It’s no secret that the COVID-19 pandemic has caused an unprecedented humanitarian and health crisis, not to mention the impact on the global financial markets. Volatility has spiked, and nobody can predict the severity and length of what’s ahead of us. Challenges caused by the destabilizing effects of the pandemic will not be easy to overcome, however, we at VIAINVEST remain optimistic about the future.
VIAINVEST mother company VIA SMS Group has been doing its best to diversify the company funding sources. VIA SMS Group was founded during the previous financial recession of 2008, so it’s not the first time we find ourselves in the midst of financial turbulence. We have every reason to believe that consumer lending will survive the potential economic downturn this time as well. Moreover, as reported before, we are fully committed to making the industry of P2P lending more transparent and regulated, as our platform has entered the final stages of its licensing process with the FCMC (Financial and Capital Market Commission).
We care deeply about our investor community, so we reached out to a number of our investors and opinion leaders to get to know their outlook on the current situation and their future investment plans. This is what they told us.
Lars Wrobbel, Passives Einkommen mit P2P
“Since 2015, I have been using P2P loans as a stabilizer and expansion of my global investment portfolio (5-15 % of the whole portfolio). In the past, P2P loans were able to absorb minor fluctuations in the stock market. Therefore it is extremely important to keep this component and not to sell it in a panic during the COVID-19 crisis. Apart from the global uncertainty, conditions in the P2P markets are currently better than ever before. I stay invested.”
“Investing in P2P is very risky – most platforms are not regulated, some are scams – in the last couple of months 5 shady P2P platforms have shut down. So not only we have global health & economic crisis caused by COVID-19, but also – emerging issues that may challenge investors’ trust. I have reduced my P2P portfolio from 25k to 10k, and I am invested only in two P2P platforms. My advice to others:
- Diversification among many P2P platforms does not work. If you invest in P2P, select a few good platforms. Top things to look out for: is platform regulated, profitable & operating at least 3-5 years? Are the promises realistic or do they sound too good to be true?
- Try to understand the risks behind the loans you invest in. For example, investing in camels in Somalia is extreme speculation, almost a joke, and many understand that. But the same is true about investing in unsecured business & real estate loans. If there are no pledges, valuations & agreements that you can verify – stay away.
- Be aware of Telegram and other investor groups on social media to get the latest information on various platforms and user experience. The last couple of months have shown that some platforms were not worth the trust investors had put in them – you do not want to end up in the same role, so learn from others’ mistakes and do your due diligence before you invest anywhere, not after.”
Denny Neidhardt, re:think P2P-Kredite
“Recent events have shown very well how much especially Latvian P2P lending companies need a proper regulation – whether this is in the form of the European Crowdfunding regulation or by the national regulator, like FCMC.
In terms of the current uncertainty regarding the development of the economy and the likelihood of a strong recession, I believe that retail investors that have a good asset allocation in place already and that have their funds invested with trusted P2P lending companies, don’t need to panic at this point.
Meanwhile, looking at the current market environment and their effects on the P2P industry as a whole, I would be careful with where to invest my funds, while possibly considering to pause some P2P investments for the time being. On one side the loan default probability will increase, we witness some lenders that struggle already a lot to attract much-needed funds to cover their liabilities but also P2P platforms face an unknown and uncertain economic situation. Adding a non-regulated environment, I can understand that this can cause some unnecessary headaches.
Overall, these are all hurdles and barriers to overcome. There is no doubt in my mind, that some companies will come out of this even stronger after this. Up until the market is further consolidated though, I would be watching closely on what is happening in the upcoming months.”
Aleks Bleck, Northern Finance
“My tip for everyone concerned right now is to reflect on their decision why they started with P2P-lending in the first place, and if that reason is still valid. For me investing in P2P originally was about diversification and the return on investment (ROI). I invested 10-15% of my assets in P2P lending, depending on the strength of the stock market and I’m quite happy with that, also in the times of rising concerns. The reasons why I started are still valid today and most importantly I trust the platforms I am invested in to do a good job, cut costs and pick only the best clients for new loans to create a stronger portfolio that rewards investors that continue to place their trust in their respective P2P platforms.”
Oscar Harrington, Explore P2P
“Some investors have been exiting P2P but the key question they then face is – where to put those funds? Equities are very volatile and cash is safe but generates no returns. No one is buying real estate right now. We think that there is still a role for P2P investments during this period but investors need to choose carefully. It’s more important than ever to choose the strongest loan originators with the best track records.”
“The COVID-19 pandemic has brought a scenario of economic uncertainty at the global level. Some governments have established payment moratoriums in favor of affected borrowers, a decision that particularly affects crowdlending platforms, which to honour their contractual commitments must continue making payments to investors despite receiving less income. Some countries like Poland have limited the APR on loans to 9% for the duration of the pandemic, making it impossible for some originators to continue providing services in this market, due to the lack of profit margin.
In the current course of events, investment in crowdlending has been significantly reduced. In this regard, some investors consider that delinquency will increase and question whether the originators and platforms will be able to meet the agreed contractual conditions. Besides, platforms have been forced to make staffing adjustments and have opted to be stricter in granting loans (giving preference to regular customers with good credit histories).
To attract more investments, many entities are offering additional interest or subsidies. Undoubtedly, it is a legitimate business strategy, although the role of an investor is to choose among many offers, giving preference to more stable platforms with the capacity to face this economic crisis, like VIAINVEST, for example. After all, it is the investors with their capacity of choice and analysis who can turn this crisis into an opportunity to obtain profitability for their savings.”
Angelo, P2P Investing Europe
“We’ve never been through a situation quite like this in our lifetimes, so it’s very difficult to make predictions. However, I do think that every crisis also comes with opportunities and panic rarely leads to rational decision making. I still strongly believe in P2P lending as an asset class, but I used this period to take a closer look at my own P2P investments.
In my opinion, in these times of uncertainty, it is more important than ever to focus on transparent, profitable P2P platforms and loan originators. They should be able to adapt quickly to the current situation, have a profitable business model (+ audited financial statements to back it up) and cash reserves to get through potential short-term liquidity issues. For me personally, VIAINVEST, backed by the VIA SMS Group, deserves to be on that list.”