In the sixth interview in this series I speak to Rebuilding Society, a fintech operating in the peer to peer lending sector.
It is a great example of how fintechs can offer customers a better deal and have different revenue streams in tech and financial services. It is also a good example of some of the stuff going on outside London.
Leeds based Rebuildings Society was set up by Dan Rajkumar in 2012, on the back of the success of companies like Zopa.
The peer to peer lending platform generates loans for SMEs, and being a tech firm it makes also money selling tech to organisations setting up peer to peer lending services.
Being a small company that can respond to customer needs it offers a fairer service, according to Rajkumar. He said borrowers get a better deal. “When you are a business and you borrow from a bank that agreement is with the bank and it can call it in at any time. They also take quite a high margin with low savings rates,” explained Rajkumar. “I created Rebuilding Society to give everyone a better deal.”
Rajkumar graduated with a degree in computing management from Leeds University in 2002. He has that mix of tech and entrepreneurial skills so important in the fintech space. “I have always had an interest in computing and I started a small company which helped businesses trade in different languages, known as Web Translations.”
He moved into the fintech industry about six years ago and took an interest in peer to peer lenders like Zopa. Soon after Rebuilding Society was born.
The platform itself relays all the payments from the borrowers to the lenders with all the interest is paid to the lenders. “Everyone gets a better deal. Essentially it has the ethos of a building society, but online and for business loans,” said Rajkumar. Rebuilding Society takes an arrangement fee from the business taking the loan as well as some other administration fees.
It took the company about nine months to have the first version of the platform on the market and about another six months “to get momentum” said Rajkumar.
There are currently 14 members of staff, but the company also uses software developers in Eastern Europe, Central America and the Philippines.
About.250 businesses have so far borrowed through Rebuilding society since 2013 when it started lending. The average loan that goes through the platform is about £75,000 said. Rajkumar said that many of these customers have come back when they need refunding.”
One of the advantages of a company like Rebuildings Society is businesses can borrow form people they want to. Rather than just borrow from big banks and see their money channeled through London borrowers can get loans from local businesses or even from their own employees so interest flows to them rather than big banks.
Furthermore lenders can use the ISA investment allowance to receive tax-free interest and tax-free capital gains on funds lent through peer-to-peer lending platforms
When Rebuildings Society made its the first loan in 2013 the peer to peer lending sector was unregulated. In 2014, when it became regulated, companies operating in the sector could operate under a status of regulatory approval pending full approval. Rebuidlings Society got FCA approval to be a peer to peer lender, or Network Principal as the official title is, in 2017.
This opened up new revenue stream for the company. As a Network Principal it could become the platform for other organisations in niche markets looking to offer peer to peer lending in their communities.
“This is very important in niche markets. For example we are working with a Sharia compliant platform at the moment as well as property crowdfunding platform,” said Rajkumar.
A spin-off company, White Label Crowdfunding, which licenses the same technology used by Rebuilding Society was created.
Today more of the company’s profit comes from licensing the technology than through the commission for setting up the loans. “The peer to peer lending sector has become fragmented with businesses focusing on their niche. As a result we see growth coming from partnerships although we do want to grow are direct business.”
He said partnerships include working with organisations targeting specific markets and helping them with technology and compliance.
The company is also working on services that will take advantage of open banking. “We are doing some exciting things around open banking and we are going to apply to become a Payments Institution Service Provider.” This will enable the company to create technology for financial intermediaries that automates the relay of investment funds. This helps intermediaries return funds to investors, brings more transparency and automate banking administration
Rajkumar said the main challenge today facing fintechs like Rebuilding Society is marketing. “We have to bang the drum a bit more.”
He is not just shouting about Rebuilduing Society but also the fintech sector in the North of England through his directorship of Fintech North, which creates events to bring together fintechs in the region.
Read the previous fintech interviews
If you are a fintech and want to feature email me on [email protected]