Alexander Artopé founded smava (which stems from „SMArt VAlue“) together with Eckart Vierkant and Sebastian Rieschel in 2007. Some call it a peer to peer credit marketplace, but as the term crowdfunding gets more and more popular these days, one could also consider it as a crowdfunding marketplace. And the term crowd can be applied to both investors and persons seeking for money, as smava started in the beginning as an alternative for a classic bank especially for private borrowers.
Could you explain the business model of smava in a few sentences? How does smava work?
www.smava.de is Germany’s largest online credit market. Borrowers can obtain cheap online credit at smava.de as a clever alternative to a bank loan with investors financing these loans directly. This way, smava.de establishes a direct connection between investor funds and the use of these funds by private persons and the self-employed. The resulting savings are passed on to customers in the form of better terms: Borrowers receive cheaper credit than is available to them through banks and investors benefit from better yields than could be obtained from other interest-bearing investments.
In the UK and US there are similar businesses, for example zopa or prosper. What has been or what is the challenge of the German market for smava?
German customers focus on security, especially with online transactions. That is why transparency and favourable conditions are so important when running a credit market. Smava takes the credit business back to its roots and directly connects credit lenders and borrowers, so that both ends profit from smava as a bank alternative. The numbers speak for themselves. Until today we have procured a credit volume of 60 million Euro.
Having the big burden of building up a marketplace with credit lenders and credit borrowers, how do you address this conflict? Marketing on the one side lucrative (high interest rate) investment opportunities to potential lenders and on the other side low interest rates to borrowers?
Smava.de works like a market place. Loan borrowers and lenders “negotiate” themselves the interest rates. Smava.de offers only the necessary digital infrastructure, secures the clearing and the customer´s interests.
How would you characterize your typical lender and how your typical borrower?
More and more average bank customers turn to smava.de, because they are searching for a more favourable alternative to their current bank via the internet and find this alternative at smava.de. So our lender and borrower portfolio is quite mixed and spans across all age groups. Smava.de is used by private customers as well as by entrepreneurs.
How have you prevented that there is a lemon market problem on smava? So that smava is not perceived as the last resort for lenders, where you only go, when you do not have a chance at a bank loan?
Smava is not a marketplace for bad credit borrowers. As a rule, the only borrowers that are being rejected by a bank and get a credit at smava are self-employed persons or freelancers that have a good ability for the repayment of interest rates and principal payments. All borrowers are screened by an experienced credit check team in terms of identity, Schufa-Score and their ability for future repayments, because of course smava wants also to protect the interests of the lenders. But we work without additional securities. The overall default rate is at about 5% and with that at a normal level.
What´s your advantage in contrast to bank loans?
We mainly offer our customers the following advantages:
1. More favourable terms: Neither bank branch offices nor a complicated organization has to be financed. The result: significant better terms than a classic bank offers.
2. More transparency: The money comes from private lenders. They decide themselves, who their are willing to grant a loan and for what their capital is actually used.
3. More neutrality: The customers directly interact, without any additional third-party interests. Smava.de only offers the framework for the credit transaction.
In the beginning you targeted only private customers as borrowers, has this changed? Can companies borrow money or does a private person have to be liable?
As of April 2008 not only private borrowers can apply for a loan, but also self-employed persons and freelancers. Especially those professionals regard loans as a normal part of their everyday business life. Since 2007 smava.de has procured a credit volume of about 60 million Euro and 45% of that have been business loans. Self-employed persons and freelancers of all industry sectors are able to apply for a loan of up to 50.000 Euro.
Currently crowdfunding for companies is starting pretty well in Germany. Do you think this will be a bigger trend? How will you address this market at smava?
The growing crowdfunding trend shows, that people have overcome their reluctance of using the internet for financing their projects. In our opinion crowdfunding will grow continually in the future. To some extent, smava.de already established a crowdfunding model: we also offer a platform where all kind of projects can be presented and can then be financed by anonymous investors. At smava.de every project or loan idea gets a chance.
smava just received an investment of 4 Million Euro, how do you plan to invest the money?
The increase of capital supports product development and marketing.
When the investment was communicated to the public you also published that you invest in “Prestiamoci”, another Italian peer to peer credit platform. How much did you pay for the shares? Is the “Banca Sella” also invested in “Prestiamoci”?
As a basic principle we do not publish any financial information about the company. But the stake in Prestiamoci reaches a significant level.
Can we expect further expansion within Europe?
Our goal is to become the European market leader in the long term. But we get there step by step. Our short term goal is now becoming one of the leading players in Germany.
You have also recently announced that you put a lot of effort into the product development. What haven been your problems in the past and how will you address that with the improvements?
The last years we successfully established smava as a safe and low-priced online credit marketplace in Germany. We have also continually buildt up our structural advantage over classic banks. We want to raise the level of transparency, security and usability for our customers and will shortly introduce new features at smava.de, which will enable us to reach these goals.
We thank Alexander for the interview and are curious, how smava will develop the next months.