Mintos is one of the most successful start-up companies from Latvia this year. At the beginning of the year they received $ 1,16 million seed investment from the local investment company “Skillion Ventures”. At the end of this year the company is listed between nominees for the European FinTech Award 2016. Great job, isn’t it? So I invited the Co-Founder and CEO of Mintos, Martins Sulte, to share his story.
What is Mintos? What is your product about?
Mintos is a marketplace lending platform that brings together investors and borrowers by enabling various loan originators to use a marketplace lending model in funding loans. 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, get an instant access to investors that are looking to purchase loans by connecting to our platform. Previously loan originators established their own platforms; now Mintos offers a single platform to non-bank lenders.
How many investors/customers is the Mintos marketplace currently counting and where are they from?
We have more than 3,500 investors from more than 30 countries that have funded more than 13,000 loans for a total of EUR 9 million. Estonia, Germany, Latvia, and the UK creates 70% of the total investments. The balance is increasingly shifting to Western Europe as investors find out about us. Saving and investing culture is more developed in these countries.
Who are your main competitors? What are your competitive advantages compared to them?
The main advantage for the investors is that they have access to much broader investment opportunities as part of a single platform, both in geographical terms and in terms of various loans originated by various non-bank lenders. Different loan products and geographical locations, combined with the fact that the minimum investment in one loan is EUR 10, means that investors can easily build well-diversified-investment portfolios. Our secondary market is very liquid as a result. 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 the investors’ interests. Finally, all loans on the platform are prefunded by the loan originators; investors can start earning from the moment of the investment and there is no cash drag.
What problems did you have this year with the legislation in Latvia? Have you experienced something similar in any other country you are operating in?
Innovation precedes regulation as we have seen over and over in many industries. Financial services are no exception. So we have worked hard to inform the public, policymakers, and regulators about how marketplace lending works and we appreciate the work regulator has started to introduce the legal framework for the peer-to-peer lending industry in Latvia.
Are governments responsive to do changes in legislation according to needs of new FinTech solutions?
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 it takes 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 be learnt from the UK in how to support fintech industry. That is one of the reasons why we are in the process of moving the platform to the UK and applying for the Financial Conduct Authority’s (FCA) permission.
There are three major advantages for moving the Mintos platform to the UK. First of all, there is a clear regulatory system in the UK. Secondly, the British government has clearly indicated its support for peer-to-peer lending; this investment form is going to have the tax-free wrapper starting from April 2016. Finally, more and more investors on our platform come from Western Europe, so we want to be closer to them.
Our strategy is to be competitive at European level and our move to the UK is a logical step in that direction.
What is your exit strategy?
The exit strategy is not on the Mintos agenda. Our goal is to build a sustainable business.
What does the nomination for the European Fintech Awards mean to you?
It is great to be a part of the European fintech community. The nomination for the European FinTech Awards is significant recognition of the work we have done so far. It also gives us more trust and confidence that we are working in the right direction.
What changes can we expect in the FinTech market in the nearest future, that could influence the everyday life of a regular consumer? What attitude do banks have toward new products in the finance sector?
If previously the Central Financial Institution was a bank, now part of the market has been taken over by the non-banking sector opening doors for new and innovative financial services due to the technological progress. The rapid development of fintech companies has been facilitated also by changing habits of consumers. Today the demand is growing for a convenient, simple and easy understandable service.
I envisage that most likely we will take cash (in a few cases when it will be necessary) from ATMs using mobile phones for authorization, and plastic cards will be put away together with cassettes and CDs. It is possible that in the long run new and progressive companies will offer a full range of basic banking services, while banks will only maintain the infrastructure and become a place where numismatists will keep banknotes and shiny coins so that they do not become worn-out.