Monedo, once the largest German startup in the fintech industry backed by the likes of billionaire Peter Thiel and media giant Naspers, has filed for bankruptcy after the impact of the pandemic took its toll on the company.
Dr Christoph Morgen, a lawyer at the firm Brinkmann & Partner in Hamburg, told Sifted that the insolvency claim had been filed last week in a German court and that he has been appointed to manage the proceedings.
Founded in 2012, Monedo had specialised in microcredit loans but had struggled to find the right business model and had changed strategy earlier this year to focus on using algorithms to grant loans. The company also changed its name at this point — it was previously known as Kreditech.
But despite winning plaudits in the financial press for the new strategy, the pivot didn’t work, coming as it did in the middle of the coronavirus pandemic.
The company’s fate could signal trouble for the wider industry, and in particular other digital credit providers who may be particularly vulnerable.
Speaking to Sifted in March, Monedo’s chief executive David Chan warned that digital credit providers could suffer if the pandemic triggered a recession. Chan predicted the sector would contract as lenders’ risk appetite went down, despite the fact more loans are needed during a downturn.
Other European fintechs have been suffering as well. On releasing its annual results in July, digital bank Monzo said disruption resulting from Covid-19 has led to “significant doubt” about its ability to continue “as a going concern.”
Laws passed as a result of the pandemic were what, according to German media Finance Forward, caused particular trouble for Monedo. Spain and Poland, two of the company’s largest customer bases, both passed laws that allow borrowers to postpone the repayment of debts: meaning no returns for Monedo.
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Monedo was never allowed to offer loans in its native Germany because it used data about potential customers gathered from the internet to assess their lending risk, a practice not allowed in the country.
Morgen from Brinkmann & Partners was introduced to the company’s 300 employees via videolink on Tuesday and has said he wants to find an investor to keep the company going.
“I plan to continue operations and have already started talks with possible financiers,” said Morgen in a statement. “It is my goal to bring the investor process, which was started before the insolvency application and which according to the Monedo management looks promising, to a successful conclusion.”
Monedo was founded in 2012, is reported to have teetered on the edge of bankruptcy before. Back in 2018, the company’s value went from €200m to almost zero, after several loans to private individuals in India and Russia defaulted, Manager Magazin reports.
The company went on to draft a sustainability strategy, hoping to shore up the business with more solid loans. They also secured investment from Facebook pioneer Peter Thiel and bank investor JC Flowers. The year before, in 2017, the South African media company Naspers had invested €110m.
But the measures weren’t enough to prepare the credit provider for the coronavirus pandemic. Their chief financial officer Mariusz Dabrowski left the company shortly after the pandemic began.