Today we have Gray Stern from Landbay answering our questions.
Landbay is the marketplace lender focused on prime residential mortgages
Our questions are in bold.
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Who are you and what’s your background?
I took a gap year job in the corporate bank of Westpac NZ when I was 16… I actually got the placement via rugby (the head of the division wanted to add a decent fullback to the bank team – that’s NZ for you!). Since then I’ve worked exclusively in real estate finance – at the bank, for a fund, on behalf of private property developers. And now with Landbay – all in now that’s 20 years. Landbay is an opportunity to tackle some of the shortcomings I’ve encountered with the traditional mortgage funding model over that time.
What is your job title and what are your general responsibilities?
Chief Commercial Officer. I suppose that’s one of the benefits of starting a company – you can make yourself sound important. In a nutshell, I work on our strategy and mid/long term business plan and vision – how we evolve Landbay into a big brand and who we partner with to get us there.
Can you give us an overview of your business?
Landbay is a marketplace mortgage lender, so we direct-match retail and institutional investment funds to mortgages.
We focus exclusively on lending against residential property in the UK, to prime borrowers. Statistically it’s been a very robust market and one that performed exceptionally well during the financial crisis.
We have a very simple business model – a bit like the traditional building society but leveraging the capital and resource efficiencies of peer-to-peer (ie regulatory & technology framework).
We are working to crystallise a speed and pricing advantage over incumbent lenders. Our cost-of-funds is steadily reducing as our investor base grows and this will evolve as we disintermediate traditional capital markets by selling our loans direct to the ultimate end buyer (whether that’s a pensioner with £100 or a pension fund with £100M’s).
Tell us how you are funded.
We’ve raised about £3M to date… approx. £1M via crowdfunding on Seedrs and the rest from two institutional investors (a hedge fund and an asset manager, both active in the secured lending space).
Why did you start the company? To solve what problems?
We had a simple plan on day one: to offer a low risk P2P investment proposition and a competitively-priced mortgage.
In order to deliver on this objective we need to streamline and improve the mortgage application process. This enables us to originate loans immediately in underserved niches (competing on speed/service)… and to move more mainstream as our cost-of-funds reduces.
It’s a long term play with an end goal to democratise mortgage lending.
Who are your target customers? What’s your revenue model?
Our aim is to create a brand that helps people achieve their personal finance objectives via property ownership and investment. Mortgages underpin the housing market but the market has traditionally been opaque and exclusive. The roof over our head is almost everyone’s most important asset and as such, homes have come to symbolise financial security.
The nature of our mortgages and their correlation with our investments mean that both sides of our ledger (invest and/or borrow) are relevant at all stages of any retail investors’ lifecycle.
The investment side of our business is an enabler for us being able to write good mortgages – that’s where we make our money. We take a product fee and an ongoing trail margin, and will be generating revenue from new value-add services later this year.
If you had a magic wand, what one thing would you change in the banking and/or FinTech sector?
Mortgage securitisation – a simple and useful concept that’s evolved into something increasingly complex and opaque.
What is your message for the larger players in the Finance industry?
Inertia kills… but it’s clear that most big players recognise this.
What phone are you carrying and why?
An iPhone… Inertia! 🙂
Where do you get your industry news from?
Can you list 3 people you rate from the FinTech sector that we should be following on Twitter?
@pascalbouvier Pascal Bouvier, Venture Partner at Santander InnoVentures writes a lot of very interesting stuff on the wider fintech opportunity.
@LendAcademy Peter Renton, co-founder of Lendit – he’s right across the global marketplace lending sector.
@JRGLandbay John Goodall, my co-founder / CEO of Landbay – if you want to read endless retweets about QPR (and their journey down the divisions) then he’s your man.
What’s the best FinTech product or service you’ve seen recently?
I like the green button on Atom Bank’s holding website.
Finally, let’s talk predictions. What trends do you think are going to define the next few years in the FinTech sector?
There will be some very interesting and potentially game changing partnerships formed between old and new finance – old taking the role as a utility, with marketing/origination/underwriting/service left to the lower-cost and largely digital upstarts.
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