Klear Lending is the main personal P2P lending platform in Bulgaria to offer European retail investors debt investments directly funding loans to Bulgarian individuals. The debt investments are personal loans at fair interest rates, neither to be considered payday loans nor subprime loans at high-interest rates. In this interview, you will hear from the CEO & Co-founder Loic le Pichoux what it means to invest with Klear.
First, could you tell the readers a bit about your background? How did you become interested in working with finance?
My educational background is in Mathematics, Statistics, and Economics. Right after university, I started working in Finance with quantitative finance modelling and credit scoring. Then I joined Cetelem, the consumer lending arm of BNP Paribas Group, where I occupied different types of responsibilities.
After being a sales branch manager in France, I moved to the Portugal subsidiary where I was Risk and IT Manager. Then I spent a few years in London as Head of Risk for the Western Europe Region.
After that, I went to Algeria to build from scratch Cetelem Algeria. Then I returned to Europe as deputy CEO of the Central and Eastern Europe Region.
Eventually, Bulgaria was my last assignment in the BNP Paribas Group. I was the CEO of BNP Paribas Personal Finance in this country before leaving and creating Klear with a team of ex-colleagues very experienced in consumer lending.
How do you find and assess the investments Klear makes available to retail investors?
We offer personal loans to prime borrowers. I mean that we are not on the subprime market (small, expensive cash loans) but competing directly with banks, with a superior user experience and rates often lower.
Credit intermediaries are our main source of acquisition of new borrowers. Recommendations and referrals come in second place. We also see more and more repeat customers who take a second loan with us after repaying the first one. And finally, some of our investors who, after having saved for years, have a real estate project, and use our loans to refurbish a house or pay the first tranche for a greenfield apartment.
To assess a credit application, we use a combination of automation and human expertise.
First, we have implemented an expert system based on a socio-demographic score, a credit history behavioural score, and a set of more than 100 rules.
This system helps us to filter out applications automatically with no potential. For the eligible applications, it provides the estimated risk on which we set the interest rate for the borrower (risk-based pricing), and it points out to our granting team the alerts to be checked during the manual review.
It’s important to note that we have automated access to many databases like the credit bureau, the police database to check ID card validity, the national insurance to check the salary, the trade register for entrepreneurs, the cadaster, etc.
Why should the readers choose to invest at Klear?
First, Klear is probably one of the safest options to invest in, especially when the economic situation is less positive. We are one of the few P2P lending platforms focused on the segment of prime borrowers. For example, 40% of our borrowers are working in the IT industry.
The second reason is about the positive social impact you can make with your money. With Klear, you help people achieve important and meaningful projects for their personal life, like improving the quality of their housing. The rates paid by our borrowers are fair. No usuary conditions, no scandalous late fees, or any other unfair practices.
For example, on the very first day of the emergency state during the pandemic, we sent a letter to all our customers. It was the same content for our borrowers and investors, inviting our borrowers to contact us if they anticipate hardship and telling them that we will help them with free postponements. The option was actually used by a very limited number of them, and we went through the pandemic without any increase in the credit risk.
Last, it gives a reasonable return on your savings, way higher than what you get if you deposit your money in the bank.
What sets Klear apart from other personal debt investment platforms?
I already covered in the previous answer the fact that we are one of the very few lending platforms giving loans to prime borrowers, therefore having a very low credit risk (currently below 1% yearly).
While nowadays most of the platforms are aggregators, offering only the investment option, we are offering our investors loans that we originate ourselves. All the interest paid by the borrowers goes into the pockets of our investors. Klear gets an intermediation fee, a one-off percentage of the credit amount paid by the borrower when we finance the loan.
Something else is rather unique. On the marketplace, each loan is of course listed with all the financial characteristics like amount, interest rate, duration, … But we also display our estimation of the return net of risk, i.e. what would statistically be your return if you invest in 100 similar loans. In a nutshell, we are not shy of talking about risks and we explicitly mention them to be sure our investors are aware of what they do.
Last but not the least, we have a lot of financial education content on our blog to help people increase their financial literacy. Among the 150+ articles, you can find for example this one: “a bailiff is chasing me because of my loans in delay. what are my rights?”.
How do you decide when a loan is defaulted or with minimal chance of recovery?
We have a pretty simple and automatic process for that.
First, it’s important to mention that we do all the collection actions internally as soon as the loan is in delay for a few days.
Our main goal is first to contact the customer, to understand the situation, and the reasons behind the delay, and to negotiate a plan for repayment of the delay.
On all the loans entering the collection status in a month, we succeed to cure 90% of them.
The others are sold to an external debt collection agency. The exact criterion for default is to reach 5 instalments in delay without a minimum payment in the last 3 months.
How is Klear regulated?
Klear is a non-banking financial institution registered with the Bulgarian National Bank.
Its lending activity is supervised, and the main requirements are:
- Background and financial experience of the management
- Existence of a set of procedures to run the company
- Reliable software to manage the loans
- Minimum equity of 0.5 M EUR
So even if there is no specific regulation for the investments, the fact that Klear is regulated for its lending operations contributes to the security of the investment activity, the main factor being the minimum capital requirements which makes Klear de facto much more capitalized than many of the other P2P investing platforms.
What do you think the future of Klear looks like? Which challenges do you see for the industry in the coming years?
Obviously, the economic situation with continuously rising inflation and forecasts for recession is a challenge for everyone.
But this is also an opportunity for the P2P lending industry to show its resilience while stock markets and crypto are experiencing severe drops, and forecasts for the real estate markets are not very positive…
So, I believe Klear is perfectly positioned, offering one of the few stable alternatives to the ultra-cautious “retrieve to cash-only” approach that many people adopt during troubled times.
What’s next for Klear? Where do you see your platform in five years?
We are launching a new product, an online credit solution to purchase goods on e-commerce websites. It’s a responsible Buy Now Pay Later product as we will provide it when it makes sense (for example to buy a washing machine, but not to pay for your lunch on Takeaway) and we will check that the buyer can afford to repay it.
We also plan to reinforce our partnership with the credit intermediaries by offering integration with their system through an API that will give an instant offer to them and their customers.
We also have in the road map the ambition to develop a Peer-to-Business activity, targeting micro and small companies that are clearly underserved by banks.
There is a large untapped potential, which will be a great diversification opportunity for our investors.
In 5 years, we’ll have been active for more than 10 years on the market, and I hope we’ll have expanded in the Central and Eastern parts of the European Union.