Investing via NEO Finance platform: Why is it one of the safest?

Investing in peer-to-peer (P2P) lending platforms is becoming an increasingly popular and employed form of investing. This is so due to the accessibility and comprehensibility of this form of investing, even to those who are not professional investors.

Naturally, some people may be hesitant about this and, therefore, refrain from a great opportunity to make additional money. However, we state that investing in consumer credits via NEO Finance is one of the safest forms of investing.

Why do we say so? We have several arguments for this. We have gathered all of them to one place, and are now introducing them to you.

NEO Finance is the only Lithuanian P2P lending platform holding an electronic money institution (EMI) licence for unrestricted activity.

More: www.lb.lt/en/fs-electronic-money-institutions

The licence is different from a licence for restricted activity in several points: the institution must correspond to requirements for shareholder eligibility, managers, capital requirements. It also allows operations in entire European Union.

/ In compliance with the requirements of the Electronic money institution licence, the Republic of Lithuania Law on Electronic Money and Electronic Money Institutions, as well as the EU Directive 2009/110/EC, all funds of NEO Finance clients, i. e. investors in consumer credits, are completely separated from that of the company. Almost all client funds are held separately from that of the company, in a specially-dedicated account of the Bank of Lithuania.

Only a small portion of funds, i. e. up to EUR 100.000, is held is an account of the commercial bank Swedbank, and is dedicated to money transfers among the clients and NEO Finance accounts (Provision fund, investing, revenue).

However, keeping most of the client funds in the account of the Bank of Lithuania, the risk of bank bankruptcy face by commercial banks is minimised. In addition, in the case of bankruptcy, if the EMI becomes insolvent, recovery shall not be directed to the funds of EMI clients.

/ Each client of NEO Finance – be it borrower or lender (investor) – is granted with a personal IBAN account. Basically, the system of NEO Finance is a banking system.

Instalments made by the borrowers are transferred directly into the personal IBAN accounts of investors, as opposed to being executed via the transitory company account. Therefore, if the platform encounters financial difficulties, this ensures that the funds of the lenders (investors) will not be frozen or arrested by the third parties, meaning creditors or bailiffs.

/ As already mentioned, companies that hold electronic money institution (EMI) licence for unrestricted activity, are subject to a minimum capital requirement of EUR 350.000. This means that only a decently experienced entrepreneur can start the business.

In the end of Q1 2019, the capital calculated in company’s balance sheet totalled EUR 1.57 M. In addition, following the EMI capital calculation requirements of the Bank of Lithuania, NEO Finance capital totalled EUR 867.000. The requirements of the Bank of Lithuania determine that the capital is calculated by deducting the amount of intangible assets and deferred tax assets from the amount of equity. 

/ The electronic money institution licence for unrestricted activity has been granted to NEO Finance by the Bank of Lithuania, the Financial supervisory authority (FSA) of Lithuania. Therefore, the company is obliged to provide the Bank of Lithuania with regular reports, in addition to being thoroughly supervised.

In compliance with the requirements of Internal control, risk management and protection of funds received, as well as the legal acts of the Republic of Lithuania, Electronic money institutions, NEO Finance being among them, must employ an effective risk management system, which encompasses full strategy of risk management, limit system, in addition to performing internal and external company audit. The results of external audit are not only submitted to the Bank of Lithuania, but are also publicly disclosed in company’s website. Recently, NEO Finance has been audited by UAB Grant Thornton Baltic. Audited financial reports approve the company-prepared reports as correct, in addition to providing an opportunity to see company’s financial indexes and tendencies.

In addition, every quarter, the company is obliged to submit reports on the issued electronic money, its turnover, e-money balance in client accounts, capital requirement, profit-loss statement and balance sheet, other information. In addition, NEO Finance, as the P2P platform operator and consumer credit issuer, every quarter must provide information on the credits financed via the platform, their maturity and price, numbers of borrowers and lenders, delays.

In spite of the regularly submitted reports, the Bank of Lithuania also performs independent examinations of e-money institutions, which are not always announced publicly. This way, constant compliance with the legal acts and relevant requirements is ensured.

Should you have any questions, do not hesitate to contact us at [email protected], or +37068700300.