Daniel Drummer, cfo of German digital lender auxmoney, answers SCI's questions

Q: auxmoney re-opened the European securitisation market with its third social bond issuance, Fortuna Consumer Loan ABS 2023-1. How does this latest deal compare to auxmoney’s first two ABS transactions?
A: This is our third and largest securitisation at €350m, which directly follows our first securitisation in September 2021 at €250m and our second in May 2022 at €225m. Overall, the structure is similar to these first two deals. However, this deal is really quite unique as it makes us the first company able to price or launch a successful ABS deal in euros since September last year when the whole European consumer ABS market was basically closed (SCI ABS Markets Daily - 6 February).

We saw a lot of investor demand for this transaction, which meant we were able to tighten the pricing compared to the initial guidance that was given out. We were oversubscribed a few times over for all of the tranches - not least because investors now know us as a repeat issuer, but also because they have been able to see the strong track record we have had over the years.

Q: How does securitisation fit into auxmoney’s wider mission?
A: Since auxmoney was founded more than 15 years ago, we have grown to become one of the largest digital lenders in Germany. We can offer a fully digital process - which makes use of our advanced data analytics and machine learning models.

Compared to many traditional high street banks, we are able to offer our customers a more digital, more convenient and much faster means of borrowing money. In fact, for 90% of our customers, we offer a fully digital process.

Another key part of our mission is this element of financial inclusion. We are able to offer credit to some customers who would not be served by many traditional banks – which is why we have been able to obtain the label of a social bond in this recent securitisation.

Customers in this underserved category may include students, people in probation periods, freelancers and the self-employed. So this securitisation is just another element which allows us to keep pursuing our mission and purpose.

Q: How exactly does auxmoney’s more differentiated risk assessment offer more people access to finance?
A: Our differentiated risk assessment includes leveraging several data sources like open banking data with advanced data analytics and machine learning models, which we’ve built based on more than 15 years of data history. What the differentiated credit assessment really means is that we use more data and more advanced models to analyse the data than traditional lenders. Ultimately, this allows us to come up with a more differentiated risk assessment and pricing for many customers, especially in instances where traditional methods would fall short.

Q: What are the prospects for more securitisation transactions for auxmoney? 
A: Our securitisation strategy has now proven to be successful through several different stages of the macroeconomic cycle. We have been able to place securitisations every year since 2021 now, which has also added strong proof to our business model and our credit risk track record. So, we do expect to continue having securitisations as an important pillar of our funding strategy, while we continue to have institutional investors investing directly into the platform.

Q: It is predicted that Germany specifically will head into recession this year. Has auxmoney yet felt the impact of broader macroeconomic pressures?
A: So far, we’ve seen our portfolio perform very resiliently, and we haven’t seen any macroeconomic distress in our internal data. Nevertheless, we are very prudent and proactive when it comes to risk management, and we monitor the external environment very carefully. So, if the macroenvironment was to change at any point, we would be able to act quickly.

Q: Do you expect the recession to impact the prioritisation of ESG by investors?
A: I would argue that ESG is here to stay. After speaking with investors, it is clear that the importance of the different aspects of ESG may well be something that stays independent from the current macroeconomic environment.

For us, ESG is an important subject - independent of macroeconomic developments - and we are proactively furthering this ESG agenda, both internally and externally. When we speak with investors, we observe the same interest in ESG - even more so now than a few years ago.

More investors are focusing on ESG and really appear to be keen to understand what is really behind things like a social bond label. Nowadays, we have had some investors come to us and tell us that they have deliberately invested in our deal because of the social element.

Q: What is in store for auxmoney’s business going forward?
A: We want to continue to focus on growing in our core markets. There is still plenty of opportunity to be found – as there is still a massive market of both underserved customers and those who come to us specifically for the advantages our digital platform can offer them, in terms of efficiency and convenience. We really want to build on what we are good at, expand that further and keep reaping the benefits of the investments made over the past few years - including our funding platform, customer relations and our market-leading risk management capabilities.

Claudia Lewis