Charles Li of Elephant Club Limited
Today we are joined by Charles Li from Elephant Club Limited.
They are a hybrid online peer lending platform (and we particularly love their very cute logo!)
Our questions are in bold.
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Who are you and what’s your background?
I am Charles Li and I have over 30 years experience in the financial services industry, specialising in local and cross border IPO, fund raising, mergers and acquisitions and financial institution advisory, and have held senior positions at a number of international and regional financial institutions in Hong Kong and the UK. I am the founder of a number of corporate finance and/or M&A units including Deloitte Corporate Finance, Anglo Chinese and Libertas Capital.
I was Deloitte qualified after I graduated and worked in a number of different departments within Deloitte including the Financial Institutions, Japanese and Local Conglomerates, IT Consultancy, International IPO and lastly Corporate Finance. My IPO experience includes the listing of companies in various countries including Hong Kong, Nasdaq in the United States, Canada and Australia. I was also one of the co-founders of Deloitte Corporate Finance where I completed a number of complex M&A transactions. My previous banking clients include the Bank of Mitsubishi, Bank of Tokyo, Liu Chong Hing Bank and Wing Hang Bank.
I later joined Anglo Chinese Corporate Finance as its Head of M&A and New Business, where I led the completion of a number of headline transactions including the acquisition of Kowloon Development, the strategic investment by SAB Miller in Harbin Brewery and the acquisition of CEF financial etc. Whilst I was the Head of M&A, Anglo Chinese remained one of the top 3 M&A advisors in HK for two consecutive years.
In 2006, I joined Libertas Capital Group Plc as the Group’s founding CEO of its Asia investment banking business. I was also a member of Libertas Capital’s global management committee. Libertas Capital is a UK based financial services group with head offices in Dubai. Here, I led a number of Greater China fund raising and M&A transactions and pioneered the listing of companies from China on the London Stock Exchange with a successful track record,sourcing capital entirely from Asia.
In 2008, I founded Pelican Financial Group and have been its CEO since then. Pelican is a Hong Kong-based corporate finance firm focusing on small to mid cap companies in the Greater China region. Pelican and its SFC licensed affiliates have completed a number of listed and unlisted transactions including private and public company takeovers, strategic investments, IPO and M&A strategy advisory. SFC is the Securities and Futures Commission of Hong Kong and primarily responsible for the regulation of all the securities matters in Hong Kong.
I hold a Bachelor Degree in Commerce from the University of New South Wales in Australia with double majors in Accounting and Information Systems. I am a fellow member of the Australian Society of Certified Practicing Accountants, a member of the Hong Kong Institute of Certified Public Accountants and a member of the Hong Kong Securities Institute.
I have always been interested in technology related matters as attested by my information technology first degree some 29 years ago. And conveniently, I am also a big 4 CPA so I had a chance to practice programming (was COBOL at that time) and EDP audits for major financial institutions in HK in my early years after I graduated. I was later an investment banker, which further exposed me to various kinds of financial products and instruments as well as their business models. I maintained a record of what have been successful models and what have not. This also equipped me to come up with the hybrid online peer lending model which has proven to be very well received in HK. I believe that the powerful combination of technology and sector knowledge could improve process and create value to the society.
What is your job title and what are your general responsibilities?
I am one of the two co-founders and a Managing Director of Elephant Club Limited and I am responsible for setting and implementing the strategic and business directions, maintaining the business network, supervising the daily IT and media operations and its improvements as well as general business operations.
Can you give us an overview of your business?
Elephant Club Limited is a hybrid online peer lending company using a fully automated online lending platform to connect borrowers and investors. Leveraging upon our automated online platform, we are able to provide online origination, credit assessment and portfolio maintenance. We endeavour to provide our borrowers a faster, inexpensive, contactless, more private and efficient lending platform than most other banks/lenders. Our personal loans are unsecured and with a maximum cap of approximately US$40,000 per person. They are repayable by monthly instalments over the course of 1,2 or 3 years at an interest rate cheaper than the market (because our infrastructure cost is low).
Tell us how you are funded.
On the source of funding side, we used an innovative fund structure whereby investors could register online and subscribe. The Fund (called the “Elephant Club Consumer Debt Fund”) provides investors 3 classes of fixed income investments differentiated by tenure (1,2 and 3 years) and income is payable monthly to them.
The combination of online technology, fixed income monthly payment fund structure and peer lending in one platform is the first in HK and probably in the world (this has effectively solved the issue of asking the layman to be a peer lender as they are not professional lenders and rules and regulations of most countries would disallow it too).
Why did you start the company? To solve what problems?
I am trying to address the needs of the society by creating values to principals at either end of the financing cycle:
Investors looking for returns that are high, stable and certain and they don’t want to queue up to get it. We therefore created this fixed income fund with a yield structure which could be up to 10% per annum and income payable monthly. This has also solved a lot of retirement income and passive income issues whereby people could really rely on our passive income to maintain a good lifestyle.
Individual borrowers look for small loans to pay for a wedding, travelling, a second hand car etc and do not want to go through the arduous process of applying for it from banks and institutions. We provide a smart and contactless online system whereby by completing some 25 items online, they will get an offer from us in as quickly as 3 minutes. They can then upload their documents to our online data room for verification. The entire assessment and approval process is automatic and contactless which suits the behaviours and profiles of our target borrower group (no one wants to be exposed in public that they are seeking a loan).
Who are your target customers? What’s your revenue model?
Our target borrowers are 20- 50 year old working class people who are able to demonstrate a monthly disposal income of around US$650 or above.
We provide unsecured personal loans to each borrower up to US$40,000 and up to 36 months. Borrowers are able to receive competitive rates through our streamline online lending platform that is private and efficient.
Hong Kong has a well-developed central credit system and hence in general, the small loan delinquent rate is low – around 5% pa. By calibrating the speed of the funding engine and the lending engine carefully, we could earn a meaningful interest spread from lending to our borrowers and repaying our fund investors. The maths is simple – incoming 20% net and outgoing 10% gross etc.
The beauty of this model is that in the long run, both engines could be nicely set on auto pilot mode with little human intervention and this model could be replicated in other countries or other financial sectors quickly.
In addition, our business model has a high barrier to entry as it needs a combination of industry expertise, knowledge of regulatory boundaries and sophisticated technology know how. These combinations would not be easy for young entrepreneurs or experienced business persons who are only good at one aspect to replicate.
If you had a magic wand, what one thing would you change in the banking and/or FinTech sector?
The traditional banking industry is bureaucratic and banks are usually serving the interests of themselves rather than their customers. We strive to change this mentality and provide services that fulfil the needs of customers. It is unreasonable that a common depositor could not get more than 1% interest pa and qualified individuals could not get a loan to pursue their dreams. This inequality does not make sense to me, so I had an urge to change it some years ago.
For the Fintech sector, I would not use the word change but rather foster its growth. There are lots of existing business practices in financial services that could be improved using modern technology. The core internet engine is originating and matching. The secondary engine is to atomise the various asset classes, so that they become accredited cash and near cash and that the community could exchange them over internet and create financial liquidity, which is a source of GDP growth.
What is your message for the larger players in the Finance industry?
The rise of technology is changing the way business is conducted in the finance industry. We believe that with the combination of technology and finance, we are able to provide flexible financial services 24/7 that is simple, efficient and private as well as saving significant costs to our customers because technology is able to increase efficiency, decrease manpower and reduce the need for any physical presence.
What phone are you carrying and why?
Iphone 6 and 6 plus – user oriented, simple and smart.
Where do you get your industry news from?
Online newspapers, magazines, blogs, books etc. I consume 3 financial papers a day and 5 magazines a week, of which 1-2 are technology related.
Newspapers – South China, HK Economics Journal, HK Economic Times
Magazines – ezone, Forbes, Fortune.
Can you list 2 people you rate from the FinTech sector that we should be following on Twitter?
Elon Musk – Founder of Tesla
Peter Thiel – co -founder of paypal
What’s the best FinTech product or service you’ve seen recently?
Apple pay and I could visualise the powerful combination of mobile payment and peer funding and peer lending in using this.
Finally, let’s talk predictions. What trends do you think are going to define the next few years in the FinTech sector?
Personal Finance – the combined use of fintech and biotech. AI to tailor make financial solutions for the rich and the needy and prompt them when events happen based on pre-set parameters. Authorisation for use should be via the use of bio-scans installed in smart phones.
Corporate Finance – large or small fund managers could gain access to various corporate presentations, news, researches and video online in one hub (as if each of them are having a one on one meeting) and could make dialogues with the company directly and discreetly. This would gradually eliminate the needs of big investment banks.
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Many thanks to Charles for his answers today. You can find out more about Elephant Club Limited on their website and on Facebook.
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