Kimmo Rytkönen, founder of peer-to-peer lending marketplace Income, tells Marc Shoffman about his ambitious plans for growth
Kimmo Rytkonen is an active peer-to-peer investor and after 15 years of working in fintech lending, including launching an alternative bank in Indonesia, has started his own lending marketplace called Income.
Estonia-based Income only launched last year in the aftermath of the pandemic but has already attracted more than €1.3m (£1.07m) of institutional funding as well as completing a successful €844,019 Seedrs crowdfunding campaign.
On Income’s marketplace, both retail and institutional investors alike can invest in loans issued by loan originators globally.
Rytkönen explains what his P2P lending marketplace aims to do differently and its plans to take on the big brands in the sector.
Marc Shoffman (MS): What got you interested in P2P lending?
Kimmo Rytkönen (KR): I have been actively investing on P2P platforms since 2019, and I know lending as I have been working in this sector for most of my working life.
Covid hit and I just thought, I know lending and structured finance and something could be done better. I connected with fintechs I knew to see if they would come on board and then I just kept building.
MS: What are you doing differently?
KR: We have protection against a fintech lender default. If a fintech on the platform goes bankrupt then we use the loanbook as security for investors.
Currently, you would only have a buyback guarantee on a platform and if the borrower didn’t pay then they would buy the claim for it.
We have that but we also have a security structure that protects against the lender defaulting, which nobody else does.
These are similar methods to those used by institutional investors.
Lenders, especially those in emerging markets, have a chronic need for capital to grow and this is where we can step in.
MS: What types of loans are available on Income?
KR: It is a spread of different credit products. Today we have car loans from Latvia, consumer loans from Brazil, and shorter-term loans from Indonesia and Mexico.
We are also looking at factoring and payroll finance, which we feel is ripe for disruption.
MS: How difficult was it to plan a launch during the pandemic?
KR: The main challenge initially was that all the lenders were very busy trying to figure out what was going on so there were delays.
We started development during the pandemic in early 2020 and launched in February 2021.
The worst was over by that point in terms of the shock of closed economies.
Every deal is made at a distance now on Skype or Zoom, whereas in the past we would have been expected to be on site. It is good that we don’t all need to fly to somewhere like Mexico to agree a deal now.
MS: What impact has the Ukraine crisis had on Income?
KR: We don’t have any lenders on our marketplace that are exposed to Russia and Ukraine.
But investors are shaken and it has hit all assets such as the stock market and cryptocurrencies.
For the first two weeks we saw a slowdown in new customer onboarding which we can attribute to the Russian attack but we have recovered now.
We know other platforms are struggling, that is mainly those with exposure to the region.
MS: How is Income regulated?
KR: There are now EU-wide crowdfunding regulations.
Estonia has implemented the first stage for equity and real estate but our marketplace has been left out so far.
The rules are being penned. Our assumption is we can still apply this year but the legislator first needs to write down the requirements.
We are not regulated today but are looking forward to being regulated.
I know there are a lot of investors waiting for that. It is a stamp of approval.
MS: How do you vet lenders that list loans on your marketplace?
KR: Our first layer of due diligence is looking at their loanbook. We analyse the cash value and quality and then give an indicative offer to the company of how much money we can advance for each loan.
There is also the normal financial due diligence such as looking at the profit and loss and balance sheet, and we will also seek local experts to understand the regulatory environment and risks in the market where a lender operates.
If everything checks out, we do the IT integration and then add the loans to our system and investors can start putting money in.
MS: How did it feel to run a successful Seedrs crowdfunding campaign?
KR: It felt good to have such interest. The process took longer than we thought to get the project live, mainly because Seedrs vets candidates and verifies statements so closely. It shows how crowdfunding isn’t an easy way to get funding but it is a good way.
We saw a whole lot of investors signing up to the platform as a result of the campaign. The publicity isn’t something you get from venture capitalists.
The money will help fund small increases to the team size and we are aiming to use it to improve the product and accelerate sales.
We are discussing other fundraises with existing investors. It would probably be later this year if we do it and depending how our plans manifest.
MS: How do you plan to expand?
KR: We have several partnerships. We recently started working with Finnish fintech ResultElf to onboard its AI credit decision-making software.
It makes sense to refer our lenders to these sorts of services. It will benefit them and provide an additional revenue stream. We are trying to expand from not just being a platform but a fintech hub.
It still remains to be seen whether our regulatory licence will be passportable but we want to service the whole of the EU.
MS: Are you interested in the UK market?
KR: We would like to enter the UK and we are considering how to approach it. There is a lot of work to be done in mainland Europe first but we definitely want to be active in the UK at some point.
MS: Do you have a loanbook target?
KR: We have just reached 2,038 approved investors. These are people who have been checked for anti-money laundering and completed the know your customer documents. Those guys have today invested cumulatively around €7.7m.
Our mid-term lending target is €50m and then onwards to €100m.
The largest marketplace is running around €450m, that is the long-term view to reach.
For now, we want to keep growing our investor base. At the moment the pipeline looks pretty good. We have European, Latin American and Southeast Asian companies coming on board.
We would like to add a few institutional investors and build a secondary market. It is all in the development plan.