Building the P2P app she needed because no one else would, with Lika Osmanova
I’ve said it before, and I’ll say it again, I feel an affinity for the peer-to-peer lending model. My initial interest was sparked during an MBA project 16 years ago and reinvigorated more recently by interviews on here with Monexo and Kiva. And I’m building on that today, with Anzhelika Osmanova, founder of Lendwill, a community-first P2P platform coming to us out of Norway.
You can read more about Lendwill, right where you’d expect to, https://lendwill.com/ (worth the click for the design touches alone) but both Lika and Lendwill can be found on LinkedIn, too.
During our chat, Lika raised issues around cross-border credit scores also covered by Misha Espiov and Ash Bhatt on this same show, so you can click those links if that’s your area of interest.
You can learn more about myself, Brendan le Grange, on my LinkedIn page (feel free to connect). The show has its own page there, too, and is also present, but less active, on Instagram and Twitter using the @HTLMTS handle. My action-adventure novels are on Amazon, some versions even for free, and my work with ConfirmU and our gamified psychometric scores is at https://confirmu.com/ and on episode 24 of this very show https://www.howtolendmoneytostrangers.show/episodes/episode-24
If you have any feedback, questions, or if you would like to participate in the show, please feel free to reach out to me via the contact page on this site.
Oh, and if you’re in need of more banking podcasts, you can find related content at https://blog.feedspot.com/banking_podcasts/
Regards,
Brendan
The full written transcript, with timestamps, is below:
Lika Osmanova 0:00
Right before our podcast, I borrowed from one of the community members, because my car broke and it needs repair. So I quickly went to the Lendwill app and borrowed money, like for real, and it took me only 30 seconds to match with another person. So I'm happy that the product exists, because even I use it!
Brendan Le Grange 0:28
Look, I struggle to pronounce 'digital' and 'decisioning', two words I have to say on most work days, so there's no way I'm going to try the name of that Icelandic volcano that erupted in 2010 - but if you were trying to travel at the time, you'll know the one I mean.
It grounded flights just before my first trip to Oslo, one my boss and I needed to make. I went by train, a rather comfortable eight hours up the west coast of Sweden and then across, with plenty of space to stretch my legs. My boss for reasons I'll never understand, decided to go by bus... an overnight bus, for 12 hours with his knees around his ears!
None of this is relevant in any meaningful way to what we're about to discuss, except that we're in Norway, the only country I've visited by air, sea and rail. And it was that, or talk about how expensive everything is there. Although as I say it, that might have been the more sensible introduction to what is actually a show about a business with its roots in a personal cost of living crisis.
Welcome to How to Lend Money to Strangers with Brendan Le Grange.
Anzhelika Osmanova, founder and CEO of Lendwill, a Norway based peer to peer lending platform, welcome to the show.
I personally have a soft spot for the P2P model, I've explored it recently with Kiva and before that with Monexo. And I have a soft spot for Norway, having spent a couple of years working in the region. But I'm going to delay my gratification for a minute, because your early life and your early career is too interesting to just gloss over.
So, Lika, before we get into what you're doing now, tell me a bit about your life and your work before Lendwill.
Lika Osmanova 2:27
Absolutely. Well first, Brendan, it is a great pleasure to be on your podcast, and thank you so much for inviting me over. My early life is quite interesting. I come from Kazakhstan originally. As of now, I've been living in Norway for about 10 years, but how it all started was from me getting a scholarship to study in Norway.
And the scholarship was too small to pay for basic expenses. So it was around like four times lower than a standard salary in Norway, and I had to borrow a lot of money from my peers to be able to pay my rent. Which, as you can imagine, was not a very pleasant experience. Because you have to ask, 'can you lend me a little bit of money here, a little bit of money there' and have to remember who you borrow money from.
And I was dreaming of having an application that could solve these kinds of issues for me. And back then Tinder was already popular among kids, if it can say so. But there was no Tinder-like application to just match with people for the sake of borrowing money from them. I ended up building it myself after not finding it available.
Before that, I studied a bit in the US. I'm an educated journalist, originally, then studied a bit in the UK, then in Norway, of course, in my home country of Kazakhstan as well. But my life brought me to Norway. And here I am building Lendwill, the mobile application for borrowing money and lending money to strangers... just as your podcast is called!
Brendan Le Grange 3:52
I always like to hear, you know, the entrepreneurship stories that have their roots in an experience that you've lived yourself. Let's talk about the reality of that process, though. So you experienced this issue with raising money from your peers, you've gone out to solve it yourself, but what was it actually like to hit the ground and to start building a business for yourself?
Lika Osmanova 4:14
It was extremely difficult and I don't want to sugarcoat it. The process of starting your own company is tedious, difficult, terrible, but exhilarating, exciting, and it definitely allows you to grow into a better professional and hopefully a better person as well.
I worked at a computer vision startup at the time of starting a Lendwill. So after I graduated, I get to work in a variety of different companies before starting Lendwill. I didn't start Lendwill just out of school, which I think is also important to mention. So I went to work as a marketing person, I headed at the marketing department at Huddley, which is another popular startup in the region. They went into collab with Google in 2017 and I was the head of marketing then. So it was a very, very good place to be at the time.
And then I spoke with one of my colleagues who was also my mentor and Huddley about the idea of Lendwill. Because originally, I thought that I would just give away this idea to somebody else who was, you know, smarter, more experienced, because I don't come from a financial background. So I didn't even know that that thing was called peer to peer lending.The only thing I knew was that, okay, there needs to be products that would allow people to borrow money from each other. And I couldn't find it online, because I was Googling 'how to borrow €50 from a person'.
So I gave this idea to my mentor, and then she introduced me to the FinTech accelerator in Norway than that FinTech accelerator, they liked that idea and invited me to stay in the accelerator. After that, I quit my job, and the accelrator, it's called TheFactory, it's a FinTech accelerator focuses only on FinTech, prop tech and rec tech companies. And my original investment was €16,000 to explore the market, to build a prototype of the product, and to see if I could get people to the waiting list just to see if there's interest on the market.
And then when I managed to get people from 30 different countries, I understood that, okay, this is a problem that many people have. Many people want to either borrow from strangers or lend to strangers, and they want to have a more social way of doing it, not just going through the list of different loan applications and finding which one fits the best. But actually being able to communicate with people match with people in a Tinder-like experience and complete transaction in a safe environment. So people were just looking for safety. This was what we realised in our market research.
It's been four years since I started building Lendwill, and it is extremely difficult to build a good peer to peer lending platform that would allow individuals to borrow money from each other. So I can understand why there had not been any product that I wanted back in the days because it's really hard!
Brendan Le Grange 7:02
You've got the tagline on your website, "forget about expensive consumer loans and companies that want to get rich by making you poor, let the money that belongs to the people stay with the people".
In terms of the lender or product, what are you bringing to borrowers and lenders, what does it actually look like?
Lika Osmanova 7:20
It has a very simplistic user experience, but there are actually more than 400 different screens you can experience on the platform. So depending on what you do on the application, what you start with, depending on your first action, depending on the action following that action, there variety of different possibilities of what you can see on your mobile application screen.
But everybody starts with a screen that states their Trust Score. Trust Score is our proprietary algorithm, propriety evaluation of the users trustworthiness /credit worthiness that we derive from our internal and external external sources. And also that we based on person's behaviour inside the application.
So if you've diligently returned the money back in time, if you get good reviews from your peers, you get good star rating, you're being polite in the chat, you're consuming educational materials on the platform, then you get higher Trust Score.
And the Trust Score will determine how much money you can borrow. Or you can lend. All users who start as borrowers can borrow only up until €100, you can't borrow any more than that until you prove that you can handle this small credit line. The problem with existing credit cards, for example, that gave you that big credit line is that most people who get the credit card for the first time, they don't know how to manage it properly. And they just fall into debt in.
I'm also speaking from my personal experience. I'm a grown up woman, but still it's very difficult when you get a credit card that has let's say €3,000 or €5,000 as a credit long to spend it diligently and keep returning the money back to credit institutions on time. Here, we have a staircase model in Lendwill that allows people to gradually learn how to handle credit. So you start from small amounts, and then you gradually go up to the highest highest €1,000 limit. So we only handle Microfinance in the case.
So going back to the application, how it looks like and how it works. If you start as a borrower, you click on the 'borrow' button and then you choose what you want to borrow money for. We do not show this information to lenders, this is only for our own understanding of your borrowing and spending habits. And after that you set your criteria - you say how much money you would like to borrow and when you're going to return it.
On the lender side, we're doing very similar things. So we ask, okay, how much money you're willing to invest. And when you want it back.
Then we show users to each other based on criteria and based on all we're ordering, I'll go with them that makes sure that people have the highest possibility of matching. And then it's just like on Tinder, you see the lenders or the borrower risk card, the person's picture if the person had uploaded the picture initially, the trust score, the rating that other users have given to this person, any reviews like 'oh I I borrowed from Brendan before, he was fantastic' things like that. And then from here, you can swipe either right or left.
So if you swipe right, then a push notification has been sent to another user. And if the other user accepts you, then voila, it's a match.
And from here, users can proceed to chat, accept the loan and sign a legally binding loan agreement without leaving the application. The terms are standard for everybody. So there is no way, you know, to do any sort of arbitrage, selling their loans, we do not support that kind of behaviour. And from here, then lenders can transfer the money directly from their bank account to the borders bank account - we use open banking API's.
So just a couple of years back, there was this PSD2 regulation that came into place in Europe, that mandated all banks to open up their code. So we use open banking to make sure that transaction can happen between individuals directly, so the money does not flow through us. And that makes it better for the user. Because then we do not wouldn't have to charge expensive transaction fees, there's no way for us to do anything bad with the money. So it just goes from the user to another user is as pure peer to peer lending as it can possibly be.
Brendan Le Grange 11:24
And you've also clearly captured the spirit of peer to peer, with this community building that you do, I think that's really good for the space, because it is talking to both parts of that scenario - we're not just talking about the borrowers, you're also talking to the lenders and creating that interaction, that community,
Lika Osmanova 11:42
Something that makes the entire concept of peer to peer lending a bit closer to people's hearts is the fact that people have been borrowing and lending money for many, many years, like even before technology even existed. I still remember how people from the same block we lived in Khazakstan knocked on our door and asked for a little bit of money until payday. And that was in cash. And that was, you know, a part of community building experience where you were supposed to help each other if you live in the community.
And we really wanted to tap into the experience that people have had anyway. So you anyway borrow money from another person, will lend money to another person, let's just make it a bit more technologically advanced and convenient. Let's not force credit upon you, let's just look at how you behave in normal human situations for when you are that lender/ borrower and try to build your credit score based on that.
Brendan Le Grange 12:36
And you've got lots of aspects of gamification with badges and these tiers of staircase model, what inspired you to build those into your product?
Lika Osmanova 12:45
When I pitched Lendwill, back then Lendonomy, in the early days, I pitched it from the perspective of 'imagine that there is a trust tree growing in your user interface, and that corresponds to your credit rating. So you can actually see your credit score growing, you know what impacts it, like you return the money back and your tree grows, you got a good rating and your tree grew'.
And that happens for both borrowers and lenders. So lenders are learning more about how to handle the risk on the application. They are learning about communicating with borrowers, they're learning about how to analyse the repay rates and trust scores on the platform. They also have educational materials they can tap into to improve their score on the platform, and will also limit lenders. Something that is also very important to mention, is that very often companies in the same industry, they want to maximise the lending amounts, but because we are in microfinance, we already have a lot of lenders who want to pour the more money onto the platform, but we're limiting them. So lenders can only lend up to €200 , when they start on the platform. They also have the same staircase model that they need to go through.
And that is also to secure them to secure their funds. Because if you just come to the platform, and you throw €1,000 at a random person, it's not going to work, right? Yes, of course we do all we can to make sure that only trusted individuals happen to be on the platform. We do credit checks, we analyse our users, we detect suspicious transactions, look at their behaviour, but it's still risky. So lenders need to understand that, that risk on the platform and when we're trying to teach them the risk perception and that intuition that you know comes with experience with it, with investing. Often lenders come to us because they want to learn how to invest. They are often it's young individuals who are learning about investment, but they want to have something more tangible than for example, crypto investing.
So it's so understandable when you invest into an individual. So people prefer to start from peer to peer lending, but education has been there from the very start. But then we also added badges: you start as a humble moose and then you grow to fire squirrel and then that just evolved as we continued building the application.
Brendan Le Grange 15:00
I have been recently speaking to Jorge Enriquez at Credilikeme, they're a Mexican microlender so they're not peer to peer, but they've got a similar philosophy, they have a ladder of trust for the borrowers and this clear link between your actions and the impact on your credit score / or on your trust score.
And I think, because my background is in traditional credit bureaus, you get education out there on how do you manage your credit score, but some of the ways that you optimise your credit score are counterproductive - so if you've repaid 20 loans, I've got more confidence than if you've paid one loan, but in taking out 19 loans, and actually introducing some amount of real risk to the scenario, it's not a great way to really tell a consumer 'oh take more credit', or 'take a credit limit increase', because it's better for your score. But in your model, you've got that very easy link of this is what you should do. These are good behaviours. And if you do the good behaviours, the situation improves for you. And I think that is key. It's not just transparency, it's transparency in the logic as well, that the the actions you're encouraging are good actions for the consumer.
What is the general awareness of credit management like, among customers, say when they enter the process?
Lika Osmanova 16:17
Most people in general, normal Norwegians, you know, walk blind when it comes to their credit scores. Unfortunately, there was research in 2014, if I'm not mistaken in one of the major publications called e24 that showed that most young individuals, up until 24, do not understand that they need to return the money back, if it's a credit card. I believe things have changed significantly since then, but most people in the market where we are considering to open operations do not understand how credit works, and how credit scores work as well. Because most of the time, credit bureaus are not really disclosing that information, and also algorithms behind calculating your credit score.
In the US, it's even worse, like you're just you're forced into credit or credit cards to prove that you actually trustworthy / creditworthy. And maybe you do not want to get a loan, you just want to you know, have a basic thing, like for example, find a job. But even in those situations, where some perks of trust is required, you might have to be forced to credit upon yourself. So that makes the situation even worse. Yeah, it gives you more data if the person borrows 19 times instead of one. But it also should tell you something about the candidate the person borrows so many times, is the really good thing for the person,
Brendan Le Grange 17:41
Maybe we can talk a little bit about the technologies. It's not my background, you've come from a marketing background, I'm sure in the four years of very hard work, a lot of it has been getting your head around all the technology that's available.
Talk to me about the role of blockchain in the Lendwill product and how you leveraging that new tech.
Lika Osmanova 18:02
Blockchain is a very important aspect of of Lendwill, we use hyper ledgerfabric, and we use it to store transactions on the blockchain to make them immutable and globally verifiable.
The big idea behind it is that our world is global, but our credit histories are local.
So if you are born in Norway, and you borrow money here, or even if you have a credit card, even five credit cards, and you repay them diligently, and you have a car loan, and you also pay it back diligently, the moment you cross the Norwegian border and you go to a different country, you start from a blank slate, like you cannot take your credit history with you. Even though we are in the Schengen area, even though it's like European Economic Area, you cannot do anything about your credit history can bring it wherever you go.
So the idea behind using Blockchain here is that to make sure that we can store these transactions in a safe place, they're going to be immutable, it's going to be impossible to change them. And if it happens to be that you are going through different country and you need some sort of proxy of trust, to prove that you actually had this transactions, you can do it by downloading that report from Lendwill which is going to have your blockchain hash, which the third party or person you're given the reports you can use to just you know, go on our website, check the validity of that report and to make the your credit history globally verifiable, to make it transferable movable, and at the same time immutable.
Which is also going to have a positive effect on repay rates among borrowers, because the moment you understand that, okay, it's not going anywhere. It's not just you know, a payment remark, somewhere which is going to disappear. This is technology so it's inbuilt in the blockchain tech that is impossible to remove it. So if you do not repay €25, well, that's a too big price to pay for the immutability of the tracker that you have.
Brendan Le Grange 19:59
Again, coming back to that idea of community by being able to take that reputation with you the same way, you know, in the old days you would have travelled abroad, and there probably would be a community that you went into that somebody there knew and on top of yours, and they knew who you were, they knew the street, they knew people that you knew, and you would bring your reputation with you, as an immigrant, as a as an expatriate, to a new country in that way. This is technology enabling you to do the same beyond just the Lendwill business, I mean, anything the impact of what this does, overall is a very interesting and very exciting to watch.
Lika Osmanova 20:36
I like how you frame it, around the community, because the community aspect is extremely important to us. Sometimes among ourselves, inside the Lendwill team, we call the Lendwill application like having a mom in your pocket. So, like, when you need to borrow a little bit of money, and you go to your parents or you go to your friends in here, you have that community that sees your trust rating and that's you can always rely on like if you need a little bit of money, and does the same for for lenders, right? So like it's investing money in the community.
Now instead of just letting your money stay in your bank account and not having any interest or very minimally interest, it's a great alternative investing possibility just to give money back to the community, community is extremely important.
Brendan Le Grange 21:20
What stage is the Lendwill product at now? Are you out and live in the market are you in the launch process?
Lika Osmanova 21:26
We have an extensive waiting list of individuals. The waiting list consists 70 different countries, seven zero, some indicated they would like to be borrowers, some indicated they would like to be investors. But ultimately, you can be anybody on the platform, we do not have separate applications for borrowers and lenders, because while you are just a member of the community, you can start doing borrowing, or you can start from lending, you just cannot do that all at the same time. But you can play an active role in the community, regardless of your life situation at the moment.
We have a ready product, both iOS and Android applications, we also have our own admin panel where we're monitoring everything that is happening on the platform. And we have been running a beta version of the app, closed beta, for a bit more than a year where we have had 1,500 transactions on the platform. And where there were only two defaulted loans over the course of that testing period, which we believe is a very good indicator that our staircase model works, our checks and balances work. And our detection of suspicious transactions work as well. So only two defaulted loans out of 1,500, which we believe is a very good
Brendan Le Grange 22:34
It just goes to show that if you build a good structure and a good product, people want to repay it. And if you're giving them the tools and the education to do so, they will repay it.
And I think that those sort of risk rates are exceptionally low and good testament to what you're doing in terms of building everything else around the loan, not just providing some capital.
Lika Osmanova 22:55
And we're also not charging high interest rates. Because of that. We don't even charge cumulative interest rates very often credit companies will charge interest on top of interest that will result in a huge effective interest rate at the end of the year, we don't do that there is no interest in hope of interest, it's only 2% loan per month, because to make microfinance. So the maximum could be 30% a year for people who are just starting on the platform. But for those people who have good trust scores, we are considering adding a functionality of choosing their own interest rate, so that the borrowers could be responsible for setting up their own interest rate depending on how urgently they need the money from lenders. And then if they want to match quicker they can choose a higher interest rate but no not larger than 2% a month. And if they're not interested, they can allow to wait a day or so that they can get to 0.5% a month either trust or allow us to do so talking about another aspect of technology something else that we also do and which is also related to the blockchain use.
We when we started building Lendwill, people asked us why you would don't use cryptocurrency, since like we already have the blockchain tech from the start. And the answer was that you cannot use crypto to pay your rent. We use a fiat/ normal/ standard money which goes from one account to the other. But recently there has been a possibility of adding an integrated crypto exchange in the platform. That crypto exchange would allow to to exchange your cryptocurrency holdings into normal standard money that normal people use and send that standard money to the borrower and back. So if somebody has crypto holdings and they would like to utilise crypto in real life scenarios, not, you know, in gaming or anything like NFT related and just in real standard world, they can do that online.
Well, not at the moment, we are still speaking with a partner about how to integrate the crypto exchange inside Lendwill, but that will be another possibility of bringing technology into a real life scenario and we really want it to be real life because you know, when almost everything can be built without blockchain almost Everything can be built without the use of cryptocurrency or web three technologies. But the moment you bring those technologies into real life, you understand that okay, there is actually benefit in using those technologies. And that can also inspire innovation further in the industry.
Brendan Le Grange 25:14
Clearly, Lendwill is not just a product for Norwegians. This is a global community of borrowers and lenders, if people listening would like to get onto that waitlist, or they would like to have a closer look at the product, learn a little bit more about what you're doing and your journey, where is the best place for them to go to connect up with that community.
Lika Osmanova 25:36
Now, it's only available in Norway, because it takes time to launch in different countries regulations are different everywhere, the best place to go is, of course, our website, it's lendwill.com. So we can just go to https://lendwill.com/ and click on one of the mobile app icons in the sign up to the waiting list. We've been testing it for more than a year already, but now we're so close to getting it to life. Finally, after receiving approval from the financial regulator, we want to make sure that people will get a good product. So go to https://lendwill.com/ sign up, and we will inform you when they can use an application.
Brendan Le Grange 26:11
Right? Yeah, and I'll put those links in the show notes as well. This is a fully regulated product, it's clearly got a lot of the public good in mind. And I think that for anyone listening, whether they want to borrow and lend or just want to look I mean, there's some fantastic design elements in there as well, really slick website. And yeah, definitely good luck for that launch.