Hello there! In the last P2P portfolio update I added with Income Marketplace a new platform. Today I present you an Income Marketplace Interview with Kimmo Rytkönen. He's the founder and CEO of Income Marketplace. Enjoy reading!
Income Marketplace Interview with Kimmo Rytkönen
Hi Kimmo, thanks for the interview today. Maybe let's start with introducing you as a person and tell my audience a little bit about your experience in lending in general
I’m originally from Helsinki, Finland but living in Tallinn, Estonia for the past 13 years. I’m a big fan of boxing and try to squeeze a few training sessions into my weekly schedule. The amount of work and dedication it takes to become good in that sport is just mind-blowing, a bit like building a startup. I also have two kids, so life does not get too slow or boring.
One of my previous ventures had investors and IT developers from Estonia and I moved to Tallinn to manage these parts of the business. One thing led to another and I stayed, got married and call Tallinn my home now. I’ve been in Fintech lending for most of my career, last as the group CEO of Aasa from its early days until my exit from the group in 2020. I’ve also been part of the team that built from scratch the lending arm of AMAR Bank in Indonesia. Amar did an IPO in early 2020, so I can call that business a huge success in addition to giving me a lot of experience and also a holistic view on how to build a fintech business in an emerging market.
Some investors might think ‘Oh wow ANOTHER P2P platform promising to make everything better'. How do you answer them?
We know every platform before us, from scams to bad actors, which have used the word safe. This has created distrust from investors towards new platforms and the word safe in general. There is very little we can say or do which will fix this in the short term, except to invite investors to learn more about Income and the new concepts we are bringing to P2P and investing in loans. For those who have taken the time already to get to know us, it’s obvious we are not just another new P2P platform.
If you look at the way we secure the loan portfolios to protect our investors, I don’t think anyone has ever done it like we do in P2P. Once you read about our concepts of “junior share” and “Cashflow Buffer” this becomes even clearer. So instead of just copying what’s been done before and calling it safe, I believe we actually have a unique approach to P2P and investor security.
As a new platform we need to be even better than everyone else, and I like one comment made in a recent podcast which summarized the challenge of new platforms. It said that if the P2P investors consider the age of a new platform a red flag, then new platforms with great ideas will never grow, and we are stuck with the incumbent “bad” platforms. So from this perspective, we obviously wish that our message is heard and investors support our growth to become a player of a size that can really impact the P2P investing landscape in a positive way.
Please say some words about Income Marketplace. What's the USP?
I began the project to bring institutional level security to P2P investing, which is the USP of Income marketplace. For retail investors, there is no other marketplace doing what we do. For institutional investors, the way we’ve built our tech, enabling them to transparently connect direct to the assets through our “Income API”, is something entirely new in the industry.
As master of diversification I find it exciting to add platforms which offer loans from countries I haven't seen on other platforms. With Indonesia and Brazil you have two of them. How did you find them and maybe you can describe the onboarding process?
I actually think diversification alone is not the best strategy today. If you look at what has happened in the past, diversification at best leads you to have less losses, but you will suffer losses nevertheless and this will eat heavily into your yield. I´ll use an example:
– You have 1000 euros to invest and following the logic of diversification, you invest €100 in 10 different Loan Companies (also Loan Originators, LO) all promising to pay you 10% interest per annum.
– 9 of those loan originators work perfectly and you get the 10% yield as promised, leaving you with €900 euros of capital recovered and €90 of interest earned.
– 1 of these loan originators fails and you don’t earn any interest, and in addition you lose 50% of your invested capital. You recover €50 of invested capital.
Putting your investment together you recovered €950 of invested capital and earned €90 interest, thus net cash payment back to you is 1040€. That is only 4% yield on your money, which barely covers inflation. You can play around with the same logic and you’ll notice that loss of investment capital as in the example will cripple your yield, even if the promised interest is 15% on the loan companies that perform.
This is a simplified example, but you get the point: Protecting your capital is very important when investing in loans, even when you diversify. Actually, instead of blindly diversifying, you’d be better off if you had invested with an expected yield of 9% on a platform that has the “correct” investor and principal protection mechanisms in place, such as Income.
The onboarding process is relatively straightforward; we do a due diligence on the loan companies, during which we also establish the “cash value” of the loan portfolio that is placed on Income. This means that we analyse how much “junior share” is needed in each loan for our investors to be covered 1:1 in case there is a loan originator default and we need to take over the loan book. Once the analysis on the portfolio and other parts of the LO business is done successfully, we make them a commercial offer where junior share and other terms are outlined. If they accept we proceed with tech integration and listing.
So there are two LO's from emerging markets and one from Europe (Finland). Do you plan to add further LOs from South America, Asia or what's the plan?
I started by approaching loan companies I knew beforehand to see which ones would be interested in co-operation. We ended up with these three and in retrospect it´s a good mix, because in addition to the developed markets, we are capturing Southeast Asia and Latin America, two growing regions in fintech lending. The plan is to have global reach, so expect more LO´s from these regions as well as others.
As transparency is key: Are there connections between you and the platform itself and the LOs?
I made a small equity investment in ClickCash when it was at the seed stage, so I hold about 9% as a result. Looking at how Fintech in Brazil and the company is developing, this seems to be a very prudent investment. I’m also investing into ClickCash loans through the Income marketplace and you can read my monthly P2P investment update from the Income blog.
- Income offers loans with up to 12%
- At the moment there are loans from thee loan originators listed over three countries
- An auto-invest is available which also shows the matching loans
- You can invest from 10 EUR
- ‘Junior shares' and ‘Cashflow buffer' serve as a safety net for investors
Registration & Bonus
If you want to test Income Marketplace there is a 1% cashback for you, if you register with my link* and use the code CLHOFU during registration. I receive 20 EUR + 1%.
About new projects on Twitter, Instagram and Facebook
On my own behalf, I would like to mention that I also present new projects on Twitter (kaph1016) and Instagram (investdiversified) in which I invest myself. Also, on Facebook I have a page. There are also a few insights into how I invest in other areas. So just follow me :). *Some links in my posts are affiliate or referral links. That means I get a little bonus. For each of those who use these links, however, there are no costs or other disadvantages. On the contrary, there is usually a start bonus or cashback. So if you use these links, you support my blog and for that I say thank you in advance!