In support of the upcoming FinTech Growth Forum on September 19th, we are delighted to feature a series of profiles with some of the members of Innovate Finance who are hosting the event to support their members scaling journeys.
To kick off the series, we talked toTom Eyre, CEO of the financial inclusion fintech business, nooli.
Here’s Tom with his answers to our questions (in bold):
Who are you and what’s your background?
My name’s Tom Eyre and I’m the CEO and co-founder of nooli. I’ve been working in the finance industry for about 10 years. Prior to my current role I was an investment advisor for a group of investment houses in China and Kazakhstan. I was also part of the founding team for a corporate insolvency firm here in the UK. I’ve been lucky enough to work in some great teams across the world and had a lot of exposure to various sides of the market. As I gained more exposure to UK consumer finance, and especially the issues around the sub prime market prior to 2007/8 and just after, I realised the opportunity that FinTech brings to the day to day lives of those who are financially excluded.
In 2011, Julie, my co-founder, and I had the idea for Credit Improver. Credit Improver was to become our first customer journey dealing with the financially excluded and specifically those who are credit excluded. We bootstrapped that company from the ground up and created a solution that was ultimately to help thousands of credit-excluded people to build their credit histories.
In 2016, we grew the team by bringing in Gregor Mowat. Gregor had returned to the UK after a career overseas as a senior partner with KPMG in Russia, Kazakhstan, the CIS region and Asia. Gregor brought a new skillset to the team and together we quickly identified where we could better serve our customers. With the introduction of Gregor to the team we also restructured our business into newly-founded nooli UK Limited (nooli). nooli is an umbrella company for all the businesses that provide our customer journeys, Credit Improver Ltd, DDC Financial Solutions Ltd and LOQBOX Savings Ltd. Each company plays a vital role in our two customer journeys, Credit Improver and LOQBOX. Gregor is CFO and co-founder of nooli.
What is your job title and what are your general responsibilities?
My role is CEO and co-founder. In an early-stage business the lines get blurred around specific jobs. On a day to day basis I set the strategic direction for the business alongside Gregor and manage our developers to make sure we are building the right parts of the product at the right time. Together, Gregor and I are responsible for everything that needs to get done in a growing FinTech company. We work on direction and strategy, system developments, marketing, partner relations and partner negotiations as well as accounts and financial management for the business. As I suspect most FinTech founders can relate to, we try to be experts in everything (not always succeeding).
Can you give us an overview of your business?
At nooli we bring the financially excluded into the financial system through innovative financial inclusion journeys that build our customers’ credit histories. This helps our customers to access better financial products at better prices. Our newest journey, LOQBOX, is the first solution of its kind to allow everyone the opportunity to build a credit history while they save, for free.
LOQBOX takes people who are invisible to the banking and credit system on a journey that makes them visible. At the end of this journey, they are introduced to bank current, savings and investment accounts having built a credit history and a savings lump sum and learned about how the financial system works. And all this is entirely free for LOQBOX customers.
LOQBOX is the answer to the problem of ‘thin file’ within the existing credit system. ‘Thin file’ is a term we use for people who have borrowed very little in the past and as such do not have visible evidence of how well they can manage credit. We use the term ‘no file’ for people who have so little credit history that their profile cannot even be identified by the Credit Reference Agencies. When someone who is ‘thin file’ applies for credit, the lender needs to guess at their ability to manage credit. This often leads to applications being rejected which perpetuates the ‘thin file’ cycle. With LOQBOX, this group of people now have the opportunity to proactively build their payment history ahead of future credit applications, making them more likely to be accepted for future credit applications.
One of the great things about LOQBOX is that it works with all the existing parts of the credit system, without having to wait for regulations or market practice to change in order to help the financially excluded. LOQBOX doesn’t require the credit reference agencies or lenders to change their systems which means the benefits for our customers are immediate. This is a core principle for all our products. We like disruption but disruption should be for the benefit of the customer or user before all else.
Because of this, lenders can offer LOQBOX as a solution to those applicants whose applications have been rejected. This provides the applicant with a positive experience and ensures that the lender is providing a useful solution to applicants who would otherwise have been rejected. LOQBOX then acts as an incubator for those customers on behalf of the lender, enabling them to build their credit worthiness whilst saving money… for free. We are then able to soft search each customer’s credit profile against the original credit product they were rejected for. This ensures that the moment the customer is eligible for the credit they originally wanted they can access it without having to complete a new application. This works well for LOQBOX customers because it ensures they aren’t stuck in the ‘thin file’ cycle and are able to access the credit they were initially refused at a reasonable price and it works well for lenders because they don’t have additional marketing cost for these customers.
Since the post-pilot launch of LOQBOX in July 2017 we have seen a great response from our site visitors. Conversions are holding steady in strong double digits and feedback from our early users is very positive. We have signed significant deals with financial comparison websites, credit score providers and consumer credit lenders. Because of the value-add for our partners and their users we will be growing this B2B funnel over the rest of 2017 and 2018. We have also seen an exceptional initial response to our small B2C trials and will be rolling out a larger B2C campaign in Q4.
Tell us how you are funded.
We bootstrapped our initial product which has been a great experience. We were extremely lucky to find a fantastic developer who was happy to work almost exclusively for us at a reduced rate to create the sizeable system our products run on. We have taken on a small round of Angel investment which led to the creation of nooli as an umbrella structure and ultimately to us co-founding our LOQBOX product. We plan to raise a growth round in the not so distant future but we don’t want to lose the mentality that bootstrapping the business has given us.
Why did you start the company? To solve what problems?
Throughout the world, people who are invisible to the banking and credit system, the financially excluded, are blocked from maximising their personal and economic potential because they cannot access goods and services in the same way or for the same price as the financially included. This problem affects people in developed economies and in emerging markets in different ways but with the same basic outcome: social mobility and aspiration are prevented from flowering.
Developed economies: ‘Thin file’ people in the UK, find it difficult to access basic products and services or are charged a premium for them. For example, when someone wants to buy a mobile phone on a monthly payment contract, the phone company runs a credit check on them and will not give them the contract if they are ‘thin file’. As many as 40% of phone contract applications are refused because of this. The same group is blocked from paying for utilities such as gas, water or electricity monthly in arrears, meaning that they have to prepay at significantly higher rates. These problems are compounded when individuals are trying to apply for credit cards, loans, car finance or even mortgages.
Emerging economies: In the emerging markets, the problem is broader. Almost 50% of people do not have a bank account, living in a permanent cash economy where saving is extremely difficult and there is little or no financial safety net when things go wrong. The acceptance criteria of banks for new customers often mean that the majority of those without bank accounts would not qualify if they applied. Whilst new technology (eg payment by mobile phone) allows people to participate in some elements of the financial system without having a bank account, they remain blocked from much of the benefits of being fully financially included. Efforts to fix global financial exclusion are among the top priorities of governments worldwide and organisations such as the World Bank and are being supported by the Bill and Melinda Gates Foundation.
Who are your target customers? What’s your revenue model?
For all of our journeys the aim is to help the financially excluded, specifically those who are credit excluded. We are the first step on the credit ladder for people who are ‘thin file’ and ‘no file’. LOQBOX enables these individuals to build a credit history which makes them visible to the credit system as well as helping future lenders understand their ability to manage regular monthly repayments. For our LOQBOX customers they also build a savings pot at the same time.
Lenders assess ‘thin file’ or ‘no file’ customers as belonging to the subprime sector, which can often seem unfair. The subprime sector is the part of the credit market where customers are charged more to access credit or credit-related services or entirely denied access. These individuals have rarely done anything wrong. They are simply being penalised by dint of lack of visibility or history. There are many reasons why a customer may be ‘thin file’ or ‘no file’ and therefore need our help but the main groups are:
Young people – those who are young and have never had the opportunity to borrow in the past have by definition little or no credit history. This can make getting access to credit or services extremely difficult.
People recently moved to the UK – there is no global mechanism to share credit data so individuals moving to the UK from abroad are likely to find they have very limited borrowing options when they first arrive. This is true for foreign nationals moving to the UK and also returning expats who are often invisible to the system upon their return.
People who have deliberately never borrowed – there is a large group of people who have deliberately stayed away from credit. This leaves them with little or no credit history. As we now rely on our credit histories for much more than simply credit cards and loans the need for it increases. We are now finding that those individuals who have never borrowed are finding it difficult to access basic services such as mobile phone contracts.
Armed forces – we find that many people in the armed forces are having difficulty accessing credit and services when they leave and return to civilian life. With overseas postings, deployments and life on camp there is often no need to access credit during their time serving. This leaves them with little or no credit history when they leave. As an ex-reservist I am particularly passionate about helping this group of people.
The LOQBOX revenue model is very simple. We monetise on our base LOQBOX proposition by introducing our customers to banking and savings providers at the end of their LOQBOX journey. We additionally monetise through affiliate marketing opportunities built into LOQBOX Learn, our proprietary education journey that runs in parallel to LOQBOX.
Distribution is driven through two main channels: B2B and B2C.
B2B is our main channel prior to securing growth funding. We have signed a series of agreements with financial comparison websites, credit score providers (including the UK’s largest free credit report provider) and consumer credit lenders. In each case, when a customer of one of these partners is declined for credit, instead of simply saying “no”, the customer is introduced to LOQBOX. There is a very strong consumer-protection movement in the UK that is known as Treating Customers Fairly (or TCF). LOQBOX is seen by our partners as an excellent TCF solution when customers are declined.
In addition, for the mainstream lenders, LOQBOX can act as an incubator, soft searching each customer’s credit profile against the original credit product they were rejected for. This ensures that the moment the customer is eligible for the credit they originally wanted they can access it without completing a new application and has the added advantage for lenders of reintroducing those users into their lending products without additional marketing cost.
Our B2C distribution is currently driven through small, targeted AdWords and Facebook campaigns. This will become an equal provider of customers once growth finance has been raised.
If you had a magic wand, what one thing would you change in the banking and/or FinTech sector?
If I had a magic wand I’d remove the barriers that make cooperation difficult between incumbent financial institutions and FinTechs. The beauty of most FinTech firms is that they set out to address specific market problems. If it was possible to seamlessly work with incumbents, I think they would find that most FinTech solutions add huge value to either themselves directly, their customers or both. In our particular area, financial inclusion, a handful of FinTech companies with great solutions could end financial exclusion if there were no barriers to cooperating with the incumbents. I should also add that I think the incumbents largely agree on this but often find it difficult to overcome an ‘old-economy’ suspicion of cooperation. However, we have seen good progress in this area over the last year.
What is your message for the larger players in the Finance industry?
Let’s do it together! The FinTech revolution is here and if we can work together we will achieve the right outcome for customers, which is the only outcome that really matters.
What phone are you carrying and why?
iPhone “something”. I’m not an early adopter of technology so I got on the iPhone bandwagon a few years late but I’d never go back. It’s one of the most useful things I own. However, I massively underestimated the amount of storage I’d need so I’m forever deleting stuff to make room.
Where do you get your industry news from?
finextra.com for FinTech news and The Economist for general insight
Can you list 3 people you rate from the FinTech sector that we should be following on Twitter?
I find Twitter a bit of a distraction so I don’t use it often but when I do, this who I’m interested in:
David Brear, @davidbrear, 11fs CEO, good insight and great podcasts
Chris Richards, @finteched, great guy and always useful for opinion and insight
Barney Hussey-Yeo, @Barney_H_Y, co-founder at meet Cleo, love the app so I like following what they are doing
Can you suggest the name of an Angel Investor or VC that might be interested in being profiled?
Not at the moment. I’ll come back to you on that after our next funding round!
What’s the best FinTech product or service you’ve seen recently?
I’m currently loving Cleo (www.meetcleo.com). Despite being pretty good at managing my money Cleo has put me on another level. I now know that a disappointing amount of money seems to go in pubs!
Finally, let’s talk predictions. What trends do you think are going to define the next few years in the FinTech sector?
I’m not sure these things are going to ‘define’ the sector but they are what I’d like to see advancing over the next few years. 1. Advancements in Financial Education through AI. 2. Blockchain as a solution for payment remittance. And as a prediction I’m really interested to see how Banks manage to shift their brand and proposition to accommodate the way consumers are beginning to interact with financial services.
As far as financial education goes, in the UK we are rubbish at it. As a country that is. It’s shameful that young people leave education knowing whether Sam or John will reach their destination fastest based on their respective modes of transport yet don’t know how what an overdraft is or why APR is important. I think there is a huge opportunity to utilise AI to create financial education that is not only tailored to an individual’s ambitions and current level of understanding but also marries up education with commercial opportunities at the right time for those users. This is the kind of value-add that removes friction from commercial B2C offerings.
As CEO of a FinTech company that processes large quantities of payments on a monthly basis, I’m crying out for a solution to payment collection and processing that is secure, controllable, affordable and doesn’t rely on a three day BACS clearing window. My suspicion is blockchain will provide the answer to this with direct settlement from customer to provider.
Lastly, I don’t think it will be long before Banks cease to exist as we know them. With the UK’s new open-banking legislation (Payment Services Directive 2 or ‘PSD2’), the advancement of middleware and the obvious problem of legacy infrastructure that most high street Banks use I can see a future where Banks exist principally to hold customer funds and to design and build financial products while consumer engagement occurs through third parties such as middleware providers. This would remove banks’ direct relationships with consumers, calling into the question the need for Banks to invest so heavily in building their own brand. If customers use an app or third-party service to manage their money that talks to them in a way they understand and that connects them with all the different financial products that they are interested in, the importance of the brand behind these products becomes increasingly less important than the basic product functionality and service itself. I’m looking forward to seeing how traditional Banks counter this move.
Thank you, Tom, for answering our questions today. To find out more about nooli, visit them at www.nooli.co.uk
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