Income Marketplace Review

Requirements

To earn interest on your investment in Getincome, you must meet specific requirements.

If you don’t have a bank account in EUR, you can open a free N26 account, use Revolut, or get the Wise card. Remember that you can only transfer EUR from an account in your name.

The verification of your identity takes less than 2 minutes. You will get a QR code to take a quick selfie and a photo of your ID card.

To transfer money to Income, you must deposit funds to the Income bank account.

Remember to add your reference number so the marketplace can allocate your deposit to your investor account. You can find the reference number in your Getincome account. The transfer should take no more than two business days.

Remember that you must reside within the EU or EEA to invest in the Income P2P Marketplace. The platform doesn't offer investment opportunities for investors from outside of Europe.

Risk & Return

When it comes to P2P lending, you should always be able to evaluate the quality of the protection scheme and the quality of the loans you invest in.

In other words, look at the buyback guarantee and check the loan originators' financial information and the performance of their loan book.

Let’s first look at the buyback guarantee.

Buyback Guarantee Explained

A 60-day buyback guarantee on Income backs your investment. This means that the loan originator promises to repurchase your investment and repay the accrued interest if the loan repayments are delayed by 60 days.

Experienced investors understand that the buyback guarantee is only as good as the lenders' financials and loan performance.

Remember that certain loan originators list their loans on Income via an SPV. Non-European lenders typically incorporate an SPV that lists loans on the marketplace. 

Loan Originators

As of month year, most of the available loans on the platform originated from the Indonesian company Danarupiah, the Estonian lender Hoovi, and the Bulgarian lending company ITF Group JSC. 

This means that the Income Marketplace is only suitable for you if you want to diversify your loan portfolio across the mentioned regions. 

Income's Due Diligence And Onboarding

Let's get into more detail about the onboarding process of lenders on the Income Marketplace.

First, the platform collects data about the lending company. The lender has to provide legal documentation and financial statements and explain how the company originates loans.

In the second step, Income’s risk manager analyses the documentation. The platform considers the loan book performance and portfolio profitability as key factors.

The Head of Onboarding on Income reviews the lender's financial statements and examines the information from various perspectives.

Sometimes, a group guarantee is required if the lender doesn’t have a good track record. This could be a case where the lending company is a startup operating under a more prominent financial institution.

Next, the marketplace calculates the junior share and submits the results to the management for approval. If the decision is favorable, the lender receives an offer.

As soon as the offer is accepted, the platform conducts a sanity check and reviews the loan agreements, bank statements, and loan documents to see if the loans are backed by collateral.

If all goes well, the lender is onboarded, and API integration with the company is established so that Income can mirror the performance of the listed loans directly from the lender’s loan management system.

The platform runs a completeness check and reviews the performance of the entire loan portfolio every six months, which helps determine a new junior share.

Junior Share & Cashflow Buffer Explained

The Income Marketplace brands itself as the “safest” marketplace in Europe. It introduces additional protection mechanisms such as “junior share” and “cash flow buffer.”

Junior Share is an improved version of “Skin in the Game. “Skin in the Game represents the percentage of the loan listed on the platform funded directly from the lender’s balance sheet (not investable for investors). The junior share is subordinated to investors' funds.

The Junior Share protects your money if the lending company defaults.

Let's examine the differences between Skin in the Game and Junior Share to understand the unique Income protection better.

So, let’s say a lender with a €1 million loan portfolio and 10% skin in the game defaults.

In the next step, a collection company starts the recovery process.

Let’s assume that 40% of the portfolio could not be recovered, which means that 60% of the loan book is the final value that will now be distributed proportionally to the lender and the investors.

In this scenario, the lender and the investors are equally likely to recover the debt.

In this case, investors would lose 46% of their investments. Forty percent would be bad debt, and six percent would go to the lender.

That’s basically how skin in the game works.

Now, let’s look at the Junior Share.

The lender will list a €1 million portfolio on the platform, of which 35% is reserved as Junior Shares. That means that only 65% of the portfolio is investable by investors.

It’s important to highlight that Junior Share is subordinated to investors’ funds. Let’s examine what this means.

So, let’s say the lender goes bust, and the collection agency cannot recover 40% of the loans.

That’s not too bad,, as investors have invested in only 65% of the loan book. The junior share will be paid first to investors to cover the obligations before being paid to the lender.

In this case, investors receive all the recovered funds, resulting in only a 5% loss.

That solid protection mechanism significantly reduces your risk of losing money if a lending company defaults.

Junior Share Calculation

Based on the quality of the loan book, the Income Marketplace calculates the appropriate rate of “junior share” for every lender.

Every lender must invest the “junior share” amount from its balance sheet into every loan.

The calculation of the junior share is very straightforward.

First, the platform analyzes the performance of the lender’s portfolio.

Loan performance analysis is a crucial element in any due diligence process as it gives an idea of a portfolio's cash value over a specific time period.

So, let’s assume we expect to receive 120% of the portfolio within three months. This amount also includes the interest and fees that borrowers are paying.

In the lending business, this variable is called the expected repayment coefficient.

To figure this out, the platform must access the loan book performance.

In the next step, the Income Marketplace has to figure out how much is the required repayment coefficient to cover obligations to investors.

That includes loan principal, interest rate, and platform fees. Let’s assume it’s 104%.

So now, the platform knows, based on the loan book performance, how much is required to recover and how much is expected to be recovered.

In the third step, the platform deducts risk margins.

If the lender defaults, there are risks that you won’t be able to recover everything.

A risk factor could be that the borrower decides not to pay, the exchange rate changes or a global pandemic starts, and borrowers lose their jobs.

The Income Marketplace will calculate every risk margin separately, and it’s never the same for all lenders.

So now, the platform can calculate the investable amount by subtracting the risks from the expected repayment coefficient.

In this case, investors will be allowed to invest 79% into a loan, and they would be fully covered if all the potential risks materialize.

The cash flow buffer differs between the investable amount and the expected repayment.

A side note is that Income recalculates the junior share every six months or when the product and its pricing change.

So, the lender has a much larger "Skin in the Game (Junior Share)" if the Income Marketplace determines that the portfolio quality isn't as good or that the risks are too high.

It's a similar principle as when evaluating the LTV for real estate properties; just in this case, one considers the cash value of the loan book.

In the case of a defaulted lender, Income takes over the collection of loans of the entire portfolio and repays investors before the lender.