A Berlin-based firm has a novel approach to passing on negative interest rates to clients.
Smava is dangling an irresistible goodie (in German) in front of potential clients: money for literally nothing.
The German fintech is offering a loan of 1,000 euros now, with monthly credit repayments of 27.61 euros for four years – an interest rate of -0.04 percent. Why?
«We want to make clients in Germany aware that loans are cheaper online than with traditional providers like banks,» Smava boss Alexander Artope told German magazine «Computerbild» (in German).
Rolling Over
The fintech isn't in a position to write loans itself – it is drawing on the services of Fidor Bank in Munich for that. The lender will lose at least 6 euros on each 1,000 euro loan, but hopes that clients will roll them over after the three-year maturity into credit at normal conditions.
With the European Central Bank poised to step back from ultra-loose monetary policy later this year, Smava's bet is that interest rates will be out of negative territory when the loans expire, providing an opportunity to make some money, not give it away.
