Born during the hard times with congenital instinct to survive

2020 has threatened the financial industry's viability, causing setbacks to many businesses impacting their liquidity, credit, suspension of licenses or pushing them to bankruptcy. However, the pandemic is not solely to blame, as there were already many financial barriers existing for those businesses in the first place. The crisis merely revealed that many businesses did not have substantial financial backing from financial institutions and business lending programs. 

Fintech based alternative financing and investment have piqued the interest of many people. It has seen massive growth in the past decade and, some failures too. However, fintech based alternative financing and investment market have remained somewhat consistent with its operations, thanks to innovative tech, which further pushed its success. It has many variants - crowdfunding and p2p lending being the ones on which we will focus here.

We sat down with Valentin Ivanov – the Founder of Quanloop, an Estonian investment firm focusing on investors aiming to earn a passive income while funding SMEs to keep the economy afloat. Asking Quanloop how they were affected by the pandemic would be wrong because it did not impact them like the other businesses already established – they merely launched when they came about head to head with the pandemic. A business that sees a crisis right after launch must adapt to all the challenges that led to many similar companies' demise.

Before this interview, we dug out some interesting facts on this firm from all the reviews and articles on the internet that caught our attention. With Valentin's experience in the financing market for 20 years, he shares the general trend of new-form alternative investment and his philosophy behind Quanloop.

Financial IT: Could you discuss some of the barriers that small businesses face in general and the role of fintech based alternative financing and investment in this scenario?

Valentin Ivanov: The common misconception about failing small businesses is that people assume they have no customer. It is simply not true, and the situation is a lot more nuanced than that. Of course, having an established customer is a vital part. However, we have witnessed that small businesses' failure did not happen due to lack of customers. On the contrary, it was the lack of financial support from financial institutions, like banks. Small business lacks financial cooperation with them for development and growth.  

It is obvious that these banks seek cooperation with only big businesses. Small firms, especially now, are facing giant corporations as their competitors. As a result, providing small businesses with the help they need has become a very risky investment for banks to undertake.

Alternative financing companies are trying to fill the gap between small businesses and their growth by utilising the current financial technology at their disposal. They specialise at working with smaller companies; therefore, they understand their needs and plan out modern financial solutions. 

Quanloop, essentially, does that – by working with professional partners in small companies' business projects and approving credit to ensure its' growth in the market. 

Financial IT: From the investors' perspective, what do you think are the problems with mainstream fintech based alternative investment platforms that Quanloop is trying to solve?

Valentin Ivanov: Most investment platforms act as mere middlemen for investors. Other than being a platform for a risky investment, they take no more roles for their investors. As a result, they only serve to a limited audience who are investors with high-risk tolerability. They do not account for the other kind of investors – the risk-averse, the new investors or people who are looking for a stable income.

Quanloop takes up a multitude of distinctive roles, depending on who is investing. Quanloop can serve as a platform for risk-averse investors to keep their money and compound interest without losing their main principal. Alternatively, Quanloop can be a testing ground for a new investor to invest with a minimum of 1 Euro. Investors looking for a stable income will need to put the amount required to get the result they want in their accounts. And, of course, for high-risk takers, Quanloop offers optimal diversification for high interests. However, risk-takers are not the primary target audience for Quanloop – people who are looking to earn a passive income without risking too much are the people Quanloop aims to provide the service.

Financial IT: Most alternative investments lock the investment for a period of time, usually six months, but Quanloop only locks it for 24 hours. How can you offer this timeframe to investors?

Valentin Ivanov: The main goal behind the 24-hour model was to provide high and quick liquidity to the investors – for both short-term and long-term investors – so they can exit whenever they need to without penalties. To have access to that high and fast liquidity, Quanloop was required to think outside the box. The technological barriers needed to be pushed to make it possible. Hence, the Quanloop team engineered an algorithm that pools together the investors' capital and breaks it into 1 Euro single loans before investing for 24 hours. After the end of 24 hours, if the investor does not withdraw, then it will be reinvested the next day automatically for 24 hours which will continue until the investor withdraws. If they do withdraw at any point, then the total withdrawn amount will not be reinvested the following day and other investors' money will replace it. Quanloop essentially re-engineered the refinancing model, and thanks to the algorithm Qunaloop created, a more extended timeframe was not necessary. 

Financial IT: A unique benefit Quanloop offers is the compensation for the loss of inflation. Why did you decide to provide this?

Valentin Ivanov: We all know that inflation is a crucial factor because it exists everywhere, and it is beyond everyone's control. It affects everything, both savings and investments, and it drastically reduces the buying power of an economy, which can be devastating for people. 

Any investment faces a number of deductibles, including the income tax, the inflation to net income and any loss to risks. The income tax varies on the residency of the investor and cannot be avoided. However, risks can be mitigated, and commercial profit can cover inflation. Most financial businesses do not consider these factors, and investors only think that they have monetary control, whereas they do not. The very fundamental pillar of Quanloop is to ensure stability and passive earning; therefore, we had to consider inflation, taxes and other external economic factors before reaching out to investors. 

Financial IT: What challenges have you faced or facing now regarding investors' perception of Quanloop?

Valentin Ivanov: New investors consider Quanloop a typical peer-to-peer lending platform that involves lenders, loan originators, and the digital intermediary platform. But when they take a closer look, they notice Quanloop is not an intermediary platform – it is a wholesale investment firm who is the only borrower, and the investors are the lenders. There is no middleman in this arrangement. Veteran investors, who have been investing in various P2P lending platforms for a long time, understand the difference and the benefits. 

Changing people's perception takes time, and for a considerably new business like Quanloop, which has redirected from the usual investment models, it will take more than just mere marketing to ease people into it. 

Financial IT: Can you share your thoughts on models to improve alternative investments for investors?

Valentin Ivanov: It all depends on the company's philosophy. The question that should be looked at is what they want to offer and whom they want to offer. What else can they propose other than high interests? Most financial businesses cater to natural persons and institutions, and Quanloop is no different in that aspect. But Quanloop is more dynamic in terms of their investor audience – we work with all sides of the spectrum, both veterans and newcomers, and investors with both little and large amounts of capital. 

Performing in the financial industry involves responsibility, and that should not stop at investment only but also improve the aftermath's support. For example, Quanloop does not limit itself to merely providing a monthly income but also eases the process that comes after it. We do not advise on external matters, but we inform our investors of the global changes and help them make an informed decision.

Businesses should ensure that their customers and partners are not burdened with issues that can easily be solved by the financial companies themselves. Many companies miss this crucial part when providing a financial service. For example, something as simple as the "liability to investors" should not be complicated by involving many parties and leaving the investors to chase borrowers they have never seen or interacted with for failure of returns. 

Companies should think outside the box and offer more than a reductive service. Understand individual investors and suggest accordingly. Let's not put an unnecessary burden on the investors regarding matters that we can solve unless required by law or internal policies.

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