There are 2 transactional flows between Mintos and our lending companies.
- When an investor makes an investment, we receive the money and send it to the lending company.
- When a borrower makes a repayment, the lending company receives the money and transfers it to us.
The current financial set up makes it very inefficient and costly to transfer each payment individually. Instead, these 2 money flows are settled in weekly batches. Investments and repayments are offset against each other, and only the difference is transferred. It’s worth noting that this settlement system applies in both directions – the lending company will also receive the invested amount on the settlement date, so the system works out fairly for both sides. That said, we’re working on improving the process.
Under normal market conditions, outstanding investments on Mintos were increasing. In other words, there were more investments in loans than repayments over a settlement period. So while there were some pending payments, these were offset against investments flowing from the Mintos side to the lending companies. In many cases, pending payments could be released immediately, if the accumulated settlement was already in plus digits for the period (i.e. new investments exceeding repayments), which it was – hence many investors didn’t see any pending payments.
When investor demand decreases – as is currently happening due to global events – or a lending company stops offering new loans, there are more borrower repayments than new investments in loans. In this situation, lending companies need to make net transfers to Mintos investors. That means, for some of the pending payments we need to wait until we receive the money from the lending company, hence pending payments have become more noticeable.