Let me introduce DS’s most recent FinTech investment – the French platform Younited Credit – and also give a bit of a sum up of where we are in our project. I stumbled upon this company by searching the biggest FinTech firms in Europe and was surprised with their size, with reports in 2017 of over €500 million through 100000+ credits. Size is not everything, but having this track record indicates they probably have an interesting offer.
The main feature of Younited Credit is that they are a crowdleoding platform which bundles lender’s monies into funds. Those funds then support microcredit to individuals who wouldn’t previously be banking clients. Not unlike Auxmoney in Germany, it got my attention that this FinTech’s only offers and reviews by Germans related to their “Festgeld”, but we went ahead to their homepage in French and signed up for the original deal.
As usual, let’s go through positives and negatives of the first experience with this FinTech:
Younited Credit’s Strengths
– Easy to choose investment categories, five were available as I joined the platform, adjusted to risk-return and term preferences;
– Final borower credit risk has no direct impact on investor, the fund structure “protects” from defaults while on the other hand certainly affects overall returns;
– The size and relevance of this FinTech in France is certainly a plus, as this is one of Europe’s most important markets and in my view quite innovation-friendly;
– Communication was quite ok, they are not super fast responding but were able to address every question I had so far, send through their online form and answer received per email.
Disadvantages
– Expected returns were not as high as other platforms, not sure if their interests charged from borrowers are lower, fees and fund costs are higher or there are inefficiencies in their structure or market, but the fact is the yields are relatively low when comparing with German FinTechs;
– Time taken to finish on boarding and to complete purchase of shares of funds was much longer than I expected, and differed from the alternative funds;
– As much as being a fund presents advantages as above, the big disadvantage is the lack of transparency in regards to the financed projects and people. If Younited Credit wants to capitalize on being a different borrower because of where the money goes, it should have communication mechanisms with their lenders to show how financing them is fundamentally different than buying into other types of funds.
Financials
– Initial invested amount of 2000 Euros;
– Equal amounts invested among their five funds, but in the meantime some of the funds seem to have been grouped. Before we publish results, we will make sure to identify which funds are available going forward.
Milestone
After this investment, and with a few supplementary amounts to platforms we already introduced, DS finally reached the original goal of investing € 10.000,00 through FinTechs! We are extremely happy to accomplish this, and a more thorough evaluation of that experience – as well as an update on the portfolio – are coming up soon.
Thanks for reading and keep investing!
Comments
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Good afternoon
I have a question, Younited credit securitizes loans through securitization funds, right? in the standard securitization process the spv buys the loans from a bank and finances that activity by selling shares of the resulting securities, how can this happen in the Younited case, where loans have not yet been originated and what is transferred in the investment funds are just credit applications (i guess)? Would you be so kind to explain me the process in a bit more detailed way?
Thank you for your time
Hello and thanks for getting in touch about Younited Credit, let me see if I can help you with that. Let me start with what I understand this FinTech does:
– They have a side of their business which relates exclusively to conceding loans to individuals – mostly if not all of them in France;
– The resources used for that are originated through gathering investor’s Euros in one or more different funds.
In that sense, Younited Credit doesn’t exactly securitizes loans, they rather coordinate an open-ended fund to concede small loans.
Having made that clear, however, I completely understand why the confusion would arise. When comparing with classic peer-to-peer lending, where the investor takes the default risk of each individual borrower, the Younited Credit funds are implicitly protecting (securitizing if we stretch the concept) investors from any one defaulted borrower, since it all goes to one big pot determining the return for all fund investors.
Hope this answers your question, would be glad to go into more detail with you.