On Wednesday I had a chance to meet with some of the people working on MoneyZen ( site only in Estonian) which is a new P2P lending platform on the Estonian market. Some thoughts on what I saw/heard:
MoneyZen definitely has a very specific strategy thought out. Essentially this means:
– Aiming to be the market leader in quality, not quantity. (The market not being just Estonia in the longer run.)
– Having far more strict background checks than those of competitors. (More information gathered, from clients, so far 3% of loan applications accepted.)
– As a result of better background checks potentially far lower default rates in the long run (The 2% mark was mentioned, which is obviously far lower than that of competitors.)
– Lower default rates and better credit scoring would make way for lower interest rates for high quality clients. (Allowing for loans in the 15%-20% range would allow them to compete with banks for the consumer credit market.)
In typical Estonian fashion, let’s start with the things to worry about:
– The market in Estonia is quite full of different consumer credit providers who offer a similar service for higher interest, but also with higher speed/less hassle
– Competing with banks is a bold strategy that might not pay off in the long run if the banks really decide to step it up in the consumer credit market
– As with any starting business, there is a certain level of operational risk that comes from both being new to the market and lack of experience; unexpected things can always happen
– It is clear that we’re not talking about a bootstrapped business here yet, so the risk is there
What I personally liked
– The people involved in the business really believe in what they’re doing. I know that this might be a weak rational argument, but it will definitely play a non-trivial part in the success of the business. The fact that the CEO is planning to invest into every loan shows a certain level of belief (and/or insanity).
– The way they’re building relationships with clients and investors is definitely a novel approach to take. Inviting potential investors to visit them and allowing them to ask questions to their heart’s content will generate a lot of goodwill towards them that is nearly impossible to get in any other way.
– Their business plan is beyond the basics of “Oh, this works for others, we want a slice of the pie”, which seems to be a problem with a some of the P2P sites that are popping up. They believe that they have a niche that has not been filled yet, and they might be very right in that.
(- Their office was cool too.)
I must admit, when I first heard about another P2P company a few months back I was a bit skeptical about their chances of succeeding in the current loan market of Estonia. The market seemed to have reached a certain saturation point and with the impending rain of regulations aimed at consumer credit the situation clearly isn’t looking amazing for all loan providers.
After meeting some of the people behind the site I’ve definitely gained more optimism in terms of their strategy and future plans. I’d say if they play it well, they might really succeed in carving out a part of the market for themselves.
Final verdict being that I’m going to try them out to see how it goes. I’ve been meaning to diversify my P2P lending and since Omaraha (second biggest P2P lending site in Estonia) seems to be doing I don’t even know what in terms of their investor relations then I’d happily try a site that’s willing to really listen to investors.
Let’s hope they do well! (And that my investments succeed in the long run.)