In the ninth episode of SME Banking Club Podcast Series, we speak about micro leasing for entrepreneurs in Poland with Marcin Grodowski, COO & co-founder at LeaseLink.
Olena Grinyuk: Marcin, please tell us more on yourself and LeaseLink. You have professional background in leasing industry before you founded LeaseLink, you’ve been working for traditional leasing companies, Raiffeisen Leasing among them. Why have you decided to do a startup in leasing industry? What is the gap in Polish leasing market that LeaseLink covers?
Marcin Grodowski: LeaseLink is the only leasing company in Europe which provides leasing services 24 hours a day, seven days a week, 365 days a year. We purchase assets for the customers paperless and online. We have decided to open LeaseLink fintech company because we were convinced that our product suits perfectly to our customers’ needs. We have noticed that traditional leasing offer didn’t meet clients’ expectation an is not friendly. Why? Currently, people have no free time for filling forms or delivering documentation and what is the most time consuming – having meetings with sales representatives, of course, only in working hours. Moreover, entrepreneurs need financing of a wide range of assets in the different amount, not only the expensive for popular ones covered by traditional leasing companies. Financial investor of LeaseLink is Pragma Faktoring, the company stock listed on the Warsaw Stock Exchange. The Group of Pragma consists of the leasing, factoring and debt collection company.
Leasing market is changing rapidly, and nowadays we can split leasing companies into two sectors: micro-leasing with LeaseLink as the leader in the segment of small amount transactions proceeded in automatized and standardized way and let’s call it traditional leasing focused on financing cars and high-value assets serviced 100% by the sales forces. We are convinced that both segments are needed by the market however speed of growth may be expected only in a micro-leasing segment.
OG: How many customers do you have at the moment and what is your targeted segment of entrepreneurs?
MG: LeaseLink cooperates with over 2500 partners. We are delivering leasing to e-commerce, banks, brokers, networks and via white label programs. It’s unique combination of multichannel on the market. LeaseLink acquires daily 150 new clients with 20% monthly increase. But our IT solution provides setting million leasing calculations monthly to our potential customers, and that’s the accelerator of our growth. We believe in Polish companies, so we finance all segments of the economy including start-ups but we are not grouping companies in targeted or restricted segments like the other companies do, we simply do it basing on our algorithm which suit products to the customers on a real-time basis. LeaseLink provides a wide range of product financing off typical operations of financial leasing, investment loan and newly introduced rental. Use it, give it back and take a new one.
OG: And what are the main types of equipment you finance?
MG: It differs. We finance various types of assets: IT, smartphones, household goods, customer equipment, construction equipment, furniture, software and many others. But we also meet very individual needs of customers by financing rare and exotic assets. And together with our partners, we tailor it to differentiate assets and products.
OG: What is the range of your limits? What is the maximum and minimal amount you can finance?
MG: It’s simple. We finance assets from 500 Polish zlotys (app. 120 EUR) up to 50000 Polish zlotys (app. 12000 EUR). Tenors are different due to assets product time: from 6 months to 48 months.
OG: So how exactly does leasing work in LeaseLink? Let’s say I’m an entrepreneur and want to buy some equipment. How can I do it with LeaseLink?
MG: It’s also simple. We make everything simple. All process lasts 20 minutes, 100% online. You find the asset on the web or in the offline point, you input it to the application, you input simple data: email, phone and your tax number, accept the offer, then you fill simple formulary – only 6 fields of other data, transferred from excel or other sources and verify yourself by one pin bank transfer – it’s essential to protect against frauds. Within 15 minutes contract is ready for acceptance and you’ve got the leasing.
OG: Which criteria customer should meet to have your positive decision?
MG: We act differently than the market; we are not having the black list of the customers. Our policy is simple – we are not financing sector excluded clients. So, if you’ve got a problem, you are blacklisted, you’ve got bad track records of the transactions, you will be rejected. But if you open your business, we believe in your business, and you have got good credit history and reliable social media, we are pleased to finance you.
OG: And if I don’t have a good credit history, if I don’t have any, as I’m, for example, a startup?
MG: Traditionally companies are basing on the external data connected with the financials of the customer. We have the algorithms helping us measuring a customer based on other factors. So, using social media, using the track records, using other sources which are treated as the comfort factors in other companies for us is a real data for analysis.
OG: How is it possible to approve in 15 min? Are there any human beings involved in this process? Or just robots? 
MG: In our company, bots are presents on every step of leasing application. So, if you choose the offer, it helps you to choose the best offer to the client. It decides on the scope of data which are collected in the formular. It makes the decision. Of course, it’s also supported by people in case of some exclusions, but generally, everything is automated. We are using several advanced solutions like event processing, so it prevents against frauds, we are using scoring models to assess the risk, and these models are also auto-calibrating, so in the changing environment, they are changing themselves. It’s something between Artificial Intelligence and machine learning. These components are included in our infrastructure and help us in doing business. LeaseLink also obtains a lot of external data, so we collect data from government resources, we collect from the blacklist, we collect data from the internet, we collect and measure the activity of our customers before and after they have the leasing. All these factors are combined together to find the final decision to the customer.
OG: When customer gets your approve – are you signing any leasing agreement with him?
MG: Yes, unfortunately. In 95% of our contracts are signed manually.
OG: So, paper is existing in the process..
MG: Yes, only 5% is digitalized. Unfortunately, Polish Law requires signed version of leasing contract. Everybody knows that’s the total anachronism and comparing to the banks or loan world where it was changed, it causes that and shows clearly how innovations are treated by the leasing companies because most fundamental change for digitalization was not so far implemented. We are strongly motivated to change it, and we are fighting with our cooperatives to change it in the Polish Law, but so far nothing is done by the other part of the sector.
OG: How do you do this? Do you send it by the courier? Or customer have come to your office?
MG: Mostly we are sending it via courier. It works almost the same like signing a contract on the phone with the providers. We send the courier, courier takes back the contract and delivers it to us. It causes that the process becomes a bit offline, but that’s the only solution to meet the Law requirement.
OG: How much does it cost generally for the customers and how the repayment is done actually?
MG: First of all, we present the whole cost to the customer directly at the beginning of the process. Our aim is to present the offer which is 95% of the probability will be delivered at the end, so, not to be surprised negatively. So, we guarantee no hidden options or additional fees in the process. It’s around 10% real cost of the financing for the customer. And the repayment is very simple. The instalment is flat. So, if we agree on the contract for 24 months, every instalment will be equal, let’s assume 120 zlotys, so every month, at the beginning of the month, you receive the invoice with the total amount 120 zlotys with payment terms. For most our customers direct debit is set in their bank and that’s the solution for payment.
OG: You cooperate with three big banks in Poland: Raiffeisen Polbank, BOS Bank and ING Bank Śląski. So, do you see here not a competition, but a partnership? What is the model of cooperation with these banks?
MG: Nobody believes us, but that’s real cooperation. Cooperation brings benefits for both sides, and we really treat each other as partners. For banks, our micro-leasing offer suits perfect to the product portfolio by completing it. For us, it is an access to the bank’s clients. Comparing the bank product with the fintech product, fintech products act more efficient, and it’s not so over regulated like the banking sector, makes offer suitable to the customer. Our bank partners possess their own Groups’ leasing companies, all of them have it. But they decided to cooperate with us because we are not competitive with their companies, they are doing their own business with the higher amounts, we are doing small business with a lower amount, and altogether suit offering to the bank. And this is a natural trend with the banks to cooperate with fintechs and not to fight.
OG: What is the model of cooperation with them? Is it a white label solution? OR bank customers know that they are directed to you to get a leasing?
MG: In the end, they are, of course, informed that we are the leasing companies because the bank cannot omit that information. It depends on the model. Sometimes bank at the beginning presents us as the partner and sometimes in the middle of the process. However, they are selling it as cooperative partner product, but also, they are facing the product, so the product must be the same quality as the product of the bank because their sales forces are responsible for selling it and having complains from the client would be a problem for the bank, not for us. So, in all the process of integration with the bank, the crucial part was the security, structure of the product and the way how it’s serviced and how it’s sold by us, if it meets the requirements of the bank and the highest quality of doing business.
OG: Does the process of approving differ if the customer comes from the Bank to you?
MG: Mainly, not. However, we can collect some additional information about the customer which cause that the creditworthiness of the client from the bank is better than the other clients. But generally, all the customers are treated with the same algorithm, and algorithms also take into consideration the data from the bank if provided.
OG: So, banks are providing you the data?
MG: No, they are not providing us with the data. However, we have the technology enabling us to possess the data of the current accounts information form the customers, of course, after the agreement from the customer side.
OG: Does this channel – I mean cooperation with the banks – does it make a big part of your business? What are your main distribution channels?
MG: No. We created LeaseLink as the multichannel distribution of the products. We are present in the resellers, banks, brokers, top chains, like Mediamarkt, Saturn, RTV, Intercars or white label programs like Eden, as well as in the offline points. So, it is important for us to grow in all segments, not only focus on the easiest way of doing business, and I think that multichannel distribution among IT solution are crucial for the value of the company, so we are working on a smooth increase in every channel of our distribution.
OG: What is the quality of your portfolio? owHow do you deal with delinquencies?
MG: Good, really good compared to the market. In the past, we were responsible for the risk management, me personally, in the leasing company, and comparing to the best practice in the market we can say the portfolio is really good and it meets the requirements.
OG: What do you do if customer doesn’t pay the instalment? What is the process then?
MG: We love services. We buy services everywhere. The same is with the vindication process. In the Group we’ve got the company which is specialized in debt collection company, so every customer with the problem is serviced by the external company. So, everything that can be outsourced is outsourced.
OG: How many people work now in LeaseLink?
MG: Right now, it’s 25 people working in the Head Quarter. Plus, we have a group of subcontractors in IT, SEO and other issues, so the pool of people is bigger. However, we are focusing on not increasing significantly the number of people inside but simply outsource.
OG: What are your nearest plans and targets?
MG: So, firstly we can split it into two areas: Poland and abroad. In Poland, we see the potential increase in two segments. Firstly, it is consumer lease – the product which exists on the market but right now is not properly sold by the other companies, we see the potential growth especially in the rental area. The second one is delayed payment, so, payment after 30 days, 40 days for the customers. That’s the potential growth. In cooperation with our big partners, we are looking for the external expansion, so we are focusing right now on the measuring the risk of entering the Western Europe countries. It’s a plan for the next year.
OG: Good luck with it! And thank you very much, Marcin, for the conversation!
MG: Thank you!
Marcin Grodowski will speak at Alternative SME Finance Panel during CEE SME Banking Club Conference 2017 (23-24 November, Krakow). Join us to discuss micro leasing live!
