We had a discussion with Matt Clannachan, VP of Product Investing of Bondora about investing and how the current coronavirus situation and expected economic crisis will impact P2P investments in general and Bondora investors in particular. Here are the highlights as well as the full video recording of our discussion.
The text is just some highlights. There is much more in the video, so I strongly encourage anyone investing or consider investing in Bondora to watch the full video:
Matthew Clannachan leads the investor product at Bondora and has been in the company for 3 years. You can check his profile on LinkedIn. Please excuse my english, I am doing my best, but I am well aware it’s not good enough. Anyway I hope you get the idea.
Bondora chat highlights
These are the highlights of most important questions we discussed with Matt, truncated and edited for clarity. The original chat in the video is not edited in any way. During the last 10 minutes Matt asks me some questions about my investment strategy in the current situation on Bondora, other P2P platforms and in general. Maybe some people will be interested in my strategy for current turbulent times. You can see the video chat at my YouTube channel.
Bondora Go&Grow liquidity and withdraw process
Stoycho: Is now the „perfect storm“ for P2P? A couple companies went down, then coronavirus broke in. In the middle of this, investors are trying to withdraw but Go&Grow’s liquidity seems to be affected. Can you explain what is the current situation?
Matt: Partial payouts is a feature built-in Go&Grow since the product was launched, it’s not something that was put in place now. The purpose for having it was for a situation where withdrawals would exceed anything that would be a normal amount. Considering the global events now, we have experienced higher amounts of withdrawals and that is why partial payouts were activated. It’s made to protect the returns of 6.75% for investors, because if you allow all withdraw requests it may be more difficult to achieve that 6.75%. Withdrawals are currently decreasing.
Stoycho: Should there be a minimum amount for withdrawal?
Matt: There’s no minimum amount. There’s a flat €1 fee charged only once per withdraw, meaning it’s not charged for individual partial payouts.
Stoycho: Is the reserve fund of Go&Grow made not for liquidity, but to ensure the 6.75% per year returns to investors?
Matt: Yes, that’s exactly right. It’s to protect the return of 6.75% per year. We have a cash reserve in place for the liquidity. In a recent Q&A with our CEO, Pärtel, he mentioned that the amounts in the Go&Grow fund would be enough to pay the returns of up to 6.75% for another year. This isn’t taking into account new originations and the daily cash-flow coming in.
Stoycho: In the worst case scenario, will you manage to keep the returns of 6.75% for the next year with the current size of the reserve fund?
Bondora expectations about the worst case scenario
Stoycho: I expect а spike on default rates. What are your expectations for the worst case scenario?
Matt: There are always defaults within portfolios, but that is expected. How our credit model works in the background is that every single month we update it based on the transactional data we receive from the previous month. Every single transaction, loan, payment is tracked and recorded for our credit model to be updated every month. Regarding default rates, we haven’t seen any spikes or increases so far. They are still within the risk parameters that we expected. This isn’t something new for us, we have been doing this for over a decade.
Bondora’s plans no product changes or layoffs
Stoycho: Do you have plans for introducing or retiring any products?
Matt: We have tried to build a platform for anyone to invest. Be it for casual investors that just want to put the money in, get the net return and that is it, all the way up to the API. So we don’t have any plans on retiring any products and we also don’t have plans for introducing new products, as our current focus for this year is to continue delivering on the promises set for the products we already have.
Stoycho: How big is Bondora’s team?
Matt: Around 70 people. We haven’t got a huge team of people mainly because most of the processes we have are automated. If it can be automated, it is automated. Even with the recent crisis, we haven’t had to nor do we plan to lay off any employees. Everyone is able to work from home, we are fully optimized to work remotely. We are actually still hiring.
Bondora plans are to cut costs on marketing and stay profitable
Stoycho: How the current situation affects future Bondora plans? Are you focusing on expansion or on cutting costs? How big is your burn rate?
Matt: We don’t have a burn rate because we are not losing money, we have been profitable since 2017. Regarding costs, our revenue will be lower this year but our variable costs also dropped dramatically, the marketing costs have significantly decreased at the moment. We don’t have to make a huge growth in revenue and profit each year to sustain the business. It’s likely that we will still end the year of 2020 with a profit.
Stoycho: There have been lots of jokes about the Bondora BMW campaign. Do you think it’s a good campaign?
Matt: We had pretty good feedback from investors, they seem to be quite engaged with this campaign. If we talk about costs, the cost of that, for a 3-month campaign, is way lower than anything we are used to.
Stoycho: How secure is the platform?
Matt: We have always been prepared for this kind of scenario. Some people might think that platforms can’t handle the current situation, but from our side it’s very much business as usual. We have all the same processes in place, we don’t have to stop anything.
Bondora’s take on licensing and alliances
Stoycho: Some other platforms are applying for investment firm license. Do you have any plans in this area?
Matt: We have no plans to do that. We have always supported and still support an EU-wide regulation for P2P-lending. From our perspective, the main thing is having public data, investors also like to see that you are audited independently and externally and that you have a track record.
Stoycho: You have been on the market for more than 10 years. This is really nice to see. In investors’ groups, there are ideas regarding collaboration between P2P-lending platforms, which would come together to establish industry standards. Do you have any plans on that?
Matt: I guess we never really thought about that. I don’t know how effective it would be, because if you are comparing platforms within P2P, they are completely different. In terms of business models, underlying assets… It might take your time and focus on your own customers and investors. The opposite to that is an EU regulation, which would manage this and be totally independent from anyone and cannot be influenced by the biggest players in the market.
Crisis as an opportunity for Bondora
Stoycho: How can Bondora benefit from the current crisis?
Matt: I think one of the biggest opportunities for Bondora at the moment is to continue to deliver on what we always promised we would deliver. For us to continue to build that trust is the number one priority for us. After this period is over, lockdown is over and people get on with their normal lives, I think that we will see a huge growth in investors because we will be able to say: we have done this, this is how we performed despite any external market forces. I think that will give a lot of confidence to investors and I’m personally excited to see the results of that.
Brave enough to invest now?
Bondora decided to provide a small incentive for all new investors that are brave enough to invest on Bondora in current turbulent times. They will double the signup bonus for new investors to €10 starting on the first minute of Tuesday, the 21th, and ending at the last minute of the 4th of May. All times are CET.
During this time, anyone who signup via my affiliate link bil.ly/Bondora250 and invests will enter a raffle to win a prize of €250. The new investors will be also eligible for the current BMW raffle. Have fun, but don’t even think about investing just for the raffle or the bonus! This not an investment advise nor recommendation of any kind. Always do your own research and be very well aware of risks associated with investing!
I would like to hear your opinion and discuss Bondora and other P2P platforms available for European investors in my Facebook group https://www.facebook.com/groups/P2PLendingEurope/. You guys are very welcome!