„I think our loan is really unique.“ – Interview with Petko Plachkov (Co-Founder of CommuterClub)

Commuter-ClubKlaus-Martin Meyer: Petko, you are one of the founders of CommuterClub. Would you please introduce yourself and your company to the Crowdstreet readers?

Petko Plachkov: I am the co-founder and also run CommuterClub. I launched CommuterClub about a year ago as a new and innovative way to help commuters get a better deal by making the big discounts of annual tickets more affordable.
Previously I used to work at McKinsey consulting to the big UK banks and at an investment firm called Resolution. I was actually pursuing an MBA in the US at Wharton when I decided to take a leave and focus on CommuterClub full time.

The inspiration for CommuterClub was twofold. On the one hand we saw the terrible state of consumer financial services, where customer trust had been repeatedly misused through the financial crises and most recently with the pay day lenders like Wonga. Our goal was simple, honest and transparent credit that actually allowed a consumer to save money by making the most discounted ticket affordable. I think our loan is really unique. Unlike normal credit where default means debt collection, we link our loan to the refund on a cancelled annual ticket. That means we are fully collateralised at any point in time, meaning almost no loss on default and also allowing a customer to cancel at any point. We actually don’t have defaults or credit losses.

As a resident of London we also were disappointed by the lack of options for commuters. By making the annual more accessible we are just making a widely available product affordable for more commuters.

Klaus-Martin Meyer: How did you come up with the idea to develop your own business model with a little help of a p2p marketplace? Would it be possible to go ahead with a traditional bank as well?

Petko Plachkov: Great question and one that get us very excited. From the outset we decided not to work with the big banks and to build on the growth of new and innovative financing platforms like peer-to-peer. Working with RateSetter allowed us to get going quickly, providing us with low cost financing which we could then pass onto our customers to offer an attractive and simple loan with interest of just 5.6%. P2P provided us with the flexibility to deliver a product that met the needs of consumers (low cost, simple monthly instalments and cancellation). To a certain extent CommuterClub is a enabled by the growth of P2P, I think if we had gone with a big bank, the model would never have been tenable.

Klaus-Martin Meyer: I was imprested to read that close to 1500 costumers already tested your platform. How did you manage to achieve this figur

Petko Plachkov: We have had great progress since we got going last summer. Our book is close to £3mn and we are seeing fantastic customer referrals (approaching 50% which is absolutely remarkable for a credit product). While we accept that this product is not for everyone, there are literally millions of consumers who could benefit with our solution. Our goal is to find cost-effective and honest distributors to tell our story to Londoners.

Klaus-Martin Meyer: From an online marketing point of view commuters seem to be an attracive target group. They need a renewable for the ticket every single year. Are there more advantages comming with the commuters that could be a reason for low costumer acquisition costs?

Petko Plachkov: Apart from the obvious cost saving, we actually deliver a fantastic way for a regular commuter to pay for public transport. We have fixed monthly payments via Direct Debit giving the user unlimited access to public transport. It’s a bit like a Netflix for commuting and we think this aspect is just as important as savings. Commuting is generally not a happy moment in anyone’s day, if we can make it slightly easier and more manageable, that is a huge consumer benefit

Klaus-Martin Meyer: Which risks do you see from the investors point of view that are involved with your business model?

Petko Plachkov: Inevitably as an early stage business, there are many risks worth considering. We work within the price difference between Annuals and lower duration tickets, if this narrowed our customer proposition would naturally be reduced. However, the relative price of Annuals to Monthlies and Weeklies has barely change in over 50 years in the UK so that appears a small possibility.

We also need to be careful of interest rate risk. If inflation does come back and rates rise, our cost of financing will rise with it squeezing margins. However, we think we can absorb any interest rate increases by adjusting pricing. We also expect relatively low inflation for the short to medium term.

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