Series 4 PropTech: FinTech Wrap Up

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Over the past few weeks, we have been covering FinTech in particular. So, this week, I plan to wrap up the FinTech theme based on much of what came out of my discussions with Ray from UnMortgage, Ishaan from Trussle and Ian from LendInvest. However, I shall also add in some extras from my own research at the same time.

So, lets pull together the key themes and trends with FinTech, as it relates to PropTech now then.

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Transcription of the show

Hello, and welcome to another episode of The Property Voice podcast. My name is Richard Brown and it’s a pleasure to have you join me on the show again today.

Over the past few weeks, we have been covering FinTech in particular. So, this week, I plan to wrap up the FinTech theme based on much of what came out of my discussions with Ray from UnMortgage, Ishaan from Trussle and Ian from LendInvest. However, I shall also add in some extras from my own research at the same time.

So, lets pull together the key themes and trends with FinTech, as it relates to PropTech now then.

Property Chatter

FinTech has a number of segments, here they are and how they can relate to us as property investors:

1. Mortgages & Lending
   1. All 3 of my recent guests had a stake in this segment, although coming at it from different angles. First, Ray from UnMortgage, who is looking at developing a hybrid between renting and buying a property, then Ishaan from Trussle, who are leading the digitisation of the mortgage application market, and Ian from LendInvest, who have developed an online lending platform using multiple funding sources. All 3 have technology at the heart of what they do and seek to innovate or make progress to do familiar things in property financing in more efficient, productive and innovative ways.
   2. Prior to the 1990s, when it came to acquiring an investment property, we probably had a choice of using cash or a commercial bank loan or facility with high cash deposit and if we could also persuade a bank manager to lend us the money. Buy-to-let mortgages arrived in the 1990s, followed by bridging finance in the past 10-15 years or so. None particularly used technology in the way they were offered or taken up to us as investors and borrowers. Now we have BTL and commercial mortgages from lenders and brokers that offer us an opportunity to apply online. We have seen Peer-to-Peer and Crowdfunding platforms spring up with companies such as LandBay, LendInvest, Funding Circle, Property Partner, The House Crowd, and Property Moose as just some of the new kids on the block.
   3. Now, beyond more mainstream lending, we can even obtain property financing through bonds, equity raises and even JV partnerships through various niche online platforms starting to mushroom up, such as from Property Crowd and also some matching of JV partners initiated online, for example with some of the larger property networks. Whilst most finance providers often need to be high net worth or sophisticated investors, but investors and developers using such financial services don’t need to be. So, do expect more of these services to be fully delivered using online and mobile apps going forward.
2. Payments & Currency
   2. Collecting payments for services provided and income, such as rent, short-term stays or smaller ad hoc services for example, can now be done easily online and on mobile. Internet banking has helped a great deal, but so too have technologies like PayPal, as a more established player, but also relative newcomers such as Stripe with its Internet payment collection, GoCardless with its everyman direct debt collection service and iZettle, recently acquired for $2.2Bn by PayPal, with its low-cost contactless payment collection terminal, all of which are making collecting smaller payments simpler and more cost effective using technology.
   3. Mobile wallets and payment apps are not as popular in the UK as in other parts of the world, but make no mistake, Apple Pay, Samsung Pay and Android Pay are helping to turn your smartphone into a payment card. Prepaid credit cards are also emerging as a safer way to protect online payments. I have used CashPlus in the past but there are plenty of others and equally, companies like Revolut also offer a prepaid payment card facility through both a physical and virtual card, mobile payments is a growing and emerging sector too, so watch this space.
   4. Then, there is currency transfer services, which have always been time-consuming and hellishly expensive for what they are. Thank goodness for TransferWise, which has helped me to make and receive international property foreign currency transfers, Revolut for an omni-currency pre-paid credit card for international travel and whilst we have not really touched on this yet, Cryptocurrency trading platforms and wallets, which may well revolutionise both international transfers and domestic micropayments in particular over the next decade.
3. Banking
   1. High street branches are closing all around us and are being replaced with Internet banking from both some familiar and less familiar names. Banking is increasingly available on your desktop, tablet, or your mobile phone now, which does make life easier.
   2. There are also some newer players coming through, who have different service propositions that lend themselves to technology. For example, I recently used Tide for my banking needs when forming a special purpose company for a recent property purchase. Both Monzo and Starling are banks specifically built for your mobile phone, so are very intuitive and easy to use. Then there are some banks that specialise in online banking but without branches, signatures or credit checks, such as Acorn Account.
4. Insurance
   1. We have not heard too much about innovation within the insurance sector over this series. You may have used an insurance market consolidation site, such as MoneySupermarket or GoCompare for example. These essentially use data and screen-scrape robots to search the databases of multiple insurance companies to arrive at the most competitive quotes. They work ok, but don’t tend to cater for the more sophisticated needs of property investors, such as those with HMOs, short-term or holiday lets, of just being landlords looking for more than a cheap product really.
   2. Ray from UnMortgage did mention Lemonade, who are a USA-based insurer that are adopting behavioural economics to the sector by basing premiums on rewards rather than punishments, for example by sharing the savings from no claims with customers.
   3. Then, there is SafeShare, founded in 2015 that has developed an insurance product for people renting out space in their homes to people to use as offices, built on Blockchain technology and using Lloyds insurers to underwrite the policies. But that sounds like a whole podcast episode all on its own, so we will leave that one for our Blockchain-themed episode I think!
5. Wealth Management, Investments & Advice
   1. This is another subject that we did not touch on too much over the past couple of weeks but is attracting attention, especially to people looking to save, such as for a property deposit or to diversify their investments across different asset classes and geographies. For example, you can easily set up an ISA or a SIPP in just minutes using platforms such as Hargreaves Lansdowne among others.
   2. Another trend is the emergence of the so-called ‘robo-adviser’ using a digital platform. Nutmeg is one of the most established, but you can find an increasing number of alternative platforms and apps emerging too. For example, I have just invested in 3 start ups in this space. One is MarketsFlow, which uses machine learning to manage the asset allocation and portfolio, another is Oval Money, which helps to keep on top of your spending and saving habits and then Wombat Invest, which provides smaller investors the opportunity to invest into a larger diversified portfolio.
   3. Finally, and especially if you qualify as a high net worth or sophisticated investor, is the potential to access the start-up and venture capital community. Sites like Kickstarter, CrowdCude and Seedrs all allow founders of start-ups and potential investors to meet, pitch and invest using a fully online portal. There are angel investment sites springing up, along with the opportunity to co-fund along with some of the VCs themselves, such as Pi Labs for example.

So, here are some of the key issues and themes that I have observed.

1. Digital is opening up greater possibilities within Fintech – The rise of the Internet over the past 18 years and the Mobile Internet, in particular over the past 5 years, is allowing more financial services offerings to be made available to more people and more efficiently. This is helping to make reaching customers and delivering services through technology faster, cheaper, instantly available, without physical or geographical limits and with more choice of provider at the same time.
2. Younger people, in particular, Millennials and the newly emerging Gen Z, grew up with and now expect online, social and mobile in all aspects of their everyday lives, so expect more as they increase in their numbers as a percentage of the total population. Although, middle-aged and older people are interested in using simple, cost-effective and easy to use of financial technology too!
3. Customer service through technology in property-related finance is starting to take hold – 24/7 service, without borders reach, and everything digital is driving greater customer awareness, interest and also greater competition from financial providers, both old and increasingly new too.
4. There are still some challenges to overcome – as Ishaan possibly best summarised a couple of weeks ago. Consumers do need to be educated before adopting some of these new technologies, stakeholders within the sector need to fully engage and collaborate, and regulation needs to both catch up as well as being both sensible and sensitive to our technological changing world too. The status quo could do more, but equally, there are plenty of quick wins, progress milestones and genuine innovations to celebrate at the same time.
5. Evolution, not revolution…we might not have yet seen the Google, Amazon or Facebook of FinTech, however, given the recent acquisition of iZettle by PayPal, we might be at the start of some consolidation through mergers and acquisitions such as this and who knows, one of these start-ups we have mentioned might just turn into a monster yet too. We are perhaps seeing the most activity in FinTech around process automation and customer reach or sales and marketing, but the machines are ready and waiting to take us onto the next level of development after that I am sure.
6. Increasing usage of online & mobile platforms means financial services is more widely available and usable than it has ever been – we have far more choice and options now than we have ever had before. So, now we need to establish ways to understand what is available, from where and who, along with what best fits our needs and personal interests. It could be a bank that is built to work with our phone, a lender that allows us access to a bank of peers, as opposed to us peering into a bank branch, or one payment card that can replace all those cards in your wallet and online payment services as we go about your business, be it close to or far from home.
7. People and machines working together – machines can simplify processes, leaving well-trained and experienced people to focus on what they are good at doing. However, the machines are becoming increasingly intelligent and are also learning fast!

So, there we have it, my wrap up and summary of FinTech as it relates to us as property investors. My thanks for you Ray, Ishaan and Ian for their respective contributions over the past few weeks as well. I perhaps saw FinTech as one of the most prolific and fast-changing segments of PropTech when I started this series and much of that view still remains. There could be some big changes that we could start to see from other technologies, such as the Internet of Things and Blockchain, but perhaps over the second half of the next decade than the first. I for one am expecting to see more advances in FinTech in the next five years ahead that’s for sure.

That’s all for this week, next week I plan to dive a little deeper into Learning and Development, which is not exactly one of the most obvious segments of PropTech, so make sure you join me for that. In the meantime, the show notes can be found over at www.thepropertyvoice.net or if you want to talk about anything from today’s show, receive an intro into one of my guests or just talk property investing, email me at podcast@thepropertyvoice.net, I would be happy to hear from you!

Once again, all I want to say is thank you very much for listening once again this week and until next time on The Property Voice Podcast…it’s ciao-ciao.