Tag: Fintech Spotlight

Fintech Spotlight Cheq – A Financial Angel on Your Shoulder

In the latest of our “Fintech Spotlight” series of posts, we look at a new player who is attempting to disrupt Payday lending using a digital platform and smart analytics. As normal, DFA was not paid for this post, and the views expressed are our own.

I caught up with CEO & Co-Founder of Fintech Cheq, Tarek Ayoub, to discuss how Cheq has the potential to prevent thousands of vulnerable Australians from turning to predatory payday lenders, with their sky-high interest rates and fees, and their vicious repayment structures which are designed to keep people trapped in a crippling cycle of debt.

Cheq Founder – Tarek-Ayoub-and-Dean-Mao

In fact, Cheq has just raised $1.75 million in debt and equity to launch a revolutionary ‘Pay On-Demand’ (POD) solution. This allows working Australians facing a cash shortfall to access their accrued wages instantly up to $200. Cheq charges a fixed transaction fee of 5 percent with absolutely no additional fees or interest, compared to the 52 to 1,000 per cent annualized percentage rates charged by payday lenders on similar amounts.

We know there are around 5.9 million Australians currently living paycheck to paycheck who often resort to payday lenders during cash shortfalls.

Ayoub, an ex-management consultant, with a track record in the finance sector, highlights the rise of the ‘on-demand’ economy. “As our society increasingly embraces the ‘on-demand’ model of consumption, it is only natural that we begin to see this flow over into remuneration. You can get food, TV shows, cleaning services, dog walking, and everything in between on demand. So why is it that we can’t yet access our own money – money we have already physically worked for – as soon as it’s needed?”

Cheq is available via a mobile app, were individuals can register for the service and link their bank account. Cheq uses the transactional data from that account to analyse and profile the spending habits of the individual, using machine learning, AI, and statistical analysis.

As important as the access to cash – up to $200 is, the real power of Cheq is the personal financial management solutions built into the app which helps users by predicting upcoming bills, categorising expenses, and creating budgets for better money management.

As the relationship builds, Cheq is able to offer suggestions to help manage financial stress. And the $200 advance, ahead of the next wage, is automatically repaid in one hit, or as stage payments repaid in 2, 3 or 4 wage cycles (which can be weekly, fortnightly or monthly). Money is only recouped from a user’s bank account once wages are received, so they can’t exceed their spending capacity or get trapped in debt.

The $1.75m comprised $1.4m equity and a $350k debt facility from investors including VFS Group (an early investor in Grow Super) and Released Ventures. Interest has been received for more funding as the firm has grown to 5 employees and with ambitious plans ahead.

Six hundred users downloaded Cheq from the app store within 2 days of its beta launch and had more than ten thousand downloads in the first month. The typical user of the service is aged 24-35 years, often working in retail, call centres or fast food sectors. 70% of users have also used “Buy Now Pay Later” (BNPL)  apps and 60% had also used payday loans. Most funds were used for transport and groceries, though many users left the money untouched in their accounts. But the most fascinating aspect is the fact that Cheq users were often weaned off payday loans in just a few months.  This could be a game-changer.

Cheq is quite selective in their customer assessment, with 4,000 rejected so far. Applicants are screened via their proprietary assessment model, without relying on external credit scores or other financial data such as property equity or other assets.

By shifting from ‘enterprise first’ to ‘direct-to-consumer’, Cheq puts the power over accrued wages back in the hands of all workers, says Mr. Ayoub: “To achieve a future where Australians are free from payday lender-induced debt traps, the solution must be available to everyone.”

Tarek says Cheq is also aiming to reinvent and pioneer POD as a new industry category by being first in Australia to offer POD direct to consumers. And he is eying markets in the US and India, where he believes a similar solution would have significant take-up.

We think there are some parallels with what AfterPay did with “Buy Now Pay Later” (BNPL) as a category killer, and once again a financial services licence is not required, although in practice Cheq says they would in any case exceed any responsible lending obligations. Cheq is therefore regulated by ASIC.

On average, individuals who registered and completed on-boarding with Cheq took out their first advance 3 days later, with most users stating they liked the piece of mind they had to know that Cheq is there and can be used only when they have a shortfall in funds, according to Tarek.

The most fascinating aspect of this story is the alignment to the customer, with the real purpose centred on financial management and education, rather than turning a quick profit from vulnerable individuals.  But it’s an open question whether Cheq is primarily a data analytics firm, a financial services provider, or a financial coach. The truth lies within that triangle.  Payday lenders are on notice that their business models are likely to be disrupted.

A High Volt-age Bolt of Banking Lightening!

Steve Weston, fresh back from 4 years with Barclays in the UK was listening to the May 2017 budget speech, and his world changed. The budget contained a plethora of banking reforms, including Open Banking, big bank levies, the BEAR (cultural reform) and the potential to allow new Fintech bank start-ups an on-ramp in terms of regulation and capital to foster innovation and competition in the banking sector.

The announcements opened the door on the potential to create a digital bank and platform business, akin to Starling Bank in the UK. Starling was founded in 2014 by industry-leading banker Anne Boden, who not only recognised how technology could transform the way people manage their money and serve customers in a way that traditional banks hadn’t, but also how a platform business can accelerate scale. They have since surpassed one million accounts, raised £263 million in backing and were voted Best British Bank two years running. Their customers also rate them Excellent on Trustpilot.

Throughout 2017 Steve developed the concept, built a team and by January 2019, Volt Bank was Australia’s first neobank to receive an unrestricted ADI licence. It has now begun on-boarding sections of its 40,000-strong waitlist and is announcing a ‘no catches’ ongoing base interest rate of 2.15 per cent on savings, ahead of a public launch planned for early 2020. Volt’s ‘no catches’ interest rate is not subject to an introductory period, or conditions that lead to many consumers not actually receiving a higher rate, like minimum monthly deposits or a minimum number of transactions.

Volt’s unique digital solution was designed to help consumers ‘save often’ and ‘spend wisely’ after CEO & Co-Founder, Steve Weston, noted a distinct absence of personal finance products that actually help to make Australian consumers better off.

Steve Weston, Volt Bank’s CEO and Co-Founder

“What I find troubling is banks saying they are putting customers at the heart of what they do but that isn’t reflected in actual practice. As an example, banks should say what percentage of their savings account customers get the higher advertised interest rates rather than the often very low base rates. The same applies to home loan interest rates. Why is it that new customers get a better deal than loyal customers?

“Banking needs to be done in a better way. Volt’s first product, our savings account, offers a highly competitive rate without any conditions. I challenge other banks to do the same.

 “We are taking our time to build every product and feature in a prudent fashion, including by seeking feedback through our co-creation app, Volt Labs. When we launch to the public in 2020, Volt will be a viable, well-understood, and trusted option for everyday Australians,” concluded Mr. Weston.

So, what’s under the hood?

Well first there are no branches, but it has also been built digital first. and at the heart of the concept is the desire to truly assist customers reach the outcomes they’re seeking and is aiming to help shift behaviours.  For example, the Volt app will also support savings discipline, helping to create a savings habit. This is decidedly NOT a product push.

Customers can onboard in less than 3 minutes and Volt will deliver a customer experience not provided by incumbent banks.

But Volt is also a platform, where providers of digital finance services can connect. Indeed, Volt already has an agreement with PayPal (after Citi, Barclays etc).  Via their API they plan to offer best in class digital services on their platform.

They plan to grow via what Steve called Viral Advocacy and the 40,000 wait-list is part of that plan. 

And Volt is a fully fledged ADI (in APRA speak) and so can offer deposit and savings accounts protected by the Government’s Financial Claims Scheme up to $250k, just like other Australian licenced banks.

They have a road map already laid out ahead, tackling other customer needs, and whilst initial funding for the venture has come mainly from high-net worth investors, they will be tapping a broader investor base to raise the capital they will need to commence lending quite soon.

So, I see this as more than just another upstart Fintech. Volt has the pedigree, the vision and the capability to become a significantly disruptive player in the Australian market. And frankly, as their Deposit rate is no holds barred higher than others in the field, it will be interesting to see how the incumbents respond. But this could just be the start of the long awaited and needed banking revolution here.  Perhaps like Aussie Home Loans disrupted mortgage lending a generation ago?

Things could get very interesting indeed!

Note: DFA has no commercial relationship with Volt Bank. This article is one in our series on digital banking disruption – Fintech Spotlight.

Fintech Spotlight – Digital Disruption of Trade Receivables

In the latest in our occasional series on digitally disruptive innovators, we look at Tradeplus24.

Note DFA is not paid for this article. Our sole focus is to share insights into the disruption which is occurring across the Finance Sector. Trade Receivables in no exception.

I caught up with ex-Nab exec Adam Lane, Managing Director of Tradeplus24 Australia, who is leading the charge into Australia of the Credit Suisse-backed alternative lending start-up. Headquartered in Switzerland, this is a first step in its international expansion plans after raising 120 million Swiss francs (AUD173.6 million) in debt and equity in February.  Tradeplus24 was founded in 2016.

(Left To Right Kelvin Rossely, CRO, Adam Lane MD Australia)

Adam explained that Australia was an excellent jumping-off point because it parallels British regulation, and the necessary data is available, thanks to the early adoption of cloud-based accounting services here. There is a clear need to offer credit to the SME sector, and he believes the regulatory and political environment is right to launch. The fact that commercial brokers already operate here, and Adam’s experience via NAB completed the deal.

The start-up will target SME’s with a turnover of $3-50 million annually, and a flow of account receivables. They will offer variable credit lines range between $500,000 and $10 million.

We know from our DFA SME surveys that many businesses are finding it too difficult to get finance to support their business, and often a bank will require property as collateral which means firms are locked into relationships which are far from perfect. In addition, traditional lenders are struggling to structure cash-flow finance smaller than $5 million, and alternative lenders typically not providing loans above $250,000, so there is a niche to exploit.

Tradeplus24 does not require property as collateral, rather it collateralises the trade receivables, and relies on its digital platform to asses new business and manage existing firms. Thus, while its credit limits may be comparative with significant lenders like Scottish Pacific, Tradeplus24’s automated credit technology assesses SME supply chain data and calculates risk down to individual invoices in real time, making it as fast, agile, and accurate as tech-based alternative lenders.

They are targeting sectors including manufacturing and supply chain, labour hire, etc, any with a large receivables book. They are avoiding the construction sector.

Facilities are offered on a 12-month term, but experience shows that typically firms require help over 3-5 years to take their business to the next level. An application fee is charged at 1% of the facility and 1% ongoing fee annually, and the typical interest rate is in the range of 7-9%. They structure transactions by harnessing insurance to underwrite the account receivables of SME’s, which removes risk for funders and enables Tradeplus24 to offer more competitive rates.

It is a digital play.  This is unlike other players who generally handle paper-based information, and run a “shadow” ledger for customers, requiring more time and effort to maintain and manage.  One reason why Trade24Plus is so named.

Adam said

 “We’ve enjoyed immense and rapid success in our home market of Switzerland in just two years of operations, including attracting investment from the likes of Credit Suisse, SIX Group, and Berliner Volksbank, but we always had global expansion in mind when we developed the business,” said Adam Lane, Managing Director of Tradeplus24 Australia.

“We believe several characteristics of the Australian business lending market and wider economy make our offering uniquely well-positioned for success in this market.

“Lack of competition in Australia not only reduces the need for banks and larger lenders to innovate, but also means they’re free to release capital largely under their own terms. To this end, banks regularly take a charge over an entire business and also secure the loan against the owner’s personal property assets. They also struggle to lend without property as security, which is a major factor contributing to the current shortage of capital for Australian SMEs.

“Secondly, Australia’s weakening housing market is also compounding the inability of business owners to secure funding by offering property as collateral for further borrowing, with many ‘running out’ of adequate security to offer.

“Finally, the Banking Royal Commission has put everyone on notice when it comes to credit; there is simply less of it flowing through the economy as a whole. These factors combined create an urgent need for more innovative business credit solutions which don’t require a borrower to put up property assets as collateral.”

Tradeplus24 is currently in the advanced stages of negotiating a nine-figure debt facility and is exciting about making a difference by enabling many Australian SMEs to reach their growth potential.

They are in the throes of testing and expect to be in operation by early July 2019.

To me this is a classic demonstration of how smart digital disruption can really make a difference to businesses. Such innovation should be welcomed.

Fintech Spotlight – SocietyOne – P2P Lending Getting the Recipe Right

I caught up with Mark Jones, Chief Executive Officer of SocietyOne, Australia’s first and only marketplace lender to reach $500 million in loan originations across its personal loan, agri lending and marketplace business. And now its setting its sights on reaching $1 billion by the end of calendar year 2019.

I wanted to know how he had been able to grab the $500m of the $100 billion market, and specifically whether it was the appetite for P2P which was growing, or whether there were particular elements which had made the difference, given the 60 people working in the business, plus the external technology platform provider.

He argued that in the past 3-6 months SocietyOne had made a number of improvements to its business, and combined this had made a significant difference to their momentum. First, they have improved their algorithms around risk assessment and pricing. He explained that their underwriting algorithm had been tuned and improved, but that loans were still reviewed by a credit officer.  They are sending data to, and expect to benefit from the new comprehensive reporting regime which is coming in October.

Next they are clear on their target market, with a focus on good quality borrowers, often stable homeowners aged 35-50, with loan interest rate tailoring between 7.5% and 18% depending on individual risk profiles. The typical loan would be in the region of $22k, over 3 or 5 years, though they are able to offer facilities between $5k and $50k.  Average loan duration is around 4 years, and funds are offered on a principal and interest, straight line repayment basis.

Finally, they have invested in new technology, designed to offer customers a better online experience. They will shortly be launching a new application form, built from the ground up for mobile devices. Loans via these devices make up more than half of the loan applications now, and are growing quickly. This is a substantial change from the previous front end which was PC/Web based primarily. Mobile is the future.

They offer unsecured loans, and also credit to agribusiness sector – for example for the purchase of cattle and sheep. Momentum has accelerated thanks to the development of the broker channel, which they started in June 2018. They wrote $100k in June/July via this channel, $1.4m in August and are on track for $2m in September. This is proving to a significant venture. Most of this business related to unsecured personal credit, where around half of loans are refinancing of existing facilities, debt consolidation and credit cards. More than half of the loans are written below 13% interest rate, which is significantly lower than many credit cards. Brokers often advise their clients about managing their debt, Mark said. Other reasons to borrow include car loans and holidays.

Ahead they are considering offering secured loans including motor vehicle finance among others. They will continue their focus on the Australian market, which remains a significant opportunity.

Their portfolio is quite concentrated in the Sydney and Melbourne metropolitan areas, because they have been targeting their marketing and advertising there. That said it is a national business.  In terms of portfolio losses, Mark said he was satisfied with these, making the point that all applicants were effectively “new to bank” so there was no customer history. But on a like-for-like basis the loss ratios were quite similar if not better than what a typical bank might see.

Finally, I asked about the funding source for the business. Around a quarter comes from high-net worth “sophisticated” individual investors, with the remaining coming from a range of institutions, including mutual banks and institutional investors. These channels are growing more quickly, as shown by the relative fall in the proportion from high net worth sources, which was 30-35% a year ago.

The recipe of good risk profiling, target markets, and a focus on customer experience is clearly paying off, and the $1 billion target certainly looks achievable, ahead.

Fintech Spotlight: GetCapital

Fintech, GetCapital, one of the most interesting SME business lenders here in Australia, recently announced a distribution agreement with aggregator PLAN. So I took the opportunity to discuss the growth of the business with GetCapitals’ COO  Frank Sterle in our occasional Fintech Spotlight series.

Frank Sterle COO GetCapital

GetCapital is a specialist lender to the SME sector. It was founded in 2013, and really hit the market in earnest in 2015, offering finance to businesses with an annual turnover of typically between $200k and $2m, though they have written deals for much bigger firms too. Their focus is the Australian and New Zealand Markets. They have lent more than $250 million in loans so far, and this is still growing, with a team now topping 100.

Frank, who by the way previously worked at Deutsche Bank within the Fixed Income, Currencies and Commodities (FICC) division of its Investment Bank, highlighted that they will consider deals across all sectors, and they offer loans for a range of business purposes from vehicle purchase, working capital, equipment finance and import lines of credit, with the proviso that borrowers will need to provide a personal guarantee as a minimum.  They operate in the “Prime” to “Near-Prime” credit space.

Around one third of leads come via their direct channel – using an on-line application, one third from strategic partnerships, and one third from a portfolio of aggregators, including AFG, CFG, Fast, Plan, and others. In fact, this is the channel which is expanding fastest and they expect to announce additional aggregator partnerships soon.

Their underwriting processes are interesting, as they have invested big in technology at the back end, for example to be able to capture bank statement data using tools from Proviso and this supports quick assessments of deals by their dedicated Relationship Managers, who will also consider credit history, and serviceability.  Although a portion of loans with a low “expected loss” are fully automated, GetCapital still used a final human overlay by an experienced credit officer for larger and more complex underwrites. This also enables a broker to transparently workshop a deal with their Relationship Manger rather than being advised of a black box “computer says ‘no’ response”. They can approve finance in under 24 hours, often much less. They have three price tiers, with the lower value one typical of the sector, averaging around $40,000, but the average is much higher in the stronger credit tiers, with different pricing structures above.  Frank was at pains to underscore the prime quality of the loans they write thanks to their specialist capabilities, and that their loss rates are very low, across the country.  They claim to be “sharp on price” as well, though the price will depend on how long the business has been trading, their credit score and the assets backing the deal.

They are funded by a couple of institutional investors, including NAB, who provides their wholesale funding, so no crowd funding in sight here!

The experienced team also includes CEO, Jamie Osborn, ex. Managing Director at Macquarie Capital; Chief Commercial Officer Renata Cihelka, ex. ANZ, AMP, Morgan Stanley and CBA; Head of Sales, Cristian Fedrigo, ex. AFG, CBA; Head of Customer Operations, Brad Kinna, ex. ING Direct and Rabobank and Chief Risk Officer, David Hurford, ex. Westpac Institutional Bank.

Looking ahead, Frank believes the SME funding market is set to grow, but in so doing, there will be a bifurcation in the target market, with some focussing on the higher more sophisticated end of the sector, while others will battle it out at the lower end. He thinks they are well positioned for the former, and sees the prospect of further expansion in Australia ahead.

My sense is that GetCapital is indeed well positioned to disrupt core prime lending to SME’s in Australia, and as such are becoming a force to be reckoned with. Highly relevant given the feedback from our latest SME surveys which shows again that the incumbent lenders are forcing SME’s to jump though ever higher hoops to get a loan.

Further evidence of the digital disruption of finance ahead!

Fintech Spotlight – What’s On the Cards?

I caught up with the Co-Founder and CEO, David Boyd of Credit Card Compare, on their announcement of expansion into Singapore.

 Kwok (A Co-Founder of Finty), David & Andrew Boyd.

Credit Card Compare does what it says on the tin, by providing a website for prospective credit card customers to select and compare the features and benefits of a wide range of Australian credit cards. In fact, the business, which started in a domestic setting a decade ago has thrived, and now has around 150,000 people seeking advice each month via the site.

When customers get a card approved from the bank, they receive a referral fee but do not handle the application or credit assessment processes, so Credit Card Compare is essentially a lead generating platform for lenders. The trick of course is to get current data passed back from the banks and David said that given the legacy systems in some organisations, this can be a challenge. They have some additional enhancements in the works, which we will see down the track. As yet they do not provide advice on which card is best, but simply make it possible for consumers to compare cards on a range of standard parameters and prioritise the features which they believe are most important.

The announcement of Credit Card Compare’s acquisition of Singapore based start-up, Finty.com highlights their desire to reach out and expand into selected Asian markets. Singapore has a unique credit card market, in that as well as card applicants being enticed with cash back, rewards and points, Finty enriches the rewards they receive, and as a result has a significant footprint in the market, despite relatively modest numbers of applications. In that market, customer rewards for taking a card are paid once approved, and most card holders possess a battery of separate cards for different purposes, for example, travel, expenses, and shopping. The average Singaporean would somewhere between six to eight cards, a much higher number than in Australia where most people only have one or two cards.

David sees significant growth potential across Asia, and also potentially some leverage from Finty.com back into the Australian business, seeing a win-win between the two businesses, with niche expertise from Singapore paired with executional capability in Australia.

Given the release of the ASIC report into Credit Cards, where they underscore the fact that many households have the wrong cards for their purchase and repayment behaviour, it seems to me that Credit Card Compare is well placed to bring greater sophistication into the local Australian market, whilst growing across the region. A nice trick to pull off if they can do it.

Fintech Spotlight – Tic:Toc:The 22 Minute Home Loan

This time, in our occasional series where we feature Australian Fintechs, we caught up with Anthony Baum, Founder & CEO of Tic:Toc.

Whilst there are any number of players in the market who may claim they have an online application process for home loans, the truth is, under the hood, there are still many manual processes, workflow delays and rework, which means the average time to get an approved loan is often 22 days, or more.

But Tic:Toc has cracked the problem, and can genuinely say they can approve a loan in 22 minutes. This represents a significant improvement from a customer experience perspective, but also a radical shift in the idea of home lending, moving it from a “specialised” service which requires broker or lender help, to something which can be automated and commoditised, thanks to the right smart systems and processes. Think of the cost savings which could be passed back to consumers!

But, what is it that Tic:Toc have done? Well, they have built an intelligent platform from the ground up, and have turned the loan appraisal on its head, through a five-step process.

The first step, when a potential customer is seeking a home loan, is to start with the prospective property. The applicant completes some relatively simple details about the home they want to purchase or refinance, and the system then applies, in real time, some business rules, including access to multiple automatic valuation models (AVMs) to a set confidence level, to determine whether a desktop valuation, or full valuation is required to progress, or whether the prospective deal is within parameters. If it is, the application proceeds immediately to stage 2. In the case of a refinanced loan, this is certainly more often the case.

In the second step, the business rules at Tic:Toc focus on the product. They have built in the responsible lending requirements under the credit code. This means they can apply a consistent set of parameters. This approach has been approved by ASIC, and also been subject to independent audit. Compared with the vagaries we see in some other lender and broker processes, the Tic:Toc approach is just tighter and more controlled.

Up to this point, there is no personal information captured, which makes the first two steps both quick, and smart.

In step three, the Tic:Toc platform takes the application through the eligibility assessment by capturing personal information and verifying it through an online ID check, and then makes an initial assessment, before completing a financial assessment.

In step four, for the application to progress, the information is validated. This may include uploading documents, or accessing bank transaction information using Yodlee to validate their stated financial position. Tic:Toc says their method applies a more thorough and consistent  approach to the financial assessment, important given the current APRA focus on household financial assessment and spending patterns.

After this, the decisioning technology kicks in, with underwriting based on their business rules. There is also a credit underwriter available 7 days a week to deal with any exceptions, such as use of retirement savings.

The customer, in a straightforward case if approved, will receive confirmation of the mortgage offer, and an email, with the documentation attached, which they can sign, and send the documents back in the post. So, application to confirmed offer in 22 minutes is achievable.

The lender of record is Bendigo and Adelaide Bank, who will provide the loan, and Tic:Toc has a margin sharing arrangement with them, rather than receiving a commission or referral fee. Of course the subsequent settlement and funding will follow the more normal bank processes.

Since starting a few months ago, they have had around 89,000 visits from some 66,000 unique visitors and in 4 months have received around $330m of applications, with a conversion of around 17% in November. Anthony says that initially there had been quite a high rate of people applying who were declined elsewhere in the first few weeks, but this has now eased down, and the settlement rate is improving. They also had a few technical hiccups initially which are now ironed out.

In terms of the loan types, they only offer principal and interest loans (though an interest-only product is on the way), and around 50% of applications are for refinance from an existing loan.  Around 75% of applications are for owner occupied loans, and 25% from investors.

The average loan size is about $433,000. However, there are significant state variations:

In the short time the business has been up and running, they have managed to build brand awareness, receive a significant pipeline of applications, and lay the foundation for future growth. The team stands at 40, and continues to grow.

The firm also has won a number of innovation awards.  They have been listed in the KPMG and H2 Venture’s Fintech 100 (as one of the emerging stars); was a finalist, Best Banking Innovation in the Finder 2017 Innovation Awards; and a standout (and case study), in the Efma Accenture Distribution & Marketing Innovation Awards.

Looking ahead, Tic:Toc is looking to power up its B2B dimension, so offering access to its platform to broker groups and other lenders. Whilst the relationship with Bendigo and Adelaide Bank has been important and mutually beneficial, they are still free to explore other options.

In our view, the Tic:Toc platform and the intellectual property residing on it, have the potential to change the home lending landscape. Not only does it improve the risk management and credit assessment processes by applying consistent business rules, it improves the customer experience and coverts the mysterious and resource heavy home loan process into something more elegant, if commoditised.

Strangely, within the industry there has been significant misinformation circulating about Tic:Toc, which may be a reaction to the radical proposition it represents.

Reflecting on the conversation, I was left with some interesting thoughts.

First, in this new digital world, where as our recent Quiet Revolution Report showed, more households are wanting a better digital experience, it seems to me there will be significant demand for this type of proposition.

But it does potentially redefine the role of mortgage brokers, and it will be a disruptive force in the mortgage industry. I would not be surprised to hear of other lenders joining the platform as the momentum for quicker yet more accurate home loan underwriting grows.

As a result, some of the excessive costs in the system could be removed, making loans cheaper as well as offering a quantum improvement in customer experience.

Time is running out for the current mortgage industry!

Fintech Spotlight – Lodex:Breaking The Lending Mould

This time, in our occasional series where we feature Australian Fintech’s, we caught up with Co-Founder & Co-CEO of Lodex, Michael Phillipou.

Imagine the possibility of checking if the loan you have at the moment is the best available, in all but real-time, with no impact on your credit score. That’s the promise offered by Fintech Lodex, which launched a few weeks ago.

At first glance Lodex looks like a typical consumer loan auction site where you specify your finance requirement, be it for a home loan, car loan or personal loan. You register and complete some details via their platform, in around 10 minutes; then anonymously, and for free receive later a range of quotations from lenders, based on your profile and need, over the following 4 days.  The anonymous submission means your credit score is unaffected.

Below the hood, Lodex provides registered users with their credit score, courtesy of Experian, and by using an Australian first “social score” from their tie-up with Lenddo, which uses non-traditional data based around 12,000 parameters to derive an alternative to a traditional credit score.

When a consumer places a request, lenders or brokers on the platform will receive an alert via email, SMS or on their Lodex dashboard, based on their pre-set requirements. Many of the 90 broker groups on the platform at the moment, plus some smaller lenders, have implemented profiles which enable them to generate automated responses in near real time, while others choose to make a manual assessment as to whether to respond.  Once the responses are in, the Lodex user can then choose which, if any of the bids to progress, and choose to share their information with the lender. Lodex, other than getting a referral fee from the broker or lender, drops out.

Since launch Lodex have around 1,800 registered users, and have had around $55 million of loans requested, home loans being the largest share by value, but unsecured personal loans the largest by volume.

But what makes this platform unique is the possibility that current borrowers can benchmark their existing loans using the platform, to test whether they have the best possible deal. This is a game changer.  Because there is no charge to register, the only downside is the short amount of time required to build your profile. But the potential is there to find the best loan available, and then choose whether to switch, or stick.  Think of it as a market based loan health check.

Co-Founders & Co-CEO of Lodex, Michael Phillipou (Left) and Bill Kalpouzanis

Lodex currently have around 8 people in the team, and co-founders and banking executives Michael Phillipou and Bill Kalpouzanis have plans to take Lodex to other geographies, particularly South East Asia and Europe, which have similar distribution and regulatory frameworks, assisted by Lenddo’s coverage in more than 20 countries, and are also to add into the platform consumer credit cards and unsecured short term loans, as well as savings accounts and term deposits.

They have a strong Advisory Board includes chairman Andrew McEvoy, a former executive at Fairfax Media and managing director of Tourism Australia; marketing and advertising adviser Sean Cummins, the global CEO of Cummins and Partners; strategy adviser Kimberly Gire, a former CFO of retail & business bank at Westpac; and strategy adviser Francesco Placanica, the former CTO of Commonwealth Bank.

So, do not be deceived, this is genuinely an important evolution of lending and puts consumers back in the driving seat. It does break the lending mould.