Here in the second installment of the Fintech Interview series in this blog. Meet CreditLadder.
Beyond the buzzwords and marketing spiel the B2B fintech industry offers businesses a wide range of products and service, which often help reduce costs and make them more effective.
Many fintechs also offer services that can help businesses and consumers at the same time. These B2B2C models are increasingly popular in the age of digital.
CreditLadder, which the CEO Sheraz Dar describes as a fintech business with proptech at its heart, was an idea born in 2016 out of the notion that people that rent properties are at a disadvantage because rental payments don’t contribute to their credit history. This is a great idea and much needed. In London, for example, renting a room can cost more than a mortgage in other parts of the country. And a massive 40% of people rent in the UK.
CEO Dar told the story of CreditLadder. Like almost all startups it identified a problem that needed solving. “The problem that was identified was initially how a tenant’s rent payment wasn‘t being captured in their credit file.”
Dar said part of the inspiration came from watching innovation occur in the US where people were largely paying rent by cheque. Entrepreneurs were trying to change this through making it easier for them to pay rent electronically. “What they then realised was they now had rent paid confirmation and something called the rental exchange launched,” Dar said.
CreditLadder is backed by a family office, where a family invests its wealth. The investors hired Dar based on his fintech and proptect experience. He has a marketing background and spent six years in the drinks industry at companies including Britvic and Pepsi. His experience of launching a brand “from a blank piece of paper” was what was needed.
His first period in digital was around 2000 when he experienced the tech bubble expand and finally burst. “I got caught up in the explosion and the business suffered on the back of it.”
This kind of experience is vital during the current digital boom.
He stayed in digital, in the marketing functions of companies including property website findaproperty.
He said the principles of growing a business are the same whether a company is digital or more traditional but the big difference is the speed of change. Dar has personally invested in startups in the proptech sector.
Now he heads up Credit Ladder, which beyond helping renters improve their credit scores it provides services to businesses in the property sector.
“I see it as a fintech business with proptech at its heart. A lot of our partnerships run across fintech and proptech,” he told me.
The company has a couple of thousand letting agents and another few thousand landlords that have tenants on the CreditLadder platform. “We also therefore have thousands of tenants on our platform.”
“We ultimately report the rent that a tenant pays so the benefit for a letting agency can even begin before a contract is signed. This is because a tenant that pays rent on time which is recognised by CreditLadder will have an improved credit history and improved credit score.
About 10% of total rent in the UK is paid late so there is a lot of money at stake. In fact late rent payments are worth about £5bn per year.
When rent is not paid on time the agents have to spend time and money chasing it, the landlord doesn’t get the rent on time and often has a mortgage on the property. “It is not a victimless crime and if someone does not pay rent on time there is a significant knock-on effect,” said Dar.
“The ability for agencies to put their tenants on our platform combined with any referencing they do helps them identify the right tenant for a property.”
When CreditLadder launched it originally received rental payments via bank transfers and forwarded them to agencies and landlords. ”This was not a long term sustainable model for us and we were waiting for Open Banking to go live.”
“But when Open Banking launched we allowed tenants to connect their bank accounts, via a third party called TrueLayer, to give us read only access of transactional data.”
“Each month when the rent is due we effectively read the transaction data to make sure the payment has been made. If it does not match up we spent some time finding out why. We want tenants that pay on time to benefit and those that don’t we want to find out why before their credit history is affected.”
CreditLadder was awarded £600,000 as part of a Government competition for companies to create a system that can help people that rent build up their credit scores. Through the Rent Recognition Challenge, as it was known, HM Treasury is offered entrepreneurs £2m if they can come up a system that will enable millions of renters to record and share data about what they have paid in rent. CreditLadder was the biggest winner.
And like Taina Technology, in the previous Fintech Interview, CredditLadder was selected by Tech Nation to take part in its fintech programme.
Today CreditLadder has a core of eight staff including two developers. “It is a fairly lean team but we will expand as the business grows and we bring out new innovation,” said Dar.
New products planned will focus on payment processing. “There is a B2B arm to the business that will focus on payments.”
But Dar does not expect the company to have to add too many people as it grows. “If the business grows ten times it does not mean we need ten times more people.”
“We are not here to build a team of hundreds of people because we don’t think we need that. This time next year we will probably have 15 people and over the next three years I don’t think this business will need more than 20 people.”
On recruitment Dar said it is one if the company’s biggest challenges. “A challenge a startup has is the skills that we are looking for is the same skills set as the established digital businesses and the non-digital businesses are looking for.”
“These are household names and we cannot compete on salaries,” said Dar. “The important thing for me is that people join with the right motivation.”
Dar says there are ways of attracting the right people. “Everyone that joins the business in the early days will get equity so people in early will potentially have a good benefit. It is about people feeling they have some ownership.”
Read previous fintech interviews here:
If you are a fintech or even an insurtech or regtech, please contact me and let me know what you are up to.