NEO Finance is a leading P2P lending platform in Lithuania, connecting borrowers with lenders.
Business overview
| Location | Vilnius, Lithuania |
|---|---|
| Social media | |
| Website | www.neofinance.com |
| Sectors | Finance & Payments Digital Mixed B2B/B2C |
| Company number | 303225546 |
| Incorporation date | 21 Jan 2014 |
Investment summary
Idea
Introduction
NEO Finance is one of the leading P2P lending platforms in Lithuania.
The platform is an intermediary for consumer loans that connects lenders directly with borrowers with the intention that lenders can earn higher returns.
NEO Finance offers Buyback and Provision fund services, which minimises risk for lenders. Moreover, our partnership with Legal Balance enables the platform’s users to experience the benefits of 8+ years of default loans recovery know-how.
The NEO Finance team is comprised of senior professionals from the banking sector with a deep knowledge of consumer lending, bank management and risk control.
NEO Finance is under supervision by the Bank of Lithuania and holds Electronic Money Institution Licence, and is also authorised to operate in the P2P and consumer credit markets.
Intended impact
In a low interest environment, we believe it is unprofitable to keep your money in a savings account. On the borrowing side, micro-credit companies and even banks can charge a high level of interest on the loan. So it can be expensive to borrow, and hard to invest.
Our company aims to connect lenders directly with borrowers, therefore making investing easier and more profitable, while making borrowing more convenient.
Substantial accomplishments to date
October, 2015: NEO Finance is granted a limited electronic money institution licence from the Bank of Lithuania.
December, 2015: NEO Finance is granted a consumer credit licence and launches www.paskoluklubas.lt - a P2P lending platform in Lithuania.
April, 2016: NEO Finance is granted a P2P lending platform operator licence.
October, 2016: We are named “Tech Company of the Year” by "Verslo žinios", a Lithuanian business magazine.
January, 2017: NEO Finance is granted an unlimited electronic money institution licence, which allows operations in the European Union.
June, 2017: NEO Finance loan portfolio becomes the largest in Lithuanian P2P lending sector (Based on our own estimates).
November, 2017: Accumulated loans issued reaches 10M EUR and a milestone of issuing 1M EUR per month is achieved.
March, 2018: www.neofinance.com is launched for international investors.
NEO Finance now has:
5.4K active lenders.
47K registered borrowers.
€21.7M in loans financed.
2017 revenue grew by 395% to 479K EUR.
Monetisation strategy
There are 4 major sources of revenue for NEO Finance:
- Installment fee for borrowers. Every borrower is charged a fee on their instalment, which on average is around 5%. Installment fee is distributed throughout the loan period for up to 60 months. At the moment we have +1.8M EUR of installment fee to be received in the future periods resulting from already issued loans.
- Secondary market fee. When an investment is bought or sold in the secondary market - NEO Finance earns 1% transaction fee.
- Payment Initiation Service (PIS) fee. As an electronic money institution we provide PIS service to e-shops, which can help them to save costs on transactions. Our fee is between 0.05-0.35 EUR per transaction.
- Interest on investments. NEO Finance co-invests into loans with current investors, therefore earning interest on investments.
Use of proceeds
NEO Finance will invest in two areas:
- 70% for marketing & sales: increasing our advertising budget so we can attract more borrowers and on the other hand - execute our PR and affiliate strategy to attract more lenders.
- 30% for IT development. We developed our own state-of-the-art platform, with advanced usability and functionality for lenders and borrowers, integration with social security, banking, credit bureau, SEPA and other systems. Our IT platform is constantly developed according to user experience and often have additional functionalities added.
Market
Target market
NEO Finance connects two target markets - lenders and borrowers.
Borrowers are Lithuanians only, as this is our home market and we have a know-how in risk assessment, management, insolvency solutions and debt recovery process. We are focusing on providing loans to customers with mid to mid-high income, in age range of 23 - 45 years, who are currently financed through banking products - consumer loan or credit card. Loans are usually offered for education, real estate projects, auto financing and refinancing purposes. We've estimated the total unsecured consumer credit market size in Lithuania is over €50M per month and we are aiming to reach 10% of it.
We welcome lenders from all over EU. Our target group includes people who are already investing in real estate, stocks or other financial instruments and are looking to diversify their portfolio with good risk and return ratio product. They are usually high-income individuals holding mid-upper management positions or are high level specialists.
Characteristics of target market
We've estimated the total unsecured consumer loan market size in Lithuania is circa 50M EUR per month. Around 60% of the market is banking loans and 40% is micro credit and other financial institution loans.
Historically Lithuanian consumer loans have high interest rates, as till February, 2016 this was unregulated market. Still, after regulation was implemented, effective interest rate is 16.8% for banking consumer loans and 78.9% for other financial institution loans in 2016.
We believe this creates a good opportunity not only for lenders to earn a decent return, but also for borrowers to refinance their current loans.
Marketing strategy
Marketing strategy is set to attract two distinct groups of user: borrowers and lenders.
- Borrowers
Communication: Communication strategy is focused on banking sector borrowers. We have chosen long term strategic market entry plan where we educate our target market and introduce P2P lending as a new alternative in financial services market.
Media: Goal is to increase consumer loan market share. This is done by increasing communication awareness with securing optimal share of voice by having efficient audience reach using 360 media mix.
- Investors
Communication: Marketing communication strategy for lenders is to support sales. Our main channels of communicating our investment platform are performance-based such as PPC based advertising and affiliate networks.
Our brand recall awareness reach, in less than two years from launch, is 33% (according to research done by RAIT research agency in October, 2017).
Competition strategy
Our competitors are banks and micro credit institutions. We stand out in the following dimensions:
Speed: Our customers are used to getting a loan quickly, which can surpass a long and complicated process at a bank.
Price: Our effective average interest rate for borrowers is circa 24%, so we are more than 2 times more competitive than micro credit institutions and in some cases - more competitive than banks.
State-of-the-art IT platform: With constant development and user friendly features, our platform is easy to use and informative for an every day borrower as well as for sophisticated investor.
Team: Our dedicated team comprises senior experts from banking sector with a deep expertise in consumer lending and risk control.
While we were the last player to enter Lithuania’s P2P market, these features enabled us to outgrow our competition and issue twice the amount on a monthly basis compared to other P2P players. According to a recent survey, 9 out of 10 borrowers would borrow from us again.
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