By John Reynolds on Wednesday 12 February 2020
Fronted hopes to sign up 500 customers a month and become an "estate agent on behalf of tenants."
“Really we see quite a lot of problems with the rental market,” says Jamie Campbell, a former executive with the HSBC-backed fintech Bud who is now the CEO of a new fintech hoping to disrupt the property rental market.
Fronted is the brainchild of Campbell, 30, former Monzo executive Simon Vans-Colina, 42, and Anthony Mann, 35, an engineer with Apple.
The three hip-looking thirty and fortysomethings all have experience of the rental market and believe it's in such a torrid state that it needs fixing.
Fronted’s play is it believes it can sign-up cash-strapped renters by helping them pay their deposits, offering cheaper lending rates by using Open Banking and other new-fangled technology as well as at a lower risk.
“We wanted to build something that was entirely focused on making the rental experience better for renters,” says Campbell.
While there is excitement within the fintech space about the new venture, Fronted is entering a competitive space, with competition from lenders and pure-play tech companies.
A ballooning market
Fronted is moving into a ballooning market: the rental market has soared to more than £50bn a year, more than double the level ten years ago, according to figures by Countrywide.
Raising a deposit for a new property can be a bane for renters, particularly the younger generation, preventing thousands from moving, as often they have to pay a new deposit before getting the previous deposit back.
“There are all sorts of issues along the journey of renting. For us, this deposit loan is really the first way into this market,” Campbell tells AltFi.
“It addresses a big consumer need around making the initial outlay when you move into an apartment less burdensome. It does it in a way where it doesn’t become preventable expensive.”
Ambition to disrupt
Campbell says Fronted’s long-term ambition is to be “an estate agent on behalf of tenants."
To achieve this status, Fronted is hoping to launch a suite of products, including a service for paying utility bills, so renters can “turn up, turn on their services” when they move into their properties.
Its first product, paying rental deposits upfront, is set to launch in March this year with a limited number of tenants.
It will use Open Banking technology to assess a tenant’s financial wellbeing before lending them their tenancy deposit.
Once it has agreed to provide credit, Fronted will send the deposit to the estate agent, which will put it in a tenancy deposit scheme (TDP). Renters will pay the money back in instalments over the duration of the rental.
Fronted will make money on the interest, with typical yields on these unsecured loans around 12.5 per cent.
Fronted believes its loans will be a cheaper option for renters than taking out an overdraft or paying by a credit card.
FCA Sandbox Programme
Being a consumer credit proposition, Fronted will need to adhere to FCA rules.
Fronted has applied to get on the FCA Sandbox Programme, a scheme that allows businesses with inventive technology to run trials with consumers that are tightly supervised by the regulator.
For instance, Fronted can test use of Open Banking to underwrite and get customers signed up, as well as testing different payment models.
It will find out later in February whether it is on the programme.
“We are confident as we can be,” says Campbell, about getting on the scheme.
“We are building the company on the assumption that we will be in. We have no reason to believe that we won’t get in.”
Fronted will have to jockey for market share against insurtech companies like Canopy and Dlighted who operate in this space, as well as taking on generic lenders.
But Campbell is adamant Fronted is in a strong position, arguing that generic lenders are put off by the relatively small size of the deposits involved and “kind of faffy” nature of the paperwork while some insurtech propositions do not favour renters.
“What that insurance is there for is not for the tenant to claim on if anything goes wrong,” he says.
“But for a landlord to claim on if a tenant misses rent. And so that product is pro-landlord and arguably it is quite a poor experience for a customer.”
Campbell also points out that Fronted will act as a counterpoint to a growing concern from campaigners that some companies are pushing deposit-free options without making it clear they could cost renters more over time.
500 sign-ups a month and getting the message out
“Where we want to be by the end of the year is we want to have proved our model with the FCA Sandbox. To be originating around about 500 people a month for these deposit loans,” says Campbell.
“And to have a new business line, which takes us away from the company that just does deposit lending to something which feels more like a full tenancy solution for renters.”
Raising awareness of Fronted will not be done by throwing bucket loads of money on advertising, says Campbell, as the product might need fine-tuning.
Instead, Campbell points to initiatives like Fronted’s community page, where potential customers can pose questions, test and comment on the product.
Moving to new London offices
Fronted is still in startup mode and is in the process of building the team.
“There are six of us now and we are based out of our investor's office,” says Campbell, who says Fronted will be shortly moving to its own offices in Old Street, London.
Along with the three founders, Fronted has hitherto recruited engineers, a marketing executive and a Finance Director.
It is likely to reveal details of investors later this month.
Lack of tech innovation in the space
Campbell, who has previously held marketing roles at TUI and brand design company Elwood before joining Bud where he served as Commercial Lead and Marketing Lead, is confident Fronted will be a hit with consumers.
One reason he is so confident is the lack of innovation in the rental market.
“There has been a lack of innovation in the credit space for the last four years,” he said.
“And there has been a lot of technological advances in that time as well. Technological advances that lenders haven’t really been making the most of,” points out Campbell, citing the example of Open Banking.
“The reason why we are not setting up as a balance sheet lender is because we want to open up access to this new lending asset,” adds Campbell.
“Something that we think will be a good yield for something that is unsecured lending but has elements in terms of performance of secured lending.”