It’s time again for a review. This time from 2 European crowdfunding platforms: Mintos & Grupeer. Crowdfunding is a term you have probably heard a lot and are told that it is also beautiful and occasionally sustainable way to invest as well as to make a positive impact with your investments. You have several parties through whom you can crowdfund but in this article I will take you through a review crowdfunding platforms Mintos and Grupeer.
Before investing: do your own research, and realize that investing can cause you to lose some of your investment.
Crowdfunding, what is it?
What exactly is a crowdfunding platform, you ask? I’ll tell you: crowdfunding, very literally translated, is funding brought about by a large group of people. In other words, you raise money by asking lots of people at once to invest in your cause or project. It is also called peer-to-peer lending.
Peer-to-peer lending makes it possible to conduct a money transaction without the involvement of traditional financial institutions, such as banks. A typical loan contract from a crowdfunding platform involves multiple lenders and one borrower(many-to-one), reducing any risk of non-repayment. Both the one who borrows and the one who receives are individual individuals.
The Internet has made it possible to bring these individuals together in a convenient way. There are now many crowdfunding platforms online, including Mintos and Grupeer.
Benefits and risks of crowdfunding
What is the benefit to the borrower? He or she gets his money at a lower interest rate than at other financial institutions. What is the benefit to the investor? Who will eventually (if the borrower achieves his or her goal and does not go bankrupt) get his or her money back, with the corresponding interest. This can add up to a substantial return (about 8-10% per year); much more than you currently get in the bank. Moreover, with the monthly interest paid back, you create a passive income. Also, with P2P lending, you have little to do with volatility.
This, of course, sounds very nice. But are there any risks? Yes, there are always those. Because you generally “do business” with individuals you don’t know, you may encounter defaults or even bankruptcies. This may result in you getting nothing or only part of your original deposit back.
Review crowdfunding platforms Mintos and Grupeer
Good, now that we know a bit more about crowdfunding in general, let’s now take a closer look at crowdfund platforms Mintos & Grupeer.
A schematic review of crowdfunding platforms Mintos and Grupeer:
| Mintos | Grupeer | |
| Easy to open account? | Yes | Yes |
| Queue to open account? | No | No |
| Focused on short-term or long-term investing? | Long-term | Long-term |
| For investing in individual stocks? | No | No |
| For start-up investors? | No | No |
| Choose funds yourself? | No | No |
| Dividend funds present? | No | No |
| Good online customer service? | Yes | Yes |
| Can I withdraw my deposit and return whenever I want? | Yes, recording is free. | No, recording is currently blocked. |
| Minimum deposit amount for deposits? | Starting at 10 euros | Starting at 10 euros |
| Minimum deposit amount for setting up monthly direct debit? | Starting at 10 euros | Starting at 10 euros |
| One-time deposit possible? | Yes | Yes |
| Risk profile? | Risk is minimized by working with approved lenders. Still, the risk is estimated to be higher when investing in e.g. ETFs or bonds. | Risk is minimized by working with approved lenders. Still, the risk is estimated to be higher when investing in e.g. ETFs or bonds. |
| Cost? | No | No |
| Efficiency? | On average 12.24% per year | On average 13.31% per year |
| Interest on counter/savings account? | N/A. | N/A. |
Mintos in detail
Mintos is a global loan investing platform based in Riga, Latvia. They started in 2015 and now have more than 300,000 investors from 63 countries involved in their platform. Together, these investors have already funded 26 million loans.
What is unique about Mintos is that you are not borrowing directly from an individual, as is common with P2P lending, but there is another lending company in between. That means: you give your money to Mintos, Mintos sends the money to these lending companies, which in turn provide individuals with their loans. Borrowers repay their loans in regular installments plus interest. Investing with Mintos can give you higher returns compared to other investment options (12.24% on average compared to 3.53% for bonds, 4.84% for stocks or 8.55% for real estate*).
In the dashboard in your account, investors can always see when the next payment is scheduled. More than 99% of loans have a repurchase guarantee. This means that if the borrower fails to pay for more than 60 days, the lender is obligated to buy back the investment from you with interest. You can automate your investing by setting your desired investment strategy and Mintos’ algorithm will do the rest.
In addition to logging into your account through the website, Mintos offers a good app where you can see exactly what amount is invested, what amount is available (and thus withdrawable) and what amount is “pending.” “In process” means that the borrower has made a payment and Mintos is waiting for the lender to transfer it to them. They then credit the money to your account. You can also see in the app how many current investments you have, what the average interest rate is and what your current return is. You can manage your portfolio in the app, add investment strategies, deposit or withdraw funds and manage your own account details.
Mintos does not charge you as an investor for investing, depositing or withdrawing. So how do they make money? Lenders who finance through Mintos pay a certain commission to Mintos. They actively strive to keep the cost to investors as low as possible, but still break even for Mintos and equal to or lower than the cost of other comparable platforms.
Grupeer in detail
Grupeer is also a crowdfunding platform that connects investors and borrowers. It is officially headquartered in Dublin (probably for tax reasons), but is also originally from Riga, Latvia.
How exactly does Grupeer work? After entering your investment criteria, Grupeer’s database spits out a list of potential investment opportunities for you, and from that you decide which investment type and amount you want to invest in. Grupeer also only works directly with lenders (and lenders with borrowers). In the case of Grupeer, you put in loans that have already been made at that time. On Grupeer, not only individuals but also investment companies can invest.
The company that made the loan remains responsible for managing it. As an investor, you only buy part of a loan and the same is true for other investors on the platform. All these parts together constitute the financing of the entire loan.
The credit companies Grupeer works with must – of course – go through an extensive selection and evaluation process. All loans are secured by collateral. Grupeer also maintains a repurchase guarantee for all loans. An investor can buy back (or have bought back) the entire loan or only part of it. As long as the borrower does pay off his loan properly, the investor receives profits based on his share of and participation in business. This is where the return to the investor comes from. The Grupeer platform manages and controls all payments.
Grupeer has the obvious disadvantage of not having an app. So you only have visibility into your account when you log in through the website. This makes Grupeer less user-friendly.
Conclusion
At first glance, Mintos & Grupeer don’t sound so different. Yet there is one big difference, and that is that Mintos continued to do extremely well even during and after the Corona crisis, and Grupeer completely collapsed. As of March 2020, Grupeer has suspended all operations. Earlier this month it was announced that a fifth is ready to be repaid.
“Currently, we are ready to repay €3.3 million, but we must first be able to resume our banking activities, “said Alla Kisika, CEO of Grupeer. “For that we need to renew our bank accounts, and for that we need to update and finalize our Anti-Money Laundering Policy. An essential part of the final process is updating the questionnaire to all investors.” Grupeer is still adamant that they will be back in business in 1 or 2 years, but that remains to be seen.
It is also unclear whether all investors will actually get their money back. Not all investors are convinced by Grupeer’s stabilization strategy and there are plans to take legal action to recover their money. Earlier this year, 2 other crowdfunding platforms from Latvia were declared bankrupt(Kuetzal & Envestio). There did not appear to be kosher practices going on there, but that has not yet been confirmed as the police investigation is still ongoing. However, Latvia’s police already indicated that the chances of investors getting their money back are slim.
Top or flop?
So why is this that Grupeer flopped so much and Mintos didn’t? Well, you name it. Maybe just fat bad luck, maybe lack of professionalism, lack of experience, poor management; many factors may have played a role that we don’t know about and will never find out. In the long run, this may be the best thing that could have happened to the market, as platforms are now forced to do more self-regulation and will be actively regulated by governments from now on. This is likely to create more transparency and lower risks for future investors.
What this situation proved once again is that investing is not without risk and that it is important to do your own proper research before you get into anything. Read reviews from existing investors. You can also actively try to reduce risk by making sure your investments are well diversified (There it is again: Diversification, diversification, diversification!). Always keep using your common sense, and if an investment or expected return seems too good, chances are it is indeed too good.
The fact remains that P2P lending is, in principle, a great investment tool that not only allows you to do good (after all, you’re helping others make their dreams come true), but also allows you to diversify your portfolio AND it often gives you a high return. This review of crowdfunding platforms Mintos and Grupeer covers only 2 parties, above all let’s not forget that other crowdfunding platforms are still doing very well right now. So stay tuned for more info on P2P lending at www.fireforwomen.com!
* Since its inception in January 2015, Mintos has an average annual interest rate of 11.76-12.91%, compared to eurozone bank deposits and popular international indices for stocks, bonds and real estate.
- Deposits: average interest rate for bank deposits redeemable at notice of up to 3 months in the euro area (January 1, 2003 – April 30, 2019). Source:
- Bonds: average annual return for the Bloomberg Barclays Global-Aggregate Total Return Index over the last 15 years (as of Jan. 31, 2020). Source
- Equities: annualized net return for MSCI World (December 20, 2000 – May 31, 2019). Source:
- Real estate: annualized return for FTSE EPRA Nareit Eurozone over the past 15 years (as of June 26, 2019). Source:
