Peer-to-peer bitcoin lending company Bitbond has secured €200,000 in seed funding during a round led by early-stage investment firm Point Nine Capital.
The funding will help Bitbond broaden its user base and accelerate loan origination. The company will also grow its programming team to improve the platform's user experience.
Bitbond is also planning new features including exchange rate linked loans, user communication tools and analytics resources for lenders, as well as an improved mobile platform.
In its pursuit to make investment and finance businesses accessible worldwide, the Berlin-based firm aims to become another essential building block in the bitcoin ecosystem. "Wallets, payment providers, brokers and exchanges are already on a fairly well-developed level," said founder Radoslav Albrecht.
"Financial services are just at the beginning and Bitbond wants to contribute to a bitcoin ecosystem where financial inclusion isn't just limited to cashless, instant worldwide payments."
Citing the warming attitudes of British regulators toward bitcoin and mobile technology, Point Nine Capital co-founder and managing partner Pawel Chudzinski said that cross-border trade and services activity in the EU is expanding steadily. As a result, he added, there are more international payments transpiring – however:
"International payments are still very expensive if you're using traditional banking services, especially when the transactions are small. To focus on Bitbond, I think lending smaller amounts of money internationally to private customers and small businesses is still rather unheard of."
A marketplace, not a bank
Bitbond launched in July 2013. It has since funded more than 180 loans worth over €36,000 ($48,000) to date, and has a user base of approximately 4,100 people from over 100 countries.
Users wanting to take out a loan or invest their savings can tap a global market to do so independently of family, friends or banking institutions – they only need a smartphone or computer with access to the Internet.
Because of the platform's peer-to-peer system, borrowers receive loans at affordable interest rates, and lenders gain higher interest rates compared to other fixed income asset classes.
Albrecht emphasized that although the company might function as a bank, it doesn't operate as one. Bitbond, he said, is a marketplace that connects borrowers and lenders on a global scale.
He told CoinDesk:
"We basically fulfil functions that the bank typically does. We provide credit and we provide investment opportunities, but there is one crucial difference: we don't have the balance sheet. We only connect borrowing and lending […] A bank stands more in between the two, while we just connect them."
Describing user activity, he said that borrowers disclose personal and financial information during sign-up and are verified once they have been deemed creditworthy. If they're denied, they can publish loan requests detailing how much bitcoin they need and why.
The lenders that sign up, he continued, want to support bitcoin projects or come to the platform to earn interest on their bitcoin savings. They decide independently which projects they find interesting.
Albrecht pointed to globalization, the recent credit crunch and the European regulatory environment as influential developments that guided his attention on the bitcoin economy for the business he would eventually build.
"In many of these economies (eg Spain, Italy, Portugal) small businesses contribute a significant portion to the country's GDP and employ the majority of the workforce. Bitbond does not only focus on emerging markets but also on European economies where banks don't live up to their expectations to provide credit to the real economy."
Chudzinski said that the Bitbond team's strong expertise in bitcoin, technology and finance played a crucial role in its investment decision. As well, their backgrounds in economics, financial services and banking perhaps further validate their leadership in international bitcoin lending.
A former Deutsche Bank trader who became an industry consultant some time after leaving the German banking giant, Albrecht spent roughly six months in Sub-Saharan Africa working on a post-merger integration of two Nigerian banks.
There, he said, he was exposed to an economy where few people have bank accounts, but in which access to mobile payments are "already quite the norm". He called the experience a "crucial" part of the beginnings of Bitbond, concluding:
"I believe that had I not had that experience, had I not seen it over a longer time period … I'm not sure I would have believed in the potential that bitcoin has without those experiences."
Lending image via Shutterstock