Esto Review 2024: Why You Should Invest! (No, seriously!)

Esto is an Estonian fintech company that specializes in payment processing for both online and offline commerce. The company offers solutions for merchants (B2B) and their customers (B2C).

In its end-customer business, Esto generates the majority of its revenue (approximately 90%) through various credit offerings. Since September 2019, the company has been financing a significant part of its loan portfolio via the P2P marketplace Mintos.

In a personal conversation with Esto CEO Mikk Metsa, as part of my P2P Lending Journey 2024, I learned more about the company’s history and business model, the importance of different financing structures, and how Esto approaches the topic of risk management. My Esto review provides a deeper look into the company and whether it might be worth investing in the Estonian company’s assets.

Please note that this Esto review is based on my personal research. I do not guarantee the accuracy of the following information or any investment decisions that may be derived from it. Make sure to do your own due diligence before investing on Esto or any other platform. Read more in the disclaimer.

Further analyses of P2P platforms can be found on my P2P Platform Review page.


Summary

Before we get started, here is a quick summary with the most important information about Esto.

  • Esto is an Estonia-based fintech company founded in 2017 that specializes in payment processing for online and offline commerce.
  • The company generates the majority of its revenue from credit offers for end customers (B2C) and focuses exclusively on the Baltic markets.
  • Since September 2019, Esto has been financing some of its loans via the P2P marketplace Mintos, where it is one of the top-rated lenders. As of July 2024, investors can also finance Esto bonds through Mintos.
  • Esto has been consistently profitable since 2020, making a net profit of at least EUR 800,000 every year.

Founded / Started:2017
Legal Name:ESTO AS (LINK)
Headquarter:Tallinn, Estonia
Regulated:No
CEO:Mikk Metsa (2016)
Primary Loan Type:Consumer Loans
Collateral:Buyback Guarantee
Skin in the Game:10%
Expected Return:9,7%
Bonus:Up to EUR 200 Bonus via Mintos

About Esto

Esto-Bonus

Esto is a fintech company founded in Estonia in 2017 that specialises in payment processing in online and offline commerce. The company offers fully automated and technology-driven solutions for merchants (B2B) and their customers (B2C).

Esto offers a variety of different loan products, including short-term consumer loans, BNPL solutions and credit lines. Esto earns around 90% of its revenue from net interest fees.

The loans are financed through a mix of equity, subordinated loans, bank loans, bonds and P2P loans. Since September 2019, Esto is collaborating with Latvian P2P platform Mintos, where a significant part of the loan portfolio is financed. Of the EUR 70+ million portfolio (as of June 2024), the Latvian P2P marketplace accounts for EUR 19 million (27%).


Ownership and Management

Who are the main shareholders and management executives behind Esto? Let’s have a look!

Esto Ownership

Who owns Esto? The company is operated by “ESTO AS“. This company in turn belongs to the parent company “ESTO Holdings OÜ“. The six main shareholders, who were also involved in the founding of Esto, include:

  • Osaühing Wellman: 19,92%
  • METCAP holdco OÜ: 19,6%
  • OÜ MRTN INVEST: 19,2%
  • Entourage OÜ: 15%
  • EESTI EKSPORT OÜ: 15%
  • Electric Sun 20 Capital Investments OÜ: 7,3%

Esto-Review-Ownership

Esto Management

Esto-Review-CEO-Mikk-Metsa

Mikk Metsa is the CEO and face of Esto. The Estonian-born entrepreneur graduated with a Bachelor of Business Administration from Tallinn University of Technology in 2012. He then began his corporate career at the investment bank Redgate Capital, where he gained a better understanding of the non-bank lending market.

After two more stints at Baltcap, the largest private equity fund in the Baltics, and Trigon Capital, an asset management firm in Estonia, he founded Esto with two other business partners.

During our personal meeting, he made a very competent and open-minded impression. Our recorded conversation can be listened to in the following podcast.


Business Model and Finances

Throughout the due diligence process, investors should also have a look at the business model of a P2P platform as well as the overall financial situation. How does the company earn money? Does the platform operate profitably? And how well is the company positioned financially? In the following paragraphs of this Esto review, you can follow-up on those questions.

Business Model

Esto-Review-Business-Model

ESTO’s business model is relatively simple to understand: At its core, the company seeks to facilitate payment processing between the merchant and the customer in an e-commerce environment. Therefore, real-time payments are offered on the merchant side and payment plans (credit offers) are provided on the customer side.

In essence, Esto has three loan products: Credit lines, BNPL loans and short-term consumer loans.

The average loan amount is less than EUR 1,000 per customer, whereas the maximum loan amount is EUR 10,000. However, this loan amount can only be achieved through good repayment behaviour in the past. For first-time customers, there are initial limits of max. EUR 4,000 for credit lines and max. EUR 5,000 for consumer loans.

According to its own information, Esto is currently having a customer base of 550,000 people. With a population of 6 million in the Baltic region, this is an impressive proportion. The same applies to the repeat rate of borrowers, which according to the CEO is at 60% (definition: at least one transaction in the last 12 months).

Monetization

Esto-Review-P2P-Monetization

How does Esto earn money?

Revenue is largely made up of interest income, which is charged to borrowers. According to the Esto annual report, this enabled the company to generate a revenue of EUR 17.2 million in 2023.

This was offset by financing costs of EUR 5.7 million, which corresponds to a net profit of EUR 11.5 million.

In addition, there was a revenue source of around EUR 2.7 million in other fees. These include processing fees for private customers, fees for premium subscriptions and fees for instant payments.

Esto can achieve a margin of around 40% ROI with its loan portfolio.

Profitability

On the Investor Relations page, Esto’s business figures can be traced back to 2020. According to publicly shared reports, the Estonian company has been consistently profitable since 2020 and has generated a net profit of at least EUR 800,000 every year. The record profit was achieved in 2023 with EUR 2.85 million.

Esto-Review-Profitability

Esto has currently been profitable for a total of 22 quarters in a row, including Q1/2024.

Balance Sheet

Esto-Review-Balance-Sheet

As Esto was financed with debt capital from the start, the company wanted to become profitable as quickly as possible.

The entire equity on the balance sheet was therefore self-generated and has been increased to up to EUR 8.7 million in recent years.

The equity ratio has also improved steadily over the years, while KPIs such as the liquidity ratio (1.51) and the debt-to-equity ratio (7.1) are also in a presentable range.


Sign Up and Bonus

If you want to invest in assets from Esto, the only option at the moment is to take the road via Mintos. There you can invest in Esto’s loan portfolio as well as in fractional bonds. 


Investing in Esto Assets

What are the opportunities for investors to invest in Esto assets? You will find all the information you need to know in the following sections.

Collaboration with Mintos

Esto has been financing a part of its loan portfolio on Mintos since September 2019. In a personal conversation, CEO Mikk Metsa was extremely positive about the cooperation with the Latvian P2P marketplace to date. In his opinion, Mintos has become even more professional following IBF licensing, although this has also increased the bureaucratic requirements for financing new assets.

Esto has currently no plans for additional cooperations in the P2P lending environment.

Loan Offering on Mintos

On Mintos, Esto offers private and unsecured consumer loans from Estonia and Lithuania. The interest rate for these loans are often between 8% to 10%. The assets are secured with a buyback guarantee from Esto (60 days) and the lender participates in the loans with 10% equity (skin in the game).

Esto-Review-Mintos

Important for investors: After the outbreak of the coronavirus pandemic, Esto was one of the few lenders on Mintos that did not introduce loan extensions or pending payments.

The Estonian Esto lender also has the highest Mintos risk score (8.6 points) of all non-affiliated lending companies.

Esto Bonds on Mintos

In July 2024, Esto began offering an investment in a fractional bond via Mintos. The framework conditions are as follows: a term of 3 years, maturing on 31 July 2027, a coupon rate of 10.5%, and quarterly interest payments.

Esto-Review-Mintos-Bond

Esto initially plans to offer up to EUR 1 million on Mintos. If there is sufficient demand, up to EUR 6 million would also be conceivable.

Esto Forum

If you have any questions about Esto, you can exchange ideas with more than 1,000 other private individuals in the re:think P2P lending community on Facebook.

Alternatively, you can get the latest Esto news and updates via my channels on Telegram or WhatsApp.


Esto Risk

Before investors invest in Esto assets, here are a few comments on how the company is approaching risk management.

Risk Management

When it comes to lending to private customers, Esto relies on three risk assessment levels.

  • Firstly: The acquisition of borrowers only occurs during the active purchasing process in (online) retail and not in the case of an occasional loan application, where the procurement of funds is not directly related to a transaction at the retailer.
  • Secondly: The data provided by the borrower must be publicly verifiable, as the information provided by the borrower alone cannot be trusted.
  • Thirdly: Gradual risk management. A larger loan amount is only increased through positive repayment patterns.

According to Esto CEO Mikk Metsa, these three factors form the pillars of Esto’s risk management to predict 90% of borrowers’ payment behaviour. The remaining 10%, however, can be optimised at different points.

Recovery and Collection

Esto-Review-Risk

Esto does not waste too much time with borrowers who are unwilling to pay. Instead, the company forwards these cases to external debt collection agencies.

In reality, this means that loans that are up to 90 days late are still processed by the local teams, whereas all other loans that are more than 90 days late are sold to external collection agencies.

According to CEO Mikk Metsa, the average discount is around 60%, which is in line with the market average.

On the other hand, Esto’s historical default rate (NPL) is very impressive, with less than 2%. At the same time, the margin that can be achieved with those loans is at 40% ROI on average.

Repayments

Esto has been on Mintos since September 2019. During this time, Esto has always honoured the buyback guarantee and repaid loan defaults to investors on time. Even during the coronavirus crisis, when many lenders struggled with liquidity, Esto did not introduce any schedule extensions or pending payments.

According to the Mintos Risk Score, Esto is rated as one of the best lenders on the Latvian P2P lending marketplace.


Pros & Cons

In this section I have listed the biggest advantages and disadvantages of Esto.

Advantages

  • Track Record: Esto has been on the market since 2017 and has built up a highly profitable business model for payment processing in (online) retail during this time.
  • Profitability: With the end of the second quarter of 2024, Esto has been able to deliver a profitable result for a total of 23 quarters in a row.
  • Repayments: Since 2019, Esto has been financing a part of its loan portfolio via Mintos. So far, there have been no schedule extensions or pending payments.
  • Transparency: Esto regularly publishes audited annual reports.

Disadvantages

  • Expected Return: Due to the good performance of the lender, interest rates for loans are very low.

Summary Esto Review 2024

Esto-P2P-Kredite-Reise-2024-Mintos

What is the final verdict of my Esto review?

Esto is an Estonian commerce company that has been among the five beneficiaries from my recent travels through the Baltic States.

The company pursues a clear strategy, is sustainably profitable, and is a reliable lender that fulfills its obligations to investors even in times of crisis. Esto’s quality is well reflected on Mintos. The company has one of the best risk scores on the platform, which is why the interest rates for Esto loans are significantly lower.

After having Esto on my investment list for some time, I participated in the first tranche of the bond offered on Mintos with EUR 4,000 in July 2024.


FAQ Esto Review

What is Esto?

Esto is an Estonia-based fintech company founded in 2017 that specializes in payment processing for online and offline commerce.

Is Esto profitable?

According to publicly shared reports, the Estonian company has been consistently profitable since 2020 and has generated a net profit of at least EUR 800,000 every year.

How does Esto earn money?

Revenue is largely made up of interest income, which is charged to borrowers. According to the Esto annual report, this enabled the company to generate a revenue of EUR 17.2 million in 2023.

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