Our investors had a possibility to ask our CEO Pärtel Tomberg any question, which they found important about our product and the company on our Facebook page.
We thank you all for the meaningful questions. Please find Pärtel’s answers below.
Q1 Dear Pärtel Running a peer-to-peer lending site is definitely a hard thing to do. Every day you must please different people segments: investors, borrowers, employees. We are sure that this environment is often stressful. Therefore I would like to ask what are the most joyful things in your everyday work that gives you real satisfaction?
A: In short, my team. It is certainly great to see borrowers across different parts of Europe getting loans with great rates and investors strong returns however it would be quite difficult to create this platform without the team we have built in the last year. It is great to see a good mix of seasoned bankers and young professionals building a global money market.
Q2 I see several loans collection process being at “Expedited court order application filed. Awaiting feedback.” for quite some time.
How long it takes until court order can be used to collect money by bailiff?
A: It might take a number of months for a court to reach a verdict. The processing time depends on the country as well as local court. After we file the claim against a borrower it might take a court 1-3 months until they start processing the case. Thereafter the borrower is given a month to respond to our claims. A court can further take a month to pass a verdict. In our 5 years of experience it is highly unlikely that a court would pass a negative verdict against the investors as the claims are supported by a number of documents, electronic records as well as bank transfers. The verdict is then passed to a local bailiff (either a private or a public institution depending on the country) who goes after the debtors assets.
Our experience shows that legal collections picks up after 12-18 months after which the initial claim is very quickly recovered. We continue to calculate additional interest and/or penalties during the ‘waiting time’ depending on the local jurisdiction. This means that recovered cases typically cover for a number of other losses.
Q3 To Bondora CEO: hope you are happy with the car we loaned you money for and that it is running nicely so far. I’d like to know where you see the Bondora platform in 5 years. How has it changed from today’s Bondora?
A: Thanks to everyone who funded the loan. My new Skoda has already helped me travel all across Estonia this summer.
Bondora will be the first and only platform connecting all parts of Europe into a single money market. We want to unite European countries giving borrowers and investors greater choice, transparency and options in managing their loans and finances. We do not think that in long-term there needs to be any differences in access to credit or cost of credit between a B2 borrower in Portugal and a B2 borrower in Germany. Unfortunately, currently there are huge caps and we are working in getting rid of these barriers.
We will likely still be focused on unsecured consumer lending, however, it would not be a big surprise if we had moved into other products. Nevertheless, we will surely act as a platform meaning that we will try to bring together borrowers and investors with varying risk/return profiles allowing everyone to find a perfect match. We believe that marketplace lending will benefit the society most of it gives access to credit markets to everyone from prime to sub-prime borrowers, connecting them with private as well as institutional investors.
Q4: Why does people take loans with such high interest rates via Bondora? Isn’t it cheaper for them asking for loan at normal bank?
Is one reason that this guys don’t get loan via normal bank? Are there any different reasons?
A: Bondora loans are not high interest rates. Banks have been very good at hiding the true cost of unsecured borrowing and most people know the mortgage rates, however not the rates that banks charging for consumer credit. The average APR charged by the largest banks in Estonia, for example, is above 36% and this is for people still being financed by banks.
Many consumers are being pushed out from credit markets by banks (that typically require a security) and have to opt for very expensive and short-term credit products (overdraft, credit cards, payday loans). We have been able to save an average borrower over 1,000 euro in interest costs by helping them refinance other products.
Q5 Which ROI in percent somebody would have, investing in every single project (no selection) since beginning of Bondora?
A: If you would have invested in every single loan then you would have made approximately 21.9% per annum.
Generally we have seen that investors with most loans have also had very high returns. It shows that diversification plays a very strong role in delivering great returns.
Q6 Is it planned to have some more selection criteria for finding special projects (male, female, age, real estate, car…)?
A: Yes, we will launch an update portfolio building in the coming few weeks.
Q7 What is the overall percentage of sustainable deficit in payment including all projects since start of Bondora?
A: The current NPL rate is at 6%.
Q8 What is the percentage of refundments in proportion to received loan after written warnings for taken loans?
Example: Loan of somebody is 1000 Euro – he’s deficit in payment – what are the refundments on average for deficit guys.
A: We have recovered nearly 80% of the overdue principal for loans that have been overdue for more than 2 years. Typically it takes time however we are always able to make progress in getting back the loan even in very risky situations.
Q9 What is the average time slot for guys which are going to sustainable deficit in payment? How long they are trustworthy on average?
A: Most loans default in the first 6-9 months. The likelihood of default drastically falls after this period
Q10 I love what you guys are doing for p2p lending in Europe. The big p2p platforms in the US both offer APIs for investors to access your platform programatically. I would love to see the same from Bondora and would likely invest more money on the platform if you did have an API. Do you have any plans to offer an API in the near future?
A: Yes, we will be looking to launch an API later this year. However we are looking to test this privately with a couple of larger customers to fine-tune the system and thereafter make public to all.
We want to have three main investment channels by the end of the year:
– Portfolio Builder for loans currently on the market
– Portfolio Manager for automated investing
– API for professional traders
Q11 Right now, most of the overdue loans get rescheduled making an assessment of the portfolio quality increasingly difficult.
Could you give a detailed explanation on why you are doing this?
And a quantified assessment about how you expect these rescheduled loans to perform based on past experience with rescheduled or overdue loans?
Have you rescheduled loans in the past, too?
A: We have had this practice since 2011 however it was discontinued due to technical reasons for a while. 11.2% of the rescheduled Estonian loans, 4% of the Spanish and 3.7% of the Finnish ones have later defaulted.
Rescheduling is an essential part of managing portfolio quality even for shorter term loans. Typically it is a good sign that customer is proactively looking to find solutions to not get overdue or when they recover to start making periodic repayments. If you do not reschedule the loans then:
– A) You would default the loan and request the entire balance of the loan be repaid ahead of schedule
– B) Most borrowers would not have this money and you would have to go to court
– C) This would further deteriorate the borrowers finance, reduce the good will and also add collection costs into the process
– D) The borrower would stop making any payments at all whilst court process is active
– E) After the court verdict they would start making payments to the bailiff however these payments would likely be at the same amount as the monthly payments you would have ended up with after rescheduling day 1 when the loan had not yet defaulted
We will however add filters allowing you to quickly find these loans from your portfolio.
Q12 Since “B+” started there is huge reduce of B-type loans and from another side, each day about 100 loans are closed as not filled. This cost IP and investors (money stay for 7-8 days in 10-30% filled opportunities). What are IP future plans and opinion about current situation? Are typical B+ borrowers people who was usually rejected by IP verification process?
A: There are no major differences between B and B+ loans. We have unfortunately created a mental barrier stopping many investors from participating in these loans and hence they come unfunded. The current capital allocation algorithms are also not best suited for a situation where there are hundreds of loans on the market.
Therefore we’ll soon:
– Bring out a portfolio builder allowing investors quickly to invest in active loans on the market
– Optimize the capital allocation formulae to only make automatic bids into loans that would likely get funding
– Launch a credit score that would normalize/standardize all loans on the marketplace so investors would better understand the risks/returns related to each loan.
Q13 Why don’t You invest in loans at Bondora platform?
A:That is not true. I invest on loans on Bondora both through by private and business account. Most of my available capital has of course gone into Bondora itself.
Q14 Do you plan to start some kind of affiliate program for people who would like to recommend your services? If so, what will be the provision structure for your partners?
A: We use a number of affiliate marketing platforms to spread the word on our service. There are however no public programs we manage internally.
Q15 Are there any plans to introduce some new types of loans?
A: We are now focused in streamlining and fine-tuning the recent changes we’ve implemented on the platform. We believe that personal loans are the key segment that we need to focus on in order to deliver most value to society.
Q16 Are institutional investors obliged to invest in different types of investments (B and B+) and different quality (A/B/C 600-100), or they can choose only those investments that they want having the priority when filling the investments capital requirement?
A: New institutional investors need to invest across all credit segments.
Q17 How many institutional Investors are on board and what are the criteria to become one?
A: There are currently no privileged institutional investors on the market as we removed all preferences last month. You would need to invest a minimum of 100,000 euro per month on the platform covering all credit groups, verification types and countries.
Q18 What are the plans for data extracts for investors? There is one data set occasionally updated with all the applications. DO you plan to make the update periodical – for example every few days (once a week for start) and possibly once a day in the future?
A: Yes, we are looking to automate this process by creating a daily dataset of all loans as well as not funded applications.
Q19 Can you please elaborate how does improvement implementation process works? What features are selected, what is the time frame for implementation? What new features are planned to be deployed till end of this year?
A: We use an agile development approach. This means that we have one month themes, but the exact features are decided each week before the start of the ‘sprint’. The features being developed depend on the current set of KPIs and priorities.
For example, currently we are looking at ways to make it really simple for investors to find loans on the market that are most suited with their strategy.
Q20 What is the plan to improve the communication from Bondora side against investors, so that every(at least major) change is clearly communicated? Some time ago there was a newsletter about this topic, where you promised improvements in this area, but not much has been done so far.
A: We have a weekly newsletter where all changes are communicated. These newsletters have gotten very extensive recently, however we recommend all investors to review them weekly. Sometimes some things we do are standard process already in practice for a number of years, but as a specific investors might ‘experience’ these steps for the first time then they could consider these as changes that have not been communicated.
We will try to update our guides as much as possible to cover also all processes that sometimes might feel as new practices.