What is Mintos?

Martins Sulte

Martins Sulte – Mintos Co-Founder & CEO

Mintos is a peer-to-peer lending marketplace that connects investors with borrowers of various loan originators. It is an easy and transparent alternative to the traditional banking system.

At Mintos both retail and institutional investors can invest in fractions of mortgage loans, secured car loans, small business loans, and unsecured loans originated across Europe. The minimum investment is EUR 10.

Loan originators, on the other hand, by connecting to the Mintos platform get an instant access to investors that are looking to purchase loans. Previously loan originators established their own platforms; now Mintos offers a single platform to those nonbank lenders that seek to use a peer-to-peer lending model to fund their loans.

Why should borrowers use Mintos instead of a normal bank? How does your credit scoring differentiate from the bank´s scoring?

Mintos does not issue loans, but it is important for us that the loan originators who originate the loans and place them on our platform at the end of the day can offer cheaper rates to borrowers.

The lending process is much more convenient at these loan originators. When borrowing money from Capitalia, the business loan provider, for instance, a small company can expect the money to arrive in its account in just a few days’ time, usually even faster. At a bank, by contrast, that could take several weeks. Finally, some of the loan originators who use our platform provide loans and services to those borrowers who might not have had an access to affordable credit before. For instance, among clients of Mogo, the largest non-bank car loan provider in the Baltic region that is also on our platform, there are those who are seeking a car loan, with the average requested sum being around EUR 3,000. This segment is underserved by the banks.

What are the advantages for investors?

At Mintos investors can invest in loans that are originated by various non-bank lenders that use our platform to fund their loans. The main advantage for the investors, accordingly, is that they get an access to much broader investment opportunities as part of a single platform, both in geographic terms, and in terms of various loans originated by various non-bank lenders. Different loan products and geographies, combined with the fact that the minimum investment in one loan is EUR 10, means that investors can easily build very well diversified investment portfolios. Also, as a result of having various loan-originators and many investors on one platform our secondary market is very liquid.

It is also important that non-bank lenders whose loans are available to investors on our platform are experienced in underwriting. Moreover, the loan originators on the Mintos platform are required to retain part of each loan on their balance sheet, i.e., to have “skin in the game” to align their and investors’ interests.

Finally, all loans on the Mintos platform are prefunded by the loan originators; thus investors can start earning from the moment of the investment and there is no cash drag. 

What ROI can investors expect?

So far the average net annual return for investors investing via the Mintos platform have been slightly below 13%. We expect the average net annual return to hover around the low double digits also in the future. However, investors should look not just at the return, but also the relevant risks. In the case of Mintos, investors can easily build a very well diversified investment portfolio across different loan products and geographies, thus reducing unsystematic risk within the marketplace lending asset category. Also, the Mintos platform was the first with a buyback guarantee where some of the loan originators buy back non-performing loans from investors, thus substantially reducing risks for investors.

How open are people from the Baltic States towards investing? Is there a developed investment culture?

We tested our platform successfully in the Baltic States, and we were the first ones in Latvia to offer such a platform. Now we have more than 3,500 investors from more than 30 countries that have funded more than 13,000 loans for a total of almost EUR 9 million.

Estonia, Germany, Latvia, and the UK account for about 70% of total investments. As investors get to know about us the balance is increasingly shifting to Western Europe where saving and investing culture is more developed.

The investment culture is not developed here in the Baltic States. People are still anxious about investing in something new. We still see that people from the Baltic States are not aware of peer-to-peer lending platforms. We have worked to inform and educate public about how the marketplace lending works. In the UK and America, these platforms appeared much sooner than in continental Europe, there are far more platforms, and people are more aware of them. That leaves a lot of untapped market in Europe and we certainly see that as an advantage when thinking about our development.

Why are there so many fintech startups from the Baltic States, who are small compared to other EU countries? Is it the political environment? Looser regulations?

On relative basis the number of fintech startups in the Baltic States might seem substantial, but in absolute terms there are not that many players. For instance, there are approximately 15 peer-to-peer lending platforms across the Baltic States, many of which are small or have just launched. In the UK, on the other hand, almost 200 platforms are operating. It’s great to see that fintech scene is shaping in the Baltic States, but I would say that it is still very early days.

Do you have any wishes towards national or EU politicans? How can they support the new-born european fintech industry?

Innovation precedes regulation as we have seen over and over in many industries. All – hotel industry, local transportation industry, drone industry, just to name a few – have experienced the regulatory challenges. Financial services are not an exception. Regulation is a very important part of the well functioning and trustworthy financial system.

However, it is important for regulators to embrace the innovations and let the industries develop before introducing any regulations that might hinder the development. I believe the UK is a very good example where the regulator has a risk based approach and takes proportionate actions in managing the potential risks in the financial system. That has helped the UK to become the fintech center. Certainly, adopting the EU wide policies is much more complicated, but there is a lot to learn from the UK in how to support fintech industry.

What was the biggest challenge in launching Mintos?

We started to work on the idea in mid 2014 and launched the platform in January 2015. To fuel our growth we raised EUR 1 million in venture capital that has helped us in forming a strong team and an experienced board of directors.

Innovations and entrepreneurship have always been ahead of regulation, and fintech is no exception. So we have worked hard to inform the public, policymakers, and regulators about how marketplace lending works. That is very important. The marketplace lending industry is developing very quickly, and we want our sector to be competitive. As the development of marketplace lending platforms in continental Europe has occurred less quickly than in the UK, for instance, it was also a challenge to educate investors.

What happens if you go bankrupt? Will investors still be able to receive their payments?

The loans are originated and serviced by the loan originators that have connected to our platform and in most cases have been lending to the borrowers from their balance sheets for a number of years before. In the unlikely event of Mintos going bankrupt the loan originator would continue to service the loans, while Mintos would give full information to the investors from the our database on the transactions they have concluded. Mintos liquidator or administrator would take all necessary actions to transfer servicing of investments to an appropriate manager. We have. In order to ensure implementation of the aforementioned provision Mintos and law firm FORT have entered into a contract of bailment under which Mintos each month hands over and law firm FORT accepts for storage data medium containing all current data from the portal.

Where do you see Mintos in the future? What are your plans?

We see ourselves as a serious player in the European market – one that provides a free movement of capital, which enables integrated, open, competitive and efficient financial markets and services that work for the benefit of investors and borrowers. We are looking to add new loan originators, new types of loans from different countries. We will continue to improve the platform so that it is easy for investors to use.

Also, we are in the process of moving the platform to the UK and applying for the Financial Conduct Authority (FCA) permission. The UK, and London in particular, is the world’s largest center for fintech. Our strategy is to be competitive at the European level, and our move to the UK is a logical step in that direction.


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