Comparison of P2P lending platforms: Fundaztic vs finance companies



  • Investment opportunities have become more advanced with the introduction of peer-to-peer lending and Malaysia has no shortage of P2P lending platforms.
  • In this article, I compared the work of two lending platforms (Fundaztic and Funding Societies) and their benefits.

As a newbie who has just started to dive into the world of investing with my first investment in robo-advisor startup, StashAway, I realized that investing is about more than traditional methods of stock trading and of Forex.

One of these investment opportunities is peer-to-peer lending, a type of crowdfunding that can help individuals or businesses request funds from investors through a digital platform. The P2P lending space in Malaysia has grown exponentially with 2,000 fundraising campaigns conducted among the six licensed players in 2018, an increase of 300% from 2017.

I wanted to try my hand at P2P lending by registering with two of the most famous platforms: Fundaztic and Funding Societies. In this article, I’m going to put my money where I say it by comparing the two platforms as an investor. For a quick rundown of what each platform has to offer, you can scroll to the end of the article.

Disclaimer: This article was not sponsored and the funds to invest came out of my own pocket.

Fundaztic

Investors in Fundaztic invest in notes issued by the issuer (companies). It is a short-term debt instrument with a maturity of between 3 and 36 months, but the life on the platform is usually around 36 months.

Dictionary time: A debt obligation is a negotiable or negotiable liability or loan.

Investors can register on the platform for free and invest in tickets starting at RM50, but keep in mind that you won’t get a lot of returns if your investment amounts are small.

In return for the investment in Notes, you will get back the amount you invested through fixed pro-rated monthly repayments (Principal + Interest) and less platform fees (1% of monthly returns).

The low investment barrier and zero deposit fee allow almost anyone with RM50 to invest in any note. However, Fundaztic provides information to investors about the risk for each issuer in the form of a percentage of probability of default (PD%). According to Fundaztic’s website, PD is taken directly from the Credit Bureau Malaysia (CBM) report that the platform uses as part of its credit assessment process.

A look at the Fundaztic platform.

In short, this means that the PD can be used to assess the likelihood of a particular SME credit default over the next 12 months based on information received from a range of business information databases.

Take for example, in the image above, the Note 528 has a PD of 9.28%, which means that the particular note has a probability of default of 9.28% within the next 12 months. This means that the lower the PD, the lower the risk and the better the score.

The platform also has a risk profiling feature that allows investors to understand their risk so that they know what type of rating to invest in.

Another feature present on the platform is Smart Invest. It is recommended to activate the Smart Invest function because in the future Fundaztic will give priority to Smart Invest members rather than manual investors.

For a user to activate Fundaztic’s Smart Invest, you must put a minimum of RM2,000 for Smart Invest to start and start investing automatically.

“This is not based on a business decision, but primarily to ensure that our issuers manage to raise their funds as quickly as possible and the way to do that is to prioritize committed money over money. not engaged, ”said Fundaztic when asked about this decision through their Facebook Messenger.

It is also good to note that Smart Invest starts every hour and it is a system wide process where it temporarily blocks all actions to avoid hiccups for about 5 minutes.

Fundaztic at a glance
Advantages The inconvenients
Shows investors the default risk for each issuer Minimum of 2,000 RM to activate Smart Invest
No deposit required to open an account Long term to recover capital + interest
Minimum of RM50 to invest Platform and application not very user-friendly
Help investors understand their personal risk profile and appetite System-wide hourly process stops all action on the platform for a few minutes

Finance companies

An overview of the Funding Societies app and the Auto Invest feature.

The concept of finance companies is similar, but it involves two forms of investment: term finance for businesses and finance for invoices.

Term finance for companies is similar to the Fundaztic platform, the money raised is used as working capital to pay, purchases of small assets, capital expenditure or expansion of the business. It has fixed interest rates, with monthly calendars and a fixed maturity date.

Invoice finance is a product in which sellers (“the issuer” in this case) sell their future receivables or invoices that the seller issues to their customers (“buyer”) to get cash immediately.

Investors will only receive their payment at the end of the financing term rather than monthly payments, as it is much shorter, ranging from 30 to 120 days, compared to commercial term financing which ranges from 1 to 24 months. .

There are also no risk rates such as the probability of default on Fundaztic, but they do have an information sheet for each company showing their finances (there are a lot of numbers but it is recommended to check this) .

The lowest amount you can invest on any of the trade terms is RM100, but even to activate your account you will need to deposit a minimum of RM1000.

However, there is no minimum amount that you would need for their automatic allocation feature to start. It is also recommended to activate it because you would have priority to invest in the duration of the financing, but don’t worry if you are a manual investor, as they will allocate a percentage of the amount of the financing term (between 20% at 40%) for manual investment.

Finance companies at a glance
Advantages The inconvenients
Auto Invest does not require any minimum amount Minimum deposit of RM 1,000 to open an account
Short term to recover principal and interest Investors should do personal due diligence to understand the risks for each business
New frequent investment opportunities Different and higher service fee structure

Should we invest?

In numbers (based on their application at the time of writing), Funding Societies has successfully raised RM 1.33 billion on its platform (in Malaysia, Singapore and Indonesia), with 255,068 business terms funded and a default rate of 0.88%. Fundaztic raised RM 40.6 million, with 514 notes funded and a default rate of 3.24%.

As a general rule, the investment opportunities of finance companies are much higher (usually up to 1 million RM) and shorter (usually within 12 months) compared to Fundaztic where the amount is smaller (usually up to ‘at 200,000 RM) and the duration is longer (normally 36 months).

Based on these statistics, the two platforms have different approaches to P2P lending; Funding Societies aims for a larger amount to be financed, while Fundaztic aims for a number of SMEs to be financed.

I have invested a total of 2,000 RM in Fundaztic and 3,500 RM in finance companies over a period of one month, and so far I would say I prefer to use these more because the platform / the application is more user-friendly. and the returns are much faster.

A glance at my Fundaztic portfolio.

Although Fundaztic payments are made monthly, it would take a few years to recover your principal with interest compared to finance companies where you will generally recover the principal plus interest in less than a year (depending on the investment in the financing at business term or invoice financing). ).

I would suggest those looking for faster returns to invest in finance companies while those who want to play safer and choose their risk (based on Fundaztic’s probability of default) and don’t mind the longer waits. for returns with Fundaztic.

Here is a brief overview of the main characteristics of Fundaztic compared to finance companies:

Fundaztic Finance companies
No deposit required to open an account 1,000 RM to open an account
Minimum investment of 50 RM per ticket Minimum investment of RM100 per ticket
Commercial term financing only Commercial term financing and invoice financing
Longer investment periods of 3 to 36 months (typically 36 months) Shorter investment periods of 1 to 24 months (typically 12 months for commercial term financing and 1 to 3 months for invoice financing)
1% platform fee Platform fees for corporate term financing (0.16% to 1.83%) and invoice financing (15%)

The best method is to invest money in both platforms and set up the auto investing features to diversify your investments because it is never good to put all your eggs in one basket.

If you ask me about my feedback, I’m only in my second month and only received a few ringgits, so we’ll see how it goes. For now, I plan to deposit more money on both platforms over the next few months and monitor how that goes.

  • If you want to learn more about Fundaztic, you can check their website here.
  • If you want to learn more about finance companies, you can check out their website here.


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