regulated eventually, which it’s a sign of maturity and trust to be authorized by the regulator, – and this is precisely what we want to be for our investors.
7 – Finally, in the past few months we have seen a number of improvements in Lendermarket marketplace including the launching of a new Loan Originator, Credory, the diversification in terms of asset classes, etc. what new developments can we expect in the coming months in terms of both functionality and investment products?EE
As a platform, we are still relatively young in terms of funding volume and number of investors. Over the next few years, however, we aim to grow 10x (and more).
The non-banking lending sector is estimated to be worth €500 billion in the EU, but it is made up of only €1.5 billion of P2P lending. The P2P market is expected to grow by 10-50x in the coming years due to its flexibility for lenders compared to traditional bonds.
Our platform will expand to include more global lenders. Investors should be able to diversify across several industries and geographies without leaving our platform.
Additionally, I believe that we will see more automated and passive investment tools in the future. In my opinion, marketplace lending has a tremendous opportunity to connect more retail investors with investment and savings products that will help them secure their financial future. As part of this process, we aim to bring this opportunity to the masses.
8 – And the last question, as we always do, let’s speak freely, is anything else you would like to comment on or share with TodoCrowdlending community?EE
We would like to express our gratitude to TodoCrowdlending as a promoter and reviewer of p2p investment platforms. The job of educating investors and helping them to make better financial decisions is unfortunately not reachable for too many people out there. We hope the community will keep growing and the knowledge accumulated will reach more new investors every year. We wouldn’t exist without our users, community and partners and we hope to continue bringing attractive investment opportunities for all of you in the future.
Thanks very much for your time, Endrik!