auxmoney — Fair credit opportunities for everyone

In 2006, two students drove through the Frankfurt banking district and asked themselves why banks were needed to borrow money. A year later they founded auxmoney, which has set itself the goal of granting loans independently of banks.

Banks act as intermediaries between creditors and debtors. They take the creditor’s deposits, pay them a small interest and lend the money to debtors at a higher interest rate. But why does the bank have to be involved as an intermediary and get a piece of the cake?

auxmoney has addressed this problem by building a peer-to-peer lending platform. Debtors can apply for a loan and creditors can decide who to lend their money to. If I need a loan of €10,000, I can get €100 borrowed from 100 different people. Because the bank is no longer an intermediary, I pay lower interest as a debtor, while the creditor receives higher interest compared to their bank account.

After a while, auxmoney noticed another problem in the credit market. Banks hardly grant loans <100,000€ anymore because it is not profitable for them. The bank employee must deal intensively with the creditworthiness of the debtor, which is why work invested is not worth it for small loan amounts.

auxmoney also addressed this problem by designing an algorithm that can determine creditworthiness without the help of humans. Today auxmoney makes 70% of all loans without the support or control of humans. This has the advantage that 1) even small loans are worthwhile and 2) more favorable loan terms can be offered due to the lower workload.

Today, auxmoney has distributed over 3 billion euros to over 400,000 loans in Germany alone. This has enabled many people to access credit who would not have had a chance to get credit from conventional banks.

I find this business model incredibly inspiring because the financial sector is very conservative and often puts profits ahead of values and ethics. Many people assume that social products are less profitable. auxmoney has proven that profitability and social responsibility can also be combined in the financial sector and has outstripped other players with its platform.

Nevertheless, auxmoney must be careful not to lose sight of the financial health of debtors. Loans can put a psychological strain on people and can also mean financial ruin if the volume is too high. The responsibility that auxmoney bears for these people is correspondingly high. To address this problem, auxmoney is heavily involved in financial education. Debtors get access to learning content on how to deal with a loan, how best to budget or save money.

auxmoney is therefore still trying hard to pursue its original goals and to remain true to its values.