Not very long time ago my twitter feed was indicating that Bondora’s chief marketing officer Jevgenijs Kazanins was hired by TWINO, the Latvian peer-to-peer lending platform focused on short term consumer loans. I was curious to find out who is Jevgenijs Kazanins and what is his view on peer-to-peer lending. Scroll down to read the interview! If you have questions about TWINO or to Jevgenijs, please leave them at the comment section below!
Who is Jevgenijs Kazanins and how was he introduced to peer-to-peer lending? Does he have investments in P2P lending sector?
At the end of 2013 I was introduced to Pärtel Tomberg, CEO and co-founder of Bondora (still IsePankur back then). He just raised the Seed Round and was looking to strengthen his team. I liked his vision, he liked my experience (prior to Bondora I run a social media analytics company in New York, and a digital marketing agency in Latvia) and eventually I joined Bondora, which became my introduction to the world of alternative finance.
I invest across several platforms to keep the pulse on the competitive space, but started building personal “savings” fund with TWINO.
Peer-to-peer lending has developed so fast pace lately that almost every week some new platform pops up. While Bondora and Omaraha were in the beginning of 2013 basically the only platforms in the Baltics, then today we have at least 8 platforms in Estonia, 2 in Latvia and 2 in Lithuania (excuse me in advance if the number is actually greater – it is really difficult to follow such rapid (even robust) growth of new platforms). What do you think why P2P lending is developing in such fast pace and what would be the near future trends?
The answer is pretty simple: potential for marketplace lending is enormous. Just think about it, the outstanding balance of consumer and credit card loans in Europe stood at the level of 1 trillion euro at the end of the last year, and this is not even the largest position on banks’ balance sheets (think mortgage!). As the result, there is a lot of talent and venture capital going after this opportunity.
The largest trend is obviously the new sources of capital for lenders: from investments by dedicated institutional investors, to inclusion of peer lending investments into ISAs (in the UK). There are pros and cons of institutional players entering the space, but this is definitely a prerequisite for making a difference in the lending landscape and taking away any noticeable market share from the banks.
You have been working in the industry for some time by now. Do you think there is more space for new platforms?
I don’t want to offend anyone, but there are only two countries in Europe, where peer lending made a dent in the lending landscape: the UK and Estonia. In every other European country the volumes going through the marketplace lenders are negligible (to the point of being a statistical error).
So yes, there is still a huge potential for both new and existing players in the space and this potential will be there for many years to come.
What are those characteristics that are most important for P2P platforms? Especially I mean how to find balance between retail and institutional money? What are the main benefits of retail money and also for institutional money?
I think I’d be lying if I tell that I know how to find the perfect balance between institutional and retail money. US platforms went as high as 70-75% in terms of the institutional capital, while European platforms so far are limiting this ratio.
The effect of institutional capital on the marketplace lenders can be perceived differently, but so far one trend is clear: institutional capital helped create large scale platforms such as Lending Club and Prosper. So I think institutional capital will be critical for the formation of larger players in Europe, players that will stay after the buzz about peer lending startups disappears and the venture capital flowing into the industry dries out.
You mean that there is a great risk of VC’s to diminish their money from peer-lending? Why should they do that if peer-lending, when made right, is safe, easily accessible and low volatility investment?
Here I meant the venture capital money that funds marketplace lending platforms (investing into equity of the platforms to fund their operations), not institutional investors that invest on those platforms (investing into the loans originated on the platform).
So at this point the opportunity is huge, and thus, there is a lot of venture capital to fund new platforms. However, marketplace lenders operate on a tiny margin (they either include a fee to the borrower, or they charge investors 1-2%). So in order to turn into large businesses and return money to their investors (venture capitalists) marketplace lenders need to become really big.
Read this article to get a perspective: Funding Circle made revenue of just 11.8 million pounds last year (and they lent out over 600 million pounds!).
As you can imagine, there will be only few player eventually that grow to that level in each country.
Twino is at the moment platform for payday lending loans (also known as SMS-loans or fast loans in Estonia). Why did Finabay developed its own platform when Mintos is basically helping other companies to list their offers on Mintos platform. For example Capitalia, mogo and Cream Finance are using Mintos platform to sell loans. Are there any risk involved that I might not see at a first glance?
TWINO is expected to have a critical role in group’s development and this is why it was decided to develop this expertise within the group. The reason is that marketplace lending model will eventually allow the lenders (that belong to the group) to offer products of larger amounts, longer duration and lower rates and thus, address medium and higher income borrower segment, which are more common for “traditional marketplace lenders”. So think about the group as a traditional marketplace lender that launched with years of experience in lending business.
How does investing looks like in Twino? Who does the risk assessment? Is there some sort of automatic investing manager available?
Investors can either invest into loans manually or setup automatic investment manager (we call it “Auto Invest”). The loans range in duration from 1 to 24 months, and yield 9.90% to 14.9% annually.
All investments are protected by the BuyBack Guarantee, so in case a borrower defaults, TWINO will buy back the defaulted loans after 60 days and in addition will pay the interest for the period when the loan was in the “delayed” status.
The loans that are listed in TWINO are originated by the lending companies that are part of the Finabay group. The lender is responsible for the loan origination (marketing, scoring, legal), servicing post origination and recoveries in case of the defaults.
What information investors can see when investing loans in Twino?
Besides the loan duration and the interest, investors can see the payment schedule, as well as the information about the borrower’s age, income and existing liabilities.
Is there any statistics about loan performance?
This is one of the areas that we are actively working now. We believe it is crucial to provide information about TWINO marketplace, and in addition, information about the financial health of Finabay.
As all loans are protected by the BuyBack Guarantee, we are essentially taking default risk management on our side, instead of leaving it to investors. This is a deliberate decision, as we believe Finabay, as an international financial group is better positioned for this task than most of the investors.
Is there any timeline set in place when TWINO will pull off from BuyBack Guarantee?
No, this is a chosen business strategy. I don’t exclude the situation that the rates could go lower in the future (that’s the point of marketplace), but BuyBack is here to stay.
Who is the investor Twino is targeting in the long run?
At the moment we accept investor registrations from all EEA countries, and offer rates that are competitive across all there markets. Currently, the investor base is dominated by the German investors and investors from the Baltic States, but I think it is just too early to tell how this will evolve over time.
I am trying to be as open as possible, so hope to learn more about individual investors investing on TWINO and why they chose to trust us their money.
At the moment information level is rather low in Twino’s website. There is almost no information about the team behind Twino. Tell us about Twino a bit closer. What is your mission, what would you like to achieve in P2P sector and who are the people working for Twino?
I am still learning the ins and outs of the organization, as it’s a large group and lenders operate locally (in Poland, Georgia, Russia, Denmark and Czech Republic), so it’s too early to talk about individual team members. However, one of the reasons that I joined was that I loved the ambition, innovative approach and technical capacity of the teams here. The people I’ve met so far are open to new opportunities and believe in technological innovation, so it feels more like a technology company than a classical financial group.
And last, but definitely not least: you left Bondora to be the CEO of Twino. Could you shed some lights about this transformation? Was there friendly separation with Bondora and what are Twino’s expectations to you?
I have an enormous respect for every single person on Bondora’s team and Pärtel individually. Perhaps, not all things went as planned, but don’t forget that Bondora almost single handedly introduced the marketplace lending concept in Continental Europe, so I believe they are one of the players that is here to stay in the long term.