How to fix Bondora?

Anger from retail investors, rampant speculation and doubts about competence of leadership and overall abandonment levels of the portal will probably start causing issues (if they already aren’t) for Bondora, and I think as the flagship of Estonian P2P investing, their failure to work well with investors is likely to destroy a lot of credibility for the whole field.


The pivot

When I started investing in Bondora three years ago, then the overall advertised mindset was that it’s an investment opportunity by the people for the people to make people happy. The core values that Pärtel Tomberg (CEO) talked about in pretty much every media presentation were being transparent, allowing investors to hand-pick as many loans as possible, give out as much data as possible and overall lead the way to a post-banking world, that plays to the strengths of retail investors.

For those who haven’t invested into Bondora for such a long time, this mindset might be a bit surprising, since you probably haven’t heard much about this, since the current statements are much more growth and expansion orientated. Retail investors have lost a lot of their importance despite having been instrumental in allowing Bondora to survive the first couple of years, and the overall opinion you can read from forums and blogs ranges from slight displeasure to aggressive anti-campaigning. What caused this?

The first reason is the pivot. There’s a time in every start-up’s life when something’s gotta give – you either accept more VC money and push for growth or risk remaining stagnant and falling behind competition that is trailing close behind, while having the advantage of learning from the mistakes you had made as a frontrunner. While Bondora hasn’t really made the statement (and they probably never will), they have clearly reoriented from retail investors – and it’s understandable, looking at the US experience then for true growth you need institutional investors who can fund loans in the millions, and retail investors just will not allow for the growth that you’re aiming for.

The second reason is leadership. No one doubts that Bondora is Pärtel Tomberg’s “baby”. Though the idea of crowdfunding had many starts, then he definitely hit a sweet spot when it comes to appealing to retail investors who stepped on board despite the lack of history and evidence based risk assessment. This was, however, eight years ago. Between then and now many funding rounds have happened and millions of VC money have been added. No one seems to want to ask this question out loud – how much power does Pärtel Tomberg still have in the company? I mean, I have no doubt that he still holds the majority of the business, but that’s not as valuable as it seems, considering how Bondora is bleeding money, and the minority shareholders are the ones financing the push to profitability. While start-ups aren’t expected to become profitable too quickly, then most VC’s would assume for less of a loss rate at the 10 year mark.

The third reason is, ironically the investors. I think that to some extent investors we’re too optimistic about just how viable such a business model is based on just the funds that retail investors are likely to provide. This causes a kind of an insurmountable gulf between the business model as it should be to be profitable and the business model as we would like it to be. People are expecting to have very much autonomy, much data to make individual decisions while institutional investors are much more interested in big data based models where their involvement has to be minimal and the returns rate is highly predictable. In theory this information model could work for retail investors as well, but due to terrible management, communication and the unexplained pivot retail investors have lost a lot of trust towards Bondora as a whole, and trust is difficult to regain.

Why is Bondora messing up such a problem?

One of the bigger problems that Bondora causing such chaos causes is ruining the view of the market for the people entering. Most people start from Bondora, since it’s the biggest, has the longest history and most information written about it. However, after investing for just a bit you end up bombarded with complaints and issues, you start noticing problems yourself and become disillusioned with the whole P2P or crowdfunding based investment field.

For a long time I recommended Bondora for beginners due to those same reasons but I’d rather not recommend Bondora at this point. One of the core values of investing is stability, and there isn’t a whole lot of that going around for Bondora, which I think is a bad precedent to create – that they want your money but refuse to do anything investors ask for, and at this point they’ve even finished giving direct information (they’ve even deleted their Facebook).

How to fix Bondora?

Honestly, from the outside looking in, I think they should just revamp a whole lot of things. Realistically there isn’t just one easy fix to make it work, and there are dozens of ideas already thrown out there by the investors, they might as well listen to some. And while they don’t then it might be food for thought that more and more people make it to my blog with the search term “Bondora bad experience”.

Clearly there are three weak points that compound the problem:

1) The IT team – whatever it is they’re doing, it’s not helping them expand. Fundamental functionality such as the cash flow page being broken has zero excuse, and honestly is basis for writing some pretty mean complaints into the Financial Inspection. If the team is good, then the IT lead or business lead are dropping the ball.

2) The investor communication aspect is nonexistent. News are found out randomly, requests for data go unanswered and the customer service answers are just about as “canned” as they can be. While they hired people to do investor communications then those people have disappeared into the black hole of Bondora’s office and no one knows anything.

3) The company lacks an overall vision, or if it has a vision then it’s definitely not known by anyone outside of the company. You can’t have everything at once, and trying to have retail investors give your money while not providing them with anything in return is quite a lot like trying to eat your cake and having if later, still.

11 thoughts on “How to fix Bondora?

  1. Doesn’t it all stem from the simple fact that they have lost investors money?
    Now the 60+days overdue loans total 8M, the total interest to date 7.8M see
    They’re toast

    Twino are telling us they are great because – because they have lent 1M€ ! I hope they’ve lent it to better borrowers

    I’d like to ask if you have any insight as to if Mintos or Twino are a better prospect for investors, can they really afford to guarantee bad loans, why will they choose better borrowers than Isepankur did?

    1. Eh, well you can’t really force such comparisons, just based off 60+ and the interest paid, since recovery has such a huge time delay. You should look at time balanced returns and while those are doing OK for Estonia, there are clear issues for other countries.

      I personally am rather suspicious about Twino – the returns they promise are not realistic in the long run. Also, they are essentially a payday loan company, which raises multiple issues, especially if you look at the markets that they operate at.

      Mintos fundamentally seems to work, but with the returns climbing downwards and not all loans being covered by buyback and no actual recovery history, I’m hard pressed to see why people are so enthusiastic about it.

      1. As usual, you are very wise but now you’re getting me worried considering I have been putting several thousands on both Mintos and Twino, I hope they are fairly solid.
        I am thinking of reducing my investment by a 25% into bondora though since I have a huge amount of defaulted loans 30% and another 15% late, that’s almost half of a portfolio of thousands of loans thats late.
        I know I was not too careful in what kind of loans I invested into at first but still that’s a lot

        1. What is your experience with Twino? I have faith in Mintos, their model is good but ultimately they can completely wipe their hands clean of any defaults since they are just a marketplace. With Twino, I haven’t had much time to do background research, but a close to guaranteed 15% return seems too good to be true, no?

          1. Well, with twino so far, all is good, they answer quickly, they take in consideration the deposit quickly etc, no problem there.
            Of course the return is 15% in the best case scenario, most loans offer a lower rate than this but still indeed its nice returns
            However, they brought on a new CEO last week that worked at bondora previously, the head of Marketing I believe

            As far as mintos, indeed, one has to investigate their partners such as creamfinance and Mogo for exemple to see if they will be strong enough to backup their claims

  2. Mulle tundub, et paljud, kes Bondora üle kaebavad, kipuvad ära unustama Bondora peamise eesmärgi, keskendudes teisejärgulisele. Bondora ei ole sotsialiseerumisplatvorm. Investorite jaoks on Bondora rahateenimise koht. Seega ainuke asi, mis maksab, on lõpptootlus ja kõiki küsimusi tuleks vaadata sellest vaatevinklist, et kuidas see lõpptootlust mõjutab. See võib tunduda veidi küüniline, aga nii see on.

    Kuna mina olen samuti Bondoras tegev, siis mulle erainvestorite lahkumise voog tegelikult sobib – mulle jääb rohkem kvaliteetsemaid laene. Ja tõesti, viimasel ajal pole mul laenude väljastamisega olnud mingeid probleeme. Aga ma tahaksin heast südamest, et ka teised investorid pühendaksid tähelepanu sellele, mis on tegelikult oluline ja mis mitte.

    1. Siinkohal ma ei nõustu. Investorite argumendid ei põhine ainult suhtlemisvaegusel vaid reaalselt sellel, et pole selge mida ja kuidas investorite rahaga tehakse. Jäädes ainult numbrite juurde, siis tootlus püsivalt langeb ja laenude taastumine on allpool oodatud määrasid – väga ratsionaalsed probleemid. Lisada sellele Bondora poolne vaikus reaalsete vastuste andmisel on tegemist rohkem kui ainult suhtlemisprobleemiga. (Me ei kujuta ju ette, et pank ei suudaks sulle kuvada korralikku kontojääki, ja selle üle kaebamine ei ole “teisejärguline”.)

  3. I have not studied the USA cases of p2p consumer lending markets.
    However, Bondora could easily grow with retail investor’s money in Estonia.
    If I am not mistaken, it was you who said somewhere Bondora’s market share in Estonia is only 10 %. That means even in Estonia it had growth potential of tenfould + entering into new markets such as collateralized consumer loans etc.
    And all of this could have been finances by us, the retail investors. The problem is, Bondora is aiming at too much to the lower credit score borrowers and the defaults will cause people leaving it.
    Always expanding to overseas in business like this you need to make sure it is worthwhile for the investors to take the risk of jumping into uncertainity. It is like starting the site all over again.
    Estonia despite being a country of 1 million people, has great potential to grow. The GDP per capita in Estonia is not in a bubble as the salaries are pretty low there. That alone gives room for the growth of Bondora domestic p2p-lending in the future (assuming Estonia is able to have growth above the EU averages which I am pretty sure it can do considering the atmosphere there).
    And Bondora could have get all of the growth from retail investors.

    1. I think that the growth potential is not as unlimited as you think. the 10% is hard won, and they compete against all banks and other creditors. With the current default rate I don’t see retail investors being that happy to invest into lower interest rate loans, I’m not sure their profiling is good enough to drop risk far enough to allow for lower interest rates across the board. Also, being realistic – Estonia is a small enough country that even if Bondora took over 50% of the consumer credit market, expansion would still be necessary in the long run.
      Secondly, I think that the capability of retail investors is limited due to two things. Firstly, we are talking about approximately 10K investors, secondly every investor should have a limit of how much money they are willing to put into social lending, due to the inherently somewhat higher risk level. Retail investors wouldn’t be able to double the amount invested to expand into a new market, while institutional investors could.
      Thirdly, while the retail investors would probably be happy just minding their own business on the Estonian market, the big investors who have invested into Bondora as VCs probably demand more growth, which is probably the reason for many of the bad decisions that have been made recently.

      1. If we believe the sharing economy (p2p lending, uber, airbnb etc) will emerge big time and make a revolution, then I think 10 % market share is nothing for the biggest and the most handsome company in the industry. However, I agree it was a hard won battle but there is also room to grow for the next ~ 90% if p2p lending completely takes over.
        Also, as I stated, in terms of euros, I think Estonia has a lot of potential in getting wealthier country. The atmosphere is very entrepreneurial friendly there which will bring prosperity to the country as all the good that we have now are created by innovations and companies.
        Among 10 K investors in Bondora there are different types of investors: the majority are very small scale (like 10-50 euros/month) but sure there are people who can easily invest hundreds of thousands of euros into high interest loans.
        With me the bottleneck with Bondora is not the funds but the fact that the majority of borrowers there were not the best quality as I do not want to take too much risk when it comes to lending with a pre-known rate. A little more risks I might consider if the growth potential of my investment is limitless.

        Doubling the investments is not something that is reasonable to do for anyone. Not for a VC nor retail investor. Increasing amounts of investment should grow steadily together with the number of good loans (or loans people want to invest).
        Most of loans that doesn’t get filled in Bondora are crappy loans.
        At least that was the case when I was active there.

  4. For me are the transparency and continuous change of terms the biggest problems. The last one, to prefer collection agencies to court and bailiff was so big, that I stopped investing. I was investing mainly to Estonian loans and here worked this system well. I’m glad that I did not rush to Finland, Slovakia and Finland loans, because the credit scoring was in all those countries at the beginning disaster. For Investors of course, not for Bondora. Estonian recovery rate is proven, that from 2009-2012 there is recovery rate over 100%. That was fine for me, but when I have to leave for collection agencies up to 35% principal and 65% interest they are collecting, well, I’m pretty convinced, that this rate drops. Maybe this is good system in Spain, to get at least something from the “reds” back, but I’m convinced it is bad for Estonian loans. Bondora customer service has a strict attitude, that they are not changing terms one-sided and backwards, but when I started investing in 2013, there was no indication, that investor has to pay (so big) collection fee, but reality is that all my investments, what I have made, and now go to bankruptcy, are headed first to collection agencies. Bondora is heading to business type, that You just put money in and get some interest. Where they invest your money, is not your business. This model has a big problem for me, as we can see what happened to Trustbuddy.
    I’m investing in Omaraha too. When I started, I felt in my heart, that Omaraha has much bigger platform risk then Bondora, but now I’m not feeling so. There is owner who answers straight, when investors want something (not the best PR man :) ), but they have had during two years only one big change in conditions (all defaulted loans are going back to portal and investor gets over 60% of principal back). Looks like he knows, what he is doing. And he is answering, Bondora is not.
    But anyway, we are small fish. I invested to Bondora 6K, and now will take it out. And it takes over 5 years. It is not a big loss for Bondora, but I am not convinced anymore, that there will be no “platform risk” in 5 years, unfortunately.

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