Looking From London: We Visited The European Conference On Alternative Financing

CEO of the platform StartTrack Konstantin Shabalin — about the event, the speakers, the European market and the attitude to the Russian site. March 30, leaders of the crowdfunding platform StartTrack, Director for investor relations Sergey Chetverikov and CEO Konstantin Shabalin — was in London to participate in the AltFi, the largest European conference on alternative financing.

Over 2.5 years using StartTrack passed almost a billion rubles of loans to businesses, so in London on the key pad for the alternative Finance — forum AltFi — would like to fly safely. However, the circumstances forced to behave modestly. Volume of the Russian market of private financing of business in 2017 should reach 2 billion rubles. It seems to be a considerable amount, but its only about 30 million pounds.

And in the UK in 2016, this market exceeded 3 billion pounds. That is, the Russian market is less British 100 times. In addition, in the UK more than 80 kraulingovy platforms, and in Russia — only three. Although using StartTrack are more than 60% of the Russian claudinette, we didnt have the feeling that were going to “present Russia”.

While it is possible to imagine a little. Here it is necessary to say at once that by nominal GDP, the UK is ahead of Russia only twice. That is, the gap is 100 times the volume of p2p lending is not due to a difference in scale economies and the underdevelopment of the market is knowdledge in Russia. Given the volume of British p2p lending, the growth prospects of the Russian market look impressive.

Anyway, we were supposed to be the first to tell the world about Russian investing. Went over the ideas, contacts, partners, and the understanding of the future market. Flew to London with the idea that the Western market investing and knowdledge in its current form — is to some extent the future of the Russian market. At the conference, we wanted to understand what awaits us and whether we go, whether work.

We used to look at America, but the AltFi conference in London is a much bigger event than the same event in new York. This concerns the quality of the exhibition and number of venues and participants (in London are more four times). The discussions in London are more active and more interesting. David Stevenson, the founder of the conference, told us that this year in Austin and new York, the conference decided not to.

In General the US market is sandwiched by the regulation. Development platforms prevents more the idea that the individual States — its almost state. Insurance market, for example, is regulated mainly at the state level. Also each state has their own laws about investing in securities.

It is not surprising that each state has an investment platform that can attract financing to the business only within that state. Its like if Russia license individual MFIs extended only to the Krasnoyarsk Krai. Large-scale Federal kraulingovy sites in the United States units, for example, Lending Club. But even this, the biggest platform is not available in all States.

And in some States you cant invest, but can borrow, and in others Vice versa. From my own experience I can say that the UK is more advanced country from the point of view kradennogo. FINTECH companies feel here freer than in the US. According to the ranking recently published by Bloomberg, that London, not new York, is a world financial capital.

We as representatives of the Russian investing and knowdledge all watched with interest and surprise. Was a little shocked, as if the natives came from distant shores. Was wondering, are we going to enter the European market and conquer it. More of a joke, of course.

Some participants AltFi came up to us and said that they have plans and interests in Russia. The main sponsor of the AltFi platform Funding Circle, through which have passed and 2.8 billion pounds of loans to 36 thousand companies. It makes an impression. According to co-founder and head of Funding Circle Samir Desai, thanks to these loans in the world was created about 100 thousand jobs.

Investors platforms have earned £ 130 million. That is only one Funding Circle for several years, transferred loans of 2.8 billion pounds or 200 billion rubles at the current rate. If the ground of such a scale appeared in Russia, it would be more than a significant player in the economy. For comparison, gigantic by Russian standards “Sberbank” in 2016, issued to small and medium business loans for 900 billion.

Colleagues at the conference gave the impression of self-confident people, not avoided any questions and did not try to “soften the sharp corners”. In General the atmosphere was informal. It was obvious that the financial sector can expect a big change, culture changes. As for dress code, the tie has almost disappeared.

But the blazers are only just starting to be replaced by t-shirts and jeans. While AltFi is still not presentation a high-tech company in the workplace, but stylistically p2p is the right place. The democratization of Finance continues. It was very young people who have already become founders of successful companies.

So p2p is a young industry even in this sense. The possibilities are many, the entry threshold is not high, invented not all. If those who came to Kreuzlingen of the traditional banking industry somehow still tried to act older, solid style, the young founders of startups could see the excitement. At the conference, it was stated that the boundary between banks and platforms eroded.

P2p lender Zopa, founded one of the first, back in 2005, creates a digital bank, and Royal Bank of Scotland and Goldman Sachs launch p2p platform. At the same time platforms and banks are starting to cooperate. The theme of the synergy of banks and platforms is discussed constantly.

Sometimes p2p platforms pose some “killer banks”. However, no irreconcilable struggle between banks and platforms no. At AltFi we met with representatives of the rating Agency Moodys, but Deutsche Bank. As it turned out, they and many other representatives of the “mainstream” Finance came to AltFi for the first time. Obviously, the market for alternative Finance and investment platform began to represent for banks a lot of interest.

The fact that banks are not always profitable to work with small businesses. As was stated at the conference, the results of the credit for 50 thousand pounds with all the necessary procedures costs a Bank the same amount, how much it will cost the loan for 3 million pounds. Another problem is the time.

As said Samir Desai, Funding Circle spends 48 hours on the decision to work with the company, whereas in a Bank it takes 30-40 days (and sometimes a few months). This is inconvenient not only to the client and the Bank, if we are talking about small loans. On the other hand, banks have a large customer base and strong brand confidence. Therefore, the Internet sites need partner banks that provide special services for SMEs.

That is, we in Russia, on the one hand, a bit isolated from the European market for alternative financing, and on the other, act and think in the same direction with the Western colleagues. Tom Blomfield, co-founder and head of “Bank mobile” Monzo, argued that in Finance there is a change in the approach to the client. Banks, at least in Britain, always tried to cultivate loyal customers even when they are in school — give them some little things (previously, it was a CD), issued the best loans for education. And then, by inertia, these customers purchase Bank products that may not be appropriate (including credit cards and mortgages).

The Bank already applies to these customers as a kind of ownership and does not seek to offer them products at best market price. Kruglenkoye platform destroy this model, offering a large selection of options, and more convenient and beneficial than is provided by regular banks. While in a dispute with Toms senior Vice President of American non-Bank lender OnDeck Rob young argued that in order to be ahead of the banks, the platforms need to do something really innovative.

Simple convenience is important, but its banks are just unable to reproduce. At AltFi we were talking about what it is banks, not the platform, fundamentally unstable. If all Bank customers with deposits there come in one day for these deposits, any Bank will collapse.

Banks undertake short-term (for example, the same deposits of one year) and loans issued long-term. All the hope that the deposits will not come all at once, and while some will take money from the Bank, others will be their to bring. However, during a crisis, when depositors withdraw deposits from banks or do not extend deposits, banks are losing assets. From the landing platforms are all different.

For a loan that is issued for three years, the lender may not at any time, and three years later. Because most of the contracts are directly between investors and the company-borrower, the platform is only an intermediary. It does not assume the risks that banks take. Therefore, courts in principle do not require such stringent regulation as the banks, they need less capital, less redundancy, they are more flexible.

However, during the discussions, it seemed that banks have access to huge volumes of cheap capital. Mean that they receive the credits from Central banks of their countries at low interest rates. Moreover, it is through the banks, through these loans, the money appears in the economy. That banks are the primary macroeconomic function, during one of our discussions reminded David Stevenson.

He tried a little cool over-optimistic colleagues, explaining that banks are actually licensed by the state institutions to inject liquidity into the economy. That is, wait their death is not worth it, we must cooperate with them. Perhaps under the influence of platforms, banks become closer to the customers, which is good. The conference talked a lot about Brexit and its impact on the market for alternative Finance.

So far, the flow of foreign investment into the UK is slowing, the real estate is cheaper, the pound also. However, in favor of the landing platforms in Britain was the fact that in August 2016, the Bank of England lowered its interest rate from 0.5% to 0.25%, thereby putting the record. This has led to lower interest rates on deposits, low. The fact that the level of interest rates was again in the news, has reignited interest in Kreuzlingen, allowing to obtain higher interest income.

At the conference we were convinced that the future of knowdledge investors with 10 pounds — has arrived. But so far only in the West. Investing very small amounts — this is the real p2p. In Russia there is no such. But there is no problems that are associated with it.

The fact that people who invest such amounts in the Finance deal is not very good, unlike those who have more money and have some experience. Whether at the site in relation to them to be some special approach. As they are supposed to be independent in decision-making. The questions are interesting, but for the Russian market yet is not too relevant.

In General, section AltFi, which was attended by StartTrack, was dedicated to equity crowdfunding (credinvest, or equity crowdfunding). Is to buy shares in companies. With us took part in it tops, and the founders of Seedrs, SyndicateRoom, Venture Founders and Growthdeck. Have something to discuss.

One of the main problems of the industry — developing common market valuation of companies, the calculation of the capitalization and return for the investor. We need to agree on how to disclose and present to investors. The theme of the standardization of accounting and disclosure companies before courts is generally passed through the entire conference. It is important that all data that provide the company, you can compare. Now have each site its own standards of evaluation and disclosure of companies.

Regardless of country, company is AAA at one site is not a AAA company on another site. In General, Ive come to the right place were to get into a discussion of how the selected projects as they disclose and represent to investors, as it should flow properly. Still I must say that coming from Russia in not the easiest of relations with the West time, I felt quite comfortable and enjoyed it. Send columns, corresponding to the requirements of the editorial Board, [email protected]

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