Consumer Crowdlending explained by Michael Boge, CFO of Cashare
Crowdfunding allows projects to be funded directly by a large group of people, the “crowd”, without any expectations of financial returns. In crowdlending, a large number of unrelated people lend small amounts directly to a small business in exchange for a financial return through a commercial loan agreement.
In this episode of the “Do you speak Crowdlending?” podcast, I had the pleasure to welcome Michael Boge, CFO of Cashare. Michael, 52 years old, talks about his life journey and Cashare’s impact on the financial industry.
How did Michael end up in Crowdlending with Cashare?
Michael studied science and microbiology but attracted by the variety of the world of finance, he then joined the banking industry. He started his career in a big bank as a business consultant for several years until he switched to product management and did several controlling functions in private banking. With 20 years in the financial industry, he then moved to fintech, joining Cashare as a CFO.
What is Cashare?
Cashare is the oldest crowdlending platform in Switzerland and aims to replace banking services. It was founded in 2008, before fintech was even invented. Cashare acquired a lot of entrepreneurial experience in various business aspects. Companies have to continuously face obstacles, overcoming hurdles at the beginning helped Cashare become resilient in the long run.
What is the role of Cashare in this industry?
Michael believes Cashare is leading the change, as they started alone with no support. They were the only fintech company in the industry and the only crowdlending platform in the industry for quite a while. Michael believes that Cashare is setting the path for other companies to follow. He also believes that every company should find its path, what worked for Cashare might not work for them.
What is different about consumer crowdlending as opposed to other verticals (like SMEs)?
Consumer lending in Switzerland is regulated by the Swiss consumer credit act. On the one hand, it is complicated because it is heavily regulated, on the other hand, it is as easy as checking a box. If you don’t check the box, then it’s against the law. Cashare makes sure its consumers can check the website, set their preferences, and see the available options, whether it’s a car loan or a house mortgage.
SMEs usually request large loans (up to a million), which has worked well with institutional investors.
One of the main differences between consumer loans and SME loans is that consumer loans can be easily evaluated by an algorithm, they have a straight-forward credit scoring. On our platform, SMEs and real estate require human intelligence to evaluate them and to give more assurance to the investors.
How do you see the competition in terms of consumer loans with banks and other consumer loan providers?
Competition with banks and lenders is strong as Cashare’s new business models are not in the market for consumer loans nor in the market for SME or mortgage loans. There is plenty of room to obtain market share. Michael states that they will achieve market share first in the consumer loan market because it’s a more focused market.
From the investor perspective, what are the main advantages of this new asset class “crowdlending”?
Investing in credit used to be the privilege of banks and big institutional investors. For consumer loans, the banks in Switzerland have huge gross margins (over 5%, it’s public information which anyone can check).
With crowdlending, private individuals can tap into the private credit stream. For the first time in Switzerland, Cashare allowed anyone to invest in credit as a private individual. You also have the possibility to choose your investment and to read about the projects you are investing in, learning about them, personally. It is one of the most innovative ideas of crowdlending, as when going through a bank you cannot know what your money is financing.
Is there anything on your mind that you believe everyone should be working towards?
Everybody has to find their own way. We are still in a very creative phase of the industry and only the future will tell which way is better than the other. That is why Michael believes that there are no general guidelines for the crowdlending industry.
One of the biggest challenges, according to Michael, is funding. Only with a stable and diversified source of funding, can a platform attract enough credit projects. Banks have unlimited funding possibilities. To outcompete banks it’s really important to solve the funding conundrum.
What would your recommendation or advice be for any beginner private investor wanting to start in the crowdlending industry?
There is one rule for every successful investment: diversify. Because crowdlending gives you the opportunity to profit from your investment up to 9% but it comes with risk. So diversify your investments, don’t put all your money in one investment. You have to check your assets and decide which portion you want to invest, and in what. You also have to consider the risk factor.
“Do you speak crowdlending?”
This podcast is covering the Crowdlending industry! Our mission is to provide you with all the insights from this market and help you make informed decisions. I’m delighted to host this podcast and hopefully bring value to all our listeners.