Wowwo Q&A
This is a thread where you can ask your questions and write your Feedback about the Wowwo situation.
Dear Investors,
On December 17, 2021, we informed you that we made the decision to suspend loans originated by Wowwo from the Primary and Secondary Markets on Mintos until further notice.
The suspension is a cautionary measure to protect investor’s interests that is driven by macroeconomic changes which impact Turkish Lira exchange rate towards Euro. Given that Wowwo issues loans in Turkish Lira, but places them on Mintos in Euro, the company needs to pay the exchange rate difference from its own resources when forwarding borrower payments if Turkish Lira value drops.
As the Turkish Lira continued to depreciate rapidly, which could create a challenging environment for the company to meet its obligations towards investors on Mintos in a timely manner. We suspended Wowwo from the Primary and Secondary Markets.
Since then we shared also an update with you:
January 28, 2022
Dear Investors,
On Thursday, 27 January 2022, we had a meeting with Wowwo to further discuss possible solutions to the case of Wowwo's borrowers' repayments not being transferred to investors on Mintos. In the meantime, the funds due by Wowwo to Mintos and investors are moved to funds in recovery. The API communication system between Wowwo and Mintos was disconnected by the Turkish lending company due to currency risk that materialized for Wowwo as Lira continued to lose value against Euro.
In the most recent meeting, we exchanged information and proposals with the management of Wowwo, and we are planning to have a follow-up meeting next week when we will further discuss proposed options which will in the meantime be evaluated by both parties.
Mintos negotiations team is fully focused on coming to a resolution that will disrupt investors the least, as the case is currently classified “Stage 3”. You can find more about what this means in the article here:
https://www.mintos.com/blog/how-we-deal-with-loan-originator-issues-and-recovery-of-investor-funds/
As soon as we reach conclusions of value for investors and that can be publicly shared without disrupting our negotiation position, we won’t hesitate to update you immediately. In any case, we will share a more detailed follow-up after the upcoming meeting with Wowwo.
Please share your questions, thoughts and Feedback about Wowwo here.
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Besides reducing my investments in Mintos and transferring them to competitors, and contacting FCMC of Latvia to issue a complaint, I am also in communication with peer-to-peer lending comparison sites so that these sites become aware of the mishandling of the Wowwo case and adjust their ratings for Mintos accordingly, highlighting the lack of control regarding local currencies loans.
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Typically, Iḿ pretty happy to take some currency risk...ups and downs...that is what happens if you invest in the currency that is lended out...so you invest in Lira, the Lira goes up, you win...down you lose...in this situation ,
thanks to the lack of transparency, there is no upside!...
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I am not happy with currency risks when it comes to fiat.
With crypto - more than happy because unlike fiat it is trending up if you zoom out.
For some odd reason I do not think the situation is that bad with Wowwo than with many of those small pay day lenders that encountered legal risks and had to stop their business in the most exotic places of the planet.
But, in my opinion, Mintos should involve legal actions or use it as a tool to pressure for Wowwo to repay the money that belongs to the investors. It is not cool to come and say "hey I decided to stop repayments of my loans".
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There is always going to be currency risk sitting with someone when lending in Euros but the underlying loans are with individuals based in a non-Eurozone country. Perhaps Mintos could make that clearer if some investors are not aware of that.
Certainly Mintos should be factoring currency risk into their scoring mechanism. I can see it has a factor for 'Buyback strength' which includes capital sufficiency, so presumably they consider currency risk here but it is not explicit and I think it should be more prominent.
Overall, in terms of managing the default now that it has happened, I am happy with the current approach of Mintos of notifying Wowwo that what they have done constitutes a default event. As far as I know Wowwo are still a going concern and still have reasonable capital resources according to their last report and accounts (though I can no longer find it on the website). Hopefully with the threat of legal action Wowwo will come back to the table and start paying again. Their capital resources are there precisely to act as a buffer so that they can pay should events such as unmanaged currency depreciation happen.
Presumably Wowwo didn't fancy taking a huge currency loss and are now trying to mitigate this it on by asking Mintos (or its investors) to forgive them the currency depreciation. Not good enough though. Wowwo borrowed in Euros to take advantage of lower interest rates in good times and they now need to dig into their pockets to pay for losses in the bad times.
Frustrating as it is, we need to give Mintos time to go through this process with Wowwo and make sure that Wowwo ends up paying back what is owed to all of us.
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i agree with you Richard. That is the reason I am not filing any complaints to the regulators on Mintos because the collection process has not yet even started.
If it goes reasonable well, there is no reason for complaints. While I want the collection to take place like yesterday, we need to be patient and see what the outcome is.
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Yes I was surprised they did not take advantage on the currency appreciation in late 2021.
Over long run, fiat currencies are trending to 0. Therefore, better to get the debts paid off ASAP by Wowwo, I agree. However, we need to be realistic also.
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I've now managed to find the Wowwo financials again.
According to their latest balance sheet on the Mintos website (as at Sept 2021) they had shareholders equity of 428m Turkish Lira. This is equivalent to 27.5m Euros at today's exchange rates.
The total exposed amount Mintos has with Wowwo is 18.5m Euros according to Mintos' latest update on 3rd Feb.
So Wowwo, even at today's exchange rates, has enough capital to pay to buyback all of the Mintos loans and still have 9m Euros left over even before they have received any repayments on the Turkish Lira car loan portfolio.
To make a long story short Wowwo appears to have plenty of money available to pay its obligations in full.
Wowwo are just trying to get away with paying less and Mintos are quite right to resist this pressure to cut a deal and instead insist on full repayment. Investors need to be patient, and hopefully there will be a 100% recovery of funds plus interest.
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Juts sold all my loans kept with countries that are not part of Euro area. I suggest you do the same (Russia, Belarus, etc) with Ucrania scenario over the table and Minto's lack of disclosure s better to sell everything ASAP.
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Richard, I think also that Wowwo gambled with forex and now wants the investors to pay their bills. Therefore, the legal actions should be taken on the table if they are not willing to repay according to contracts. And I think it is important to make this also clear to them. They have a functioning and profitable business to lose. I believe they will not want to lose it.
Of course they need an opportunity first to act nicely towards us before legal actions taken.
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Hello,
I sent to Mintos support also this request.
When the whole debt of Wowwo will get consolidated (I suppose it it will start recovering process by consolidating the whole debt in one bigger loan) - it would be beneficial for both Wowwo and Mintos investors that the debt payments are first towards principal 100 %. And once the whole principal is repaid, then only the last repayments are towards interest.
Why this is beneficial to Wowwo?
-Because their principal debt melts away so the interests accrued will sink.
Why this is beneficial to Mintos investors (to us)?
- We have to pay taxes only on interest and capital gains. If it happens, that Wowwo is able to repay only 90 % of their debt, the investors end up paying taxes even though they lose money in Wowwo. I suppose it is possible to appeal, but it is a big and lengthy process, and very unnecessary. Also, it has 0 effect on the cashflow of the investors because if Wowwo is able to pay 10000 euros/week then that is the amount they pay.
This could be also a tool for rewarding Wowwo if they are co-operative and it will not need to go to court rooms.
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Rückzahlungen sind nur in € zu akzeptieren. Mintos sollte hier hart vorgehen sonst könnte es sein das andere Kreditinstitute auch einfach die Zahlungen einstellen um bessere Konditionen zu verhandeln.
Ein Vertragsbruch sollte mit aller härte verfolgt werden. Lieber verliere ich hier 100% als das ich Wowoo sowas durchgehen lasse.
Wenn die Verträge hier keinen Schutz für Anleger haben , sollte Mintos sich auch überlegen ihre Verträge zu überarbeiten um sowas in Zukunft auszuschließen.1 -
Hey guys, Minto's support has replied to my request about other similar situations of loans in euros given in non-euro countries and confirmed such situation exists and prevails...looking at current situation in east europe (Russia, Kazakhstan, Belarus etc) i've started selling all the loans...Good luck everyone
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Due to the lack of transparency I have startet liquidation and halted auto invests. Taking my money elsewhere.
The greatest loss from this case are investors' trust in Mintos - not the portion of money from Wowwo.
I hope to see mintos recover the funds and add more transparency to it's platform to regain trust.1 -
Wowwo seems to be in the markets. As long as their business is profitable, full recovery is likely.
It probably will take some time (but also holding the loans until maturity takes time), but I am positive it will result to optimal outcome for the investors.
Bankcruptcy would cause permanent loss at least partially but their business seem to be nowhere even near bankcruptcy. I just hope their CFO understands the importance to make timely repayments and if currency appreciates (which happens from time to time), then do some extra repayments to easen the burden in the future.
To us, the investors, it is our best interest together with Wowwo to focus on principal first and once the principal is paid in full, then later focus on interest. This is for the tax reasons as you do not need to pay taxes on principal payments and the interest income is uncertain.
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I must say I am shoked about this practice of Mintos. In your very own risk management site it states "Invest in your home currency to avoid exchange rate risk. Mintos currently supports multiple currencies.". I did exactly that. So there are two things going on:
Mintos doesn't know what some lenders do with the money or it doesn't enforce certain security mechanism.
It's a weak move to push all the guilt to Wowwork Turkey now. In case of a total loss, Mintos would actually be my first instance of law proceedings in this case. I am about 6 months in on this platform, my net loss thanks to Mintos/Wowworks is now 5% of my anualy revenue. So I am down to -3% so far.
If I can't even calculate risks since I can't trust Mintos, I'll take my investments elsewhere for a while and stop recommending Mintos.
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Dear investors, thank you for your feedback. We’re working to adjust the platform features and information you use for investing - based on your first-hand experience.
We want to share that we’ve updated the information shown in the loan details’ sections (Invest → Available loans → Choose your investment → [Select specific loan] → Loan overview - Loan details).
There, we added the entry that shows “original loan currency” on the left-hand side of the loan overview, under “Loan details”. We hope that this is more straightforward and will add value to your assessment of risks when selecting a specific loan for investment.
Previously, the information about the original currency of the loan was directly available in Assignment Agreements. We are working to introduce this reminder to other places on the platform, too.
Example,
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Hi Annija,
That's a good change, thank you! It makes it easier to understand a particular loan's currency dependency.
But..... Now we need two additional things:
- Add the "Original Loan Currency" as an option in the Portfolio Filter.
- Add the "Original Loan Currency" as an option when creating Custom Automated Strategies.
I don't mind different currencies when the Loans are originated in a stable country, but the option to filter the original currency should be there. Different investors have different risk aversions, so it should suit everyone.
Thanks,
Rodrigo Valle
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Dear Mintos,
absolutely agree with Rodrigo. First of all the Original Loan Currency must available in filters for AutoInvest.
On top of that the Foreign currency risk management of a loan originator should be considered in the Mintos Score. Currency hedging is a standard requirement in financial market.
Thanks,
Petr
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Yes. I agree with Rodrigo and Petr.
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It seems to me very unlikely that when you see loan from, let's say, Zambia or Columbia in euro, you(the investor) do not realize that the loan is not actually in euro. The fact that mintos will show the actual loan currency (at not very convenient place/menu, of course) is an improvement and if they add the ability to filter-out by this parameter - that will be great, but I was wondering what's going to happen - suddenly all europe investors will invest only in eurozone countires ?
the important thing is how mintos and the loan originator manage currency risk - and is the investor informed correctly. if you take the current situation with Wowwo, as I understand all Mintos has is a breach of agreement - but is there any pledge of assets, obligations that can be enforced quickly on Wowwo - it seems to me, no. it's like a contract, that if the one side breaks it, then there are no automatic consequences, only a start of arguing one with the other how to resolve it.just trying to say that adding original loan currency is not resolving anything actually, and I did not see any reasonable suggestion about currency hedging on a p2p platform.
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I am glad that Mintos is changing the door lock after someone broke in. This is the minimum that can be done and hopefully this will give more information to new investors. It is also an acknowledgement from Mintos that the previous disclosure of risks was insufficient. The main focus must be the release of the current funds in recovery, this is what most of the impacted investors are waiting for. What is the timeline???
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To Annija or any other Mintos representative,
when will we receive updates on the situation? Since Wowwo has been moved from suspended to defaulted, is it fair to assume that there have been new negotiations? As an investor I understand there is always a certain risk of losing capital, but I'm finding Mintos to be too silent in this situation. Will updates be monthly? Every 2 weeks? Is there any schedule regarding meetings with Wowwo? Being kept in the dark is not what we need right now. We need more than simply 'we will give you updates when we know more'. When will you know more?
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Dear all my coinvestors,
Fully agree with your comments and suggestions, specifically those flagging clear bad practices around Mintos scoring and a very poor disclosure on underlying FX risks. I am a bit shocked about this Wowwo issue (not just for my potential loses worth 10% of my portfolio here), but I understand that a big chunk of Mintos current business comes from exotic countries with non-EUR currencies. For sure, I considered myself educated enough to understand the subsequent risks, but under no circumstances I did reckon that Mintos, a well reputed platform with several operating years, would have accepted non-hedged contracts from these countries, and these contracts have been shown in EUR prior to the investment. In this case, you implicitly assume that you will bring EUR back, and someone is bearing FX risks, not you, otherwise, the recipients' currencies should have been shown jointly with the EUR. To me, this is a break even point and a clear failure from Mintos. WE ALL fully understand that all these lendings in non-EURO countries implicitly have a sort of FX risk, the KEY thing here is WHO is contractually bearing this risk, one more time MINTOS has to include this into the preliminary documents and scores: what lending companies are hedged, what companies are not, and let investors decide on that basis. This lack of transparency is proving to be major than expected, Mintos' algorithmia include more than 85% of their conservative strategy (for instance), in non-EU countries and banana republics, and you "feel safe". Not having this level of granularity (hedging/non-hedging) within our decision making process is a No-Go threshold to me, and I would leave this platform. A high proportion of Mintos' business comes from highly instable recipient countries, the sooner or the later we will suffer from a similar Wowwo default with the current tools made available for us to build our portfolios.
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I agree that the lack of clarity from Mintos' side is concerning. I like Mintos overall, but it is forcing me to consider my future investing on the platform. Jose Lopez, are you moving to a different p2p platform? If so, do you have any recommendations?
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In other words, someone at Mintos had to choose between two options: (1) Reducing the amount of lending companies not willing to hedge their operations (aka business volume, a lower margin?), or (2) turning a blind eye and making the show go on with the more number of players as possible (who cares), at the end of the day, success is usually measured in volume, not quality. I would prefer Mintos to rethink this and clearly show which LO are hedged, and let the market work based on each investor risk appetite.
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Since Erdogan sucks at economics I firmly believe there isnt't going to be an improvement for the exchange rate of lira and euro. There should be a democratic vote between establishing a payment plan for Wowwo or accepting payment in Lira. Maybe it's even possible to handle this on per client basis so everyone can decide for themselfes.
Is some already mentioned: getting paid back less is better than getting paid back nothing.
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Definetely think about accepting lira
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I have just been browsing the Aston Martins on the wowwo website. Seems they still have a viable business.
I imagine they did not like being kicked off Mintos - they´ll need to find that money elsewhere to lend to their
customers - maybe their customers will use other finance companies and wowwo will miss out on that
business. If Mintos were to allow wowwo to list there loans again , in Turkish Lira - it would not concern
me - the offer might be a good incentive for wowwo to fulfill their obligations.
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In summary looks like none of the non-euro-zone lenders have any meaningful currency edging strategy in place, or at least mintos has no idea if they do and it is not accounted for in its scores. Given this and the current market instability I am not sure 6-7% interest rates are high enough compared to the actual lender default risk and the default risk of mintos itself which is definitely not 0.
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They have functioning business in Turkey.
No reason to receive payments in Liras. They can convert the Liras first into euros and ammortize the loans in euros as it was in the contracts.
However, if they want to repay in Liras, I have nothing against them issuing loans in Liras even on Mintos. Then the investors agree the currency risk.
I assume their loan contracts are legally binding so in court they will be ordered to repay in euros?
I am not willing to receive Liras because it is not the currency I can deal with in my country.
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