How would you describe Dofinance platform?
„Banking is necessary; banks are not,“ Bill Gates said already in 1990. DoFinance is a peer-to-peer lending platform that gives great alternative to traditional financial services such as conservative bank deposits or risky stock markets. We are a P2P platform where private investors can invest in consumer loans, earning up to a 12% annual return.
Finance for human is what we stand for – DoFinance aims to become the most user-friendly, secure and accessible P2P lending marketplace possible. We believe everybody should have a chance to become his or her own financial director.
– What are the three main advantages for investors?
According to the clients’ feedback, the main advantage is the easy and quick investment process. At DoFinance, becoming an investor is a matter of few minutes – one can register and the investment will start earning in less than a day. Besides that, the three main advantages are:
- Potential risks associated with the investment process are brought to minimum, and all loans are secured with an instant BuyBack guarantee. What’s different from other P2P platforms in the market – if the borrower doesn’t pay back the loan, you don’t have to wait for an extra 30 days (after the investment due date) to get your funds back, the money is available right away.
- Investors have access to their money at any time. You can withdraw the invested funds before the due date and receive the money starting from 14 to 28 days after the request with (or without) accumulated interest, depending on the chosen investment plan. DoFinance guarantees quick and transparent money withdrawal because, unlike on other P2P platforms on the market. That means the investor is not dependent on the secondary market and either the loan will be sold or not.
- The invested money is constantly earning; it never sits still. Our Auto Invest program reinvests money the moment borrower returns the loan and the investor’s funds become available.
– What ROI can investors expect?
Investors can earn from 6% up to 12% annual return. To suit investors’ preferences, DoFinance offers three different investment plans – with 6%, 8% or 12% return. The basis is very simple – the longer the investment period, the higher the ROI. For example, short-term investments, starting from 1 month, offer 6% return, while long-term investments, starting from 6 months offer 12% return, meaning that the ROI depends on the chosen investment plan.
Since all investments are invested in the same type of consumer loans, the key difference is the number of times the funds are re-invested.
– Is the technical platform self-developed or using white-label solution?
The technical platform is self-developed. It is built on two pillars – as secure and user-friendly P2P platform as possible. Our main focus is smart risk management and an accessible, easy-to-use platform.
We base our services on the combination of risk assessment tools, which also look the human factor, and manpower – our experts on risk management in-house.
– How reliable is the credit rating / credit history data available?
The credit history data help us analyzing the borrower’s profile. So far, the available data has been reliable in terms of predicting behavior, and, of course, it contributes to the analysis of potential risks. However, considering that we
live in the age of innovations, reliance on credit rating alone is not sufficient and requires integrating IT solutions to assess risks. At DoFinance, we continuously test assessment and tracking tools, study regularities, analyze and compare data based also on borrower’s cultural background – by predicting consumer behavior, we aim to bring potential risks to minimum. The goal is to ensure the lowest possible rate of non-performing loans (NPL), which is one of the variables characterizing the stability P2P business. Currently our NPL ratio is 6.7% and its continue to decline.
– How is the company financed?
With the total investment volume reaching €2 million, the platform launch was funded by the founders of DoFinance. The money was invested in technologies to create the platform and to build the loan portfolio.
We believe that the best warranty to secure investors’ funds is effective risk management thereof big part of the capital was invested in developing risk assessment tools of potential borrowers. That, in turn, minimizes the rate on nonperforming loans which guarantees we the investment process is safe.
– Are you open to international investors?
Yes, DoFinance is available to private individuals holding a bank account in EU and EEA countries. Moreover, we have opened European peer-to-peer investment gates to private investors also in Asia: Indonesia, Singapore, Vietnam, Thailand, Malaysia, South Korea and India.
– Is your platform regulated?
Peer-to-peer lending is a relatively new industry in Latvia (DoFinance is based in Latvia), hence law, providing more precise industry regulation, is currently under development. Currently P2P lending is under the provision of the Latvian Consumer Rights Protection Centre.
Fintech industry has a potential to become Latvia’s success story which would contribute to both image and prosperity of the country, thus there must be a healthy balance between industry regulation and its self-regulation. The entire financial industry and eventually the consumer will benefit from the development of FinTech as banks and FinTech companies will start cooperating when it comes down to providing services, customer service etc. Therefore, it is the state’s responsibility to create environment where these companies will stand, intellectual capacity of labor will increase and taxes will be paid. It is important that the Ministry of Finance includes industry representatives, when developing regulations on P2P lending platforms. Regulations developed without a throughout understanding of the industry can harm both investors and businesses.
In addition, DoFinance is one of the first P2P lending platforms to develop its AML procedure which has been officially accredited by the supervising authority.
– Where do you see your platform in 5 years?
It is no news that the world of banking is being disrupted. 5 years is a lot of time. 5 years are unimaginably much time for FinTechs. New technical solutions and innovations are discovered by hours, not days, so it’s hard to predict where will we be in 5 years-time. For example, currently we need human resources to study regularities and compare data to figure how to read it. Going in the direction of systematization means that machines learn which parameters should be considered when assessing potential risks. At the same time, our IT team is finalizing the integration of voice, image and mood analytics in the risk assessment procedure. In other words, the input of artificial intelligence in business development grows by day.
Recently we have expanded, and the platform is now also available to investors in Asia which is a huge step forward. If in Europe P2P lending is in its teenage age, in many Asian countries it is still a baby exploring the possibilities. We expect big shifts in the coming years. Geographical limitations in FinTech are just illusions, so we continue exploring new markets.
DoFinance provides financial technologies from people to people. Once again, we believe in finance for human, and that investing is not only for professionals. Everybody should have the chance to become his or her financial director – it can be life-changing. More and more people outside the professional financial world come to learn that, and that number will only grow in near future.
– What are your thoughts about:
* Provision funds (Mandatory or not; will it be gone in few years?)
* BuyBack guarantees (Mandatory or not; will it be gone in few years?)
It is important lenders have guarantee that the invested funds will not be lost if a loan defaults. Both provision funds and Buyback guarantee lower the risk of lending, and there should be a balance between security of invested funds and a fair interest rate. Buyback typically is a fairer and more transparent alternative than provision funds as there are no deductions of the interest due or other transactions that sometimes go unnoticed by the lender. Transparency is a value becoming ever so relevant in the business world today – and I’m not talking only about FinTechs, so it would only make sense if buyback will replace provision funds eventually.
Should a safety warrant be mandatory? Yes and no. On the one hand, a P2P platform must ensure its stability and sustainability; on the other hand, it is the lender’s choice – taking risk to increase the ROI or choosing a business model that has no risks and hence a lower return is an individual choice. Moreover, there will be new products in the future which might follow a different model from those we know now.
– How do you see competition in markets you operate in:
* New competitors or consolidations
* Working locally or internationally
Future of any industry today is the various forms of cooperation. Hence, are no absolute competitors in its traditional sense. We are open to different opportunities – if, as a result of shifting global trends or changes in the market, cooperation with potential competitors might bring results, we are open to cooperation – we believe it can bring the best for the product we offer and thus for the investor. The old-school idea of keeping all experts in-house does not fit the innovative industries, and the best way to evolve is to think outside the lines and work with different partners.
While working in the global arena, we must take into account local cultural habits, characteristics of customers as well as legal regulations – there is no single model that suits all. At the same time, there are no geographical borders in FinTech. In other words, it’s the good, old principle of Think Global, Act Local.
– Trends of features (e.g. secondary market, automated investment, etc.) that should be very significant
To bring P2P services to even wider range of investors, we are continuously working to evaluate and mitigate any potential risks associated with P2P lending. Idea of what alternative financing entitles is shifting – 20 years ago, one wouldn’t image that he/she can become an investor with no previous background in financing. And yet, it’s happening – today investors do not need professional background to become their own financial directors. What it requires is as easy-to-understand and transparent solutions as possible – one of the future trends players in FinTech definitely should consider.