Mintos cashback vol 2

A bit more than a week after last Mintos cashback bonuses were paid out, another cashback program (actually two of them) was announced. Since I’ve seen some investors seem confused about the value of such a program, I thought I’d discuss it a bit. So, why offer a cashback?

  1. The obvious – bring in more money

As I predicted in my last post, the cashback pushed people to deposit more money, Mintos finished December with 46,9 million euros worth loans financed. This means more money for Mintos instantly (since they earn money based on the volume of loans financed), and a bigger growth push for them (since people who deposit money will not withdraw it instantly after the program is over).

2. The less obvious – encouraging long term commitment

I personally know a lot of people who invest in Mintos but only choose short term loans since long term loans seem too scary. What better to help people overcome mental hurdles such as this (taking on more long term risk) than extra money? Once people have dared to invest into longer term loans once, then once they have them in the portfolio it’s easier to add more long term loans (If you’ve already taken in 60mo+ loans then some more 12+ month loans seem less scary than having to “jump” from 1-3 month loans).

3. The practical – the money remains in the portal for a bit at least

Once you’ve invested into long term loans you can’t just instantly jump out again. Either the loan has to finish (take a long time), it has to get bought back for some reason (unpredictable) or you have to sell it on the secondary market. To sell on the secondary market someone else has to buy it – meaning other investors are likely to bring in more money. Or, if you’re in a hurry to get out then you’re likely to sell at a discount, and everyone is happy (other investor gets investments cheap). You can already see people selling BBG loans at a discount after having cashed in their discount.

4. The logistical – easier to manage

If an loan company (or Mintos) wants to increase amount of money from investors then logically you would have to increase interest. For long term loans a slight increase in interest is problematic since for a long term loan that comes to a large amount of money. If you list loans with the same interest rate as before, but offering a cashback it’s easier to manage (get to predict volume) and investors are less frustrated if loans get bought back later. It’s also more instant – increased interest rates will not motivate people to make deposits as quickly as a time-limited cashback offer.


 

Overall, since I’ve been investing into mogo loans for most of my Mintos career then for me the buyback is a nice bonus to have. I even sold some older loans at a bit of a discount to benefit from the cashback (I was interested to see that people were actually buying!). Some people are probably still a bit too scared to take in such long term loans, but, well, more left for those who pick them.

Mintos cashback program

It seems like Mintos is growing at such a rate that they need more investors’ money and therefore they are offering for the month of December a cashback program for investors willing to invest into long term loans via the primary market.

As someone whose portfolio in Mintos mostly consisted of long term loans (mostly mogo) anyways, then this is not a particular hardship to take part in – the cashback offers 2-5% cashback depending on the length of loans you are willing to put your money into.

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You can already see the effect this promotion is having by the fact that a) the primary market is pretty empty if you go looking for 60+month loans and looking at the stats for the whole month then half way through the month, Mintos seems to be on track of 45-50 million euros worth of loans being funded. Essentially they are reaching a point where through Mintos as much money is invested as through most other Baltic P2P portals, so super impressive for them!

Looking at the amount of money invested, and assuming maybe half of it would be invested into loans which qualify for the program (since there’s plenty of people who still wish to have only short term loans) the expense for the cashback I would assume, would run somewhere into the range of a couple of hundred thousand to half a million euros to be paid out to the investors.

I’ve also added a bit of extra money to Mintos this month, and will probably add another top-off to benefit from the cashback offer. There are a lot of interesting aspects to this offer, I assume at least some investors will be selling the loans they invested into on the secondary market once the program is over, so I’d expect it would be reasonable to stock up some cash to pick up bbg loans which are on sale on the secondary market at the start of January.

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For my portfolio it’s a nice boost to have, probably in the range of 50-100 euros max depending how much I deposit extra, but a nice Christmas present overall. The cashback gets paid out within a week as well, so if you invest now, then you’ll have time to reinvest the cashback amount as well after it’s deposited.

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I am in the process of exiting Twino

While Twino has served my portfolio well, then the time has come to stop investing there for me. Overall I have no issues with the portal or how it’s run, there are just a few reasons why it’s no longer compatible with my portfolio and there’s no reason to keep it.

Lack of short term loan volume

That isn’t to say that there aren’t short term loans, there are just too many investors who want to have those short term loans, meaning the level of cash drag you experience when waiting for your spot in the queue is a bit too much. There is also an actual lack of loan volume, mostly due to the lack Georgian loans.

BBG vs PG loans

Ever since PG (payment guarantee) loans were introduced I’ve struggled to get any BBG (buyback) loans. I’m not fundamentally against PG loans, however they do lock you in for a LONG time. The default rate at least in my portfolio was pretty big, meaning that quite a bit of my money is locked in for a fair bit longer than I’d want. The original reason why I added Twino to my portfolio was the liquidity of the loans, that is something that is no longer true.

Big changes in the business

Seems like Twino is going through some turbulent times. The Georgian changes, different countries they’re pushing into, structural reorganisation. All of those are understandable, however their communication seems to have fallen off a cliff somewhat. I’ve been waiting to read their 2016 financial report, and as of now it’s still not available.

Where is the money going?

Well, a part of the money is going into the down payment fund of my new home, but most of the money will be transferred to Mintos. There’s enough selection of long and short term loans for me to choose from and enough originators to manage portfolio risk.

How quickly will I exit?

Well, I got the money I added + a bit on top within the first week. After a withdrawal request it takes about two days for the deposit to appear in your bank account. So far I’ve managed to get about half the earning, and due to defaulted PG loans I’ll actually manage a full exit by April 2018… Which is a bit annoying, but I’ll live.

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Overall Twino has served me well, with perfectly OK returns. Just since I stopped adding money almost a year ago now due to lack of accessible loans to my taste, there isn’t much point in keeping it about. I’ll see how they are doing and how the loan balances improve and may consider a return at some point.

Mintos and Twino portfolio updates

Mintos and Twino portfolios are both steadily trekking on, and being probably the most passive part of my portfolio still. I kind of refer to them as my latte fund – my investments there are enough for me to afford a latte every day of the year, the worst financial sin in the eyes of some savings gurus :) Of course, I don’t actually drink a latte every day because I’m too lazy to actually go and get one, but the point still stands. Next goal for these two portfolios is to allow me to buy a Starbucks coffee every day. I’ll probably fill that goal before Starbucks actually opens a shop in Estonia!

Portfolio growth

Since I’ve been saving up money for a house downpayment, then I haven’t really been adding all that much money into my portfolio this year, and I’ll be a bit less aggressive with adding money until the house is ready and decorated and all those other million expenses that go with moving. However, both Mintos and Twino portfolios are slowly doing their thing, and I’ve started to add tiny amounts of money to my Mintos portfolio again.

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I’ve stopped adding money to Twino due to the fact that for a couple of months there was a constant cash drag issue, where there weren’t enough new loans with attractive rates to really justify adding any money. If they get their pipeline going better again, I might reconsider, but I currently have 3500 euros floating around there, bringing in about 35 euros/month, so it’s a nice and slow growing portfolio.

Mintos however is really showing impressive growth, both in terms of loan volumes and amount of originators, being well on the path of becoming a P2P market leader in Europe. While I’ve been quite liberal with my autoinvest settings in Mintos, then about 90% of my Mintos portfolio is still mogo loans, which have served me well. Currently I have 4400 euros circling around, bringing in about 45 euros/month, so also a nice passive portfolio.

Returns

Now, returns are however on a different track and instead of climbing upwards they are steadily declining. This is inevitable as more money pours in to P2P, and there is more competition in the field. Currently Twino returns show as 13,42% and Mintos returns show as 13,03%.

As time goes in, I expect both of them to balance down to about 11-12%, which is still impressively good for such a passive investment. I literally just transfer money in whenever, and don’t really even log on to check the results all that often.

The only interesting thing in the past few months has been the fact that since Eurocent is struggling, I’ve checked occasionally how my one Eurocent loan (22€ loan piece) that I’d managed to pick up is doing. I’ve also pushed my Twino portfolio to be abit more towards shorter term loans, bringing the average length down, now that there aren’t much BBG loans anymore.

Twino status:

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Mintos status:

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