A few weeks ago we asked our readers which companies are their top picks for 2014. One of the names mentioned was Trustbuddy, one of the first companies in the world to focus on arranging loans and capital provision between private individuals (P2P lending) in an organised manner.
Trustbuddy’s share is listed on Nasdaq OMX First North in Sweden and has had a pleasant performance during 2013, thanks to stellar growth and a recent increase of lending capital via institutional investors.
Nordic Investor reached out to Jens B. Glasø, founder and CEO of Trustbuddy in order to get a better picture of the story.
Nordic Investor: How come you are listed in Sweden? It appears that both management and the Board are mainly Norwegian?
Jens Glasø: We are a Swedish registered company. Being registered in Sweden gives us several financial- and expanding benefits in relations to the EU. Being listed on Nasdaq reflects our seriousness and increases lender’s safety in terms of acquiring company information. In addition to this, it is a privilege for us to be the world’s first listed p2p company.
NI: Can you give a geographical sales split of your operations? Is there a large difference among the customer behaviour in the different markets you are operating in?
JG: When we open up a new market, we do a comprehensive research in order to understand the financial situation in the respective market. In regards to this, we are trying to customize efficient routines, such as the credit check and collector services, in order to optimize the outcome in relation to the overall criteria in TrustBuddy. With these secured foundations, we manage to minimize diversification in terms of customer behaviour, although some cultural differences might be factors of whether payments are made in time or over due. In case of any external changes, TrustBuddy seeks to adapt to the trend in order to maintain stability.
For further information regarding geographical sales split, I refer you to the analysis made by Liberum Capital Limited.
NI: How are you advertising your service? I saw on your Facebook page that you are sponsoring a football club. Anything else that stands out? any future marketing activities you are considering?
JG: We are currently sponsoring a supporter club of TrustBuddy HQ’s local football team – “Tigerberget” for the football team “Start” from Kristiansand, Norway. We are also cooperating with a local company of which helps people get back to work after long term breaks due to reasons such as sickness or exhaustions. On an annual basis, people are put into work in TrustBuddy, and will be hired after a trial period if the person is suitable for the job.
Marketing: As our product, with the ability to loan money for free within 14 days, is significantly helpful for a large amount of people, organic growth in terms of WOM has had a positive effect. However, due to a rapidly increasing business such as TrsutBuddy, marketing measures must be put to action.
As we are a web-based community, our main focus on marketing techniques is through social media platforms, mainly focusing on Facebook and Google.
On Facebook we are marketing through ads and sponsored ads.
On Google, we are marketing though sponsored ads, where only acquisition cost applies.
Other marketing techniques have been used, such as TV commercials. We have our marketing department in Sweden, and they are continuously working in innovative ways to market TrustBuddy in order to maintain a sufficient level in terms of both lenders and loaners.
NI: How is Trustbuddy different from Lending Club? I noticed that at Lending Club one can borrow up to USD 35,000. Is that something that you will offer in the future as well? Why limiting the amount to SEK 5,000 at this point?
JG: Although both companies operate thorugh the p2p model, the companies differ. Where as Lending club focuses on relatively long-term loans (3-5 years), TrustBuddy’s focus is on short-term loans, i.e. payday loans. (30 days)
Due to smaller amounts lent out, we manage to minimize defaults, giving our investors a more attractive interest rate of seemingly 12% versus lending club, which gives investors approximately 6%. This attracts more lenders in the respective markets, and thus expanding our business.
NI: Besides Lending Club, is there any other meaning competition in the P2P lending market? what’s your competitive advantage compared to them?
JG: In the 2p2 business, there are several competitors such as Zopa, Wonga and Payday.
TrustBuddy’s has several advantages.
1. Customers may loan money for free up to 14 days.
2. Cheaper rates than other – e.g. Wonga.
3. Highest interest rates to investors of 12%.
4. Internal collaboration and cooperation guidelines to increase depth and understanding of the company and market for all employees.
5. Strict guidelines on customer service and customer support. Email correspondence happens within 12 hours on our trading days.
6. TrustBuddy is an open organisation with the ability to enhance efficiency on all level through suggestions and dialog across the company.
7. Duration of loans is short (On average 3,2 months), which implies shorter time frame for withdrawal of money and rapid achievement of compound interests.
8. Strict credit check. We deny 62% of Scandinavian applications and 90% of Polish and Spanish applications.
NI: What do you consider the main driving forces for your organic growth?
JG: The main drive for our organic growth would simply be the customer satisfaction. We have, up to this point, met the standards we have set, and thus increased customer loyalty and the willingness to speak for TrustBuddy in a positive matter. For loaners, we have launched a recruitment service, enabling them to make money on recruiting other loaners. Lenders may share their results in social media communities, and thus spread the word. On our list of features, we have a plan to enable recruitments of lenders, making WOM a profitable measure for all our customers.
NI: If I understand correctly, you recently entered UK, Germany and the US? How are these markets developing so far? What do you expect from those markets? The US market seems huge, considering their culture of amounting large and expensive credit card debt. Are there any factors that limit your opportunities there?
JG: We have opened up for lenders in these countries. However, as we always do in new markets, we are focusing on 100% organically growth in the opening phase. This gives us, as well as the customer, the benefit of adapting to the market without drastic actions. When all is set up and ready for expansion, we will start marketing to boost the business in the respective countries. For now, our main focus of the stated markets is the UK. We have not yet enabled domestic loans in neither of the stated markets – only international lending to our fully operational markets. In the UK, an increasingly amount of lenders register every day, and we have a dedicated support team to both help lenders in the registration process, as well as consulting regarding allocation of funds in order to increase profitability for the lenders. We hope to enable domestic loans in the UK, by becoming fully operational, within Q2 2014.
All the three countries stated are very large countries, and will require a sufficient fundament of employees, with the required capacity and knowledge, in order to meet the overall requirements of TrustBuddy. We are expecting the countries to meet the numbers of interests and default we have in the other markets, and we are working to customize the systematically challenges in order to make this happen.
NI: What are the next countries you will enter and what is the timeframe for that?
JG: First of all, we are focusing on becoming fully operational in the countries we have already opened to some extent. We believe it is important to not put water over our heads, but rather focus on the countries we have already sat our foot into, and work our ways further when stability has been established. Our main focus is to increase growth in our operational countries.
NI: In your most recent quarterly report you are mentioning internal efficiency and productivity improvements. Can you be a bit more specific what you have done?
JG: This statement relates to the saying “Think globally, act locally”. By this, we mean that all TrustBuddy employees are encouraged to view TrustBuddy as a whole. However, in order to do that from a individualistic point of view, everyone are encouraged to always enhance ways of working in order to increase productivity. Although many guidelines in the respective fields come from superiors, the employees along the way improve many routines. It also relates to the encouragement of the employee’s evaluation of the reaction/result, and to make all empoloyees view their contribution as an important matter to the company’s results.
We are also in the process of implementing both remitting for faster payouts, as well as a VISA/MASTERCARD/MEASTRO/SOLO feature, which allows paybacks to go instantly as well as the possibility for lenders to cash out interests directly to their debit card as soon as the interests are credited to their TrustBuddy account. In addition, through the WIRECARD implementation, TrustBuddy will be authorized to withdraw money from the customers bank account when loans due.
NI: In Q2 2013 you had a large “Other external costs” item of around SEK 11m. What was that relating to? I guess it was mainly extra-ordinary?
JG: Other external costs refer to all operating expenses in TrustBuddy. These costs have increased naturally due to growth of the company. Other expenses under this section are the costs related to the application of a banking licence.
NI: What do you consider your biggest challenge at this point?
JG: As we are growing at a rapidly rate, technical support has become increasingly important in order to update and create features. We are currently in the process of creating a fully automated platform. In regards to this, our temporarily biggest challenge is to both introduce our system to our new developers, as well as working efficiently with the system in order to meet the deadline for the launch, 15th of march 2014.
As a p2p lending company, our main challenge and focus will always be to ensure a sufficient growth of lending capital to meet the demand for Buddy loans.