NEO Finance Analysis

Launched in January 2016, NEO Finance is a peer-to-peer (P2P) lending platform based in Lithuania. It was established by NEO Finance AB, a financial holding company that also includes three other businesses: the P2P lending platform Paskolų Klubas, the open banking service Neopay, and the crowdfunding platform Finomark. NEO Finance operates as an intermediary for consumer loans, facilitating international investors’ participation in Lithuanian consumer credit. It holds the distinction of being the first Lithuanian P2P platform with an electronic money institution (EMI) license, enabling operations across the European Union.

Citizens of the European Union, the Free Trade Association and the European Economic Area (EEA) can invest on the platform. Since its beginning in 2016, NEO Finance has raised more than €178.16 million, averaging a monthly volume of €3.64 million.^[1] The platform boasts a community of 15,480 investors.^[2]

• NEO Finance links EU and EEA investors with loans from its Lithuanian platform, Paskolų Klubas, which underwrites loans for Lithuanian borrowers.
• NEO Finance offers diverse consumer debt investment options, including car loans, home improvement loans, refinancing, medical expense loans, and student loans, starting from €20.
• Loan durations span from 48 to 92 months, with interest rates ranging from 8% to 17%.
• NEO Finance offers loan buyback after 3-5 late payments, giving investors a fixed price to sell and issuing refunds within 30 days for delayed repayments.

NEO Finance serves as an interface connecting investors in the European Union and the European Economic Area with loans issued by its sister platform, Paskolų Klubas, which acts as an underwriter for Lithuanian borrowers. Investors enter into loan agreements with NEO Finance, which facilitates lending to borrowers on the Lithuanian platform Paskolų Klubas.

Investors have a range of consumer loans to choose from, including car loans, home improvement loans, refinancing, medical expense loans, and student loans. The minimum investment is €20, and the maximum investment amount is capped at €500 per loan per twelve months under the Consumer Credit Act.^[3] Loan durations span from 48 to 92 months across the current campaigns. Investments are structured as amortized loans, where monthly repayments cover both the principal and interest, ensuring the loan is fully paid off by the end of the term. NEO Finance campaigns offer loan amounts ranging from €4,200 to €25,000.^[4]

NEO Finance offers a buyback service for its loans. The platform terminates borrower contracts after 3-5 late payments, providing investors with a fixed price to sell their investments. If loans are not repaid on time, investors receive refunds within 30 days.^[5] Investors do not have direct legal ties to borrowers; instead, they lend money to NEO Finance and its sister company Paskolų Klubas, the loan originator. NEO Finance and its sister company hold the loan contracts, preventing lenders from making direct claims against borrowers.

NEO Finance provides a secondary market for exiting investments early, as well as an auto-invest feature for queuing up new investments available on the platform. Since NEO Finance offers loans from its Lithuanian platform, Paskolų Klubas, it's safe to assume they have some control over the supply of loans made available to investors on the platform.

The platform imposes taxes on short-term loans (1-3 months) in the primary market. A 1% brokerage fee is levied on each instalment received. In the secondary market, both selling and buying investments incur a 1% brokerage fee, calculated based on the sale/purchase price.^[6] For investors from countries with a double taxation agreement with Lithuania, lenders can mitigate withholding tax by submitting a DAS-1 form and proof of tax residency, thus avoiding double taxation on income.

Among its active campaigns, NEO Finance offers interest rates ranging from 8% to 17%. Since its launch, the platform has paid out over €152.48 million in interest to investors, equivalent to 84.67% of the total issued credits. NEO Finance reports a 15.33% late payment rate within its loan portfolio. While the platform does not clearly disclose its default rate, loans overdue by more than 720 days, totalling over €7.2 million, suggest an assumed default rate of 4.01%.^[7]

NEO Finance imposes various fees on investors, including a €0.29 transfer fee and an additional account maintenance fee of €0.79 per month, along with other administrative fees. On the fundraisers’ side, the platform also charges a €3.99 transfer fee. Additional fees may apply, although specific information is not immediately available or disclosed.^[8] NEO Finance earns money by acting as an intermediary. Instead of collecting revenue when a transaction happens, the platform earns income gradually over the loan period. This revenue is collected through monthly repayments from borrowers. Considering that loan agreements are facilitated by its sister platform, Paskolų Klubas, it's reasonable to infer that the group also profits from the spread on both NEO Finance and Paskolų Klubas.

Evaldas Remeikis chairs the Board of Directors at NEO Finance AB, the parent company overseeing platforms NEO Finance and Paskolų Klubas. With a background in information technology, finance, and startup investments, Remeikis has played a pivotal role in establishing successful ventures. Joining him on the board, Aiva Remeikiene, former CEO of NEO Finance AB, now contributes to the growth of ERA Capital while leading the ERA Success management club and participating in the Business Angels network. Marius Navickas, also a board member at NEO Finance AB, holds a master's degree in economics and has prior experience in banking and risk management. Navickas is also a member of the CFA Institute.

The group NEO Finance AB controls NEO Finance and the Lithuanian platform Paskolų Klubas, which serves as the crowdfunding and loan origination platform. Additionally, the group offers payment services via Neopay. NEO Finance AB is listed on the Lithuanian stock exchange under the ticker NEOFI, currently trading at around €2.3 per share.^[9]

In 2019, the group expanded with NEO Finance B.V. in the Netherlands, aiming to attract investors from the Benelux countries. The group's third entity, FinoMark, commenced operations in 2021 as another crowdfunding platform endorsed by the Bank of Lithuania. NEO Finance owns 94.63% of FinoMark UAB.^[10] ERA Capital is the largest shareholder of NEO Finance with 82.77% ownership, and Evaldas Remeikis is also ERA Capital’s Director.^[11]

During Q2-2023, the group invested €968,000 in loans on NEO Finance’s sister platform, Paskolų Klubas, to speed up loan funding, increasing its investment limit to 80% of the initial consumer credit amount from May 2022, to handle more loan requests.^[12] NEO Finance achieved a 45% year-on-year surge in revenue, reaching €1.094 million, driven by a 47% increase in peer-to-peer lending income and a 124% rise in investment-related income, totalling €53.9 million. The loan portfolio reached €62.6 million by quarter-end, while EBITDA soared by 281% year-on-year.^[13]

NEO Finance has raised a total of €285.7K in funding over 2 rounds, with their latest funding raised in December 2018, from a Seed round.^[14] In mid-2023, nordIX, a German fixed-income investment specialist, acquired a €10.4 million portfolio from NEO Finance, AB.^[15]

NEO Finance was designated as one of Lithuania’s top fintech companies in the Global Fintech Index 2020 and was awarded the Company of the Year in the Lending, Investment & P2P category at the 2020 Fintech Week Lithuania Awards.^[16]