Category Archives: Fintech and Real Estate

Fintech Fridays EP43: Taking the Mortgage Process From 40 Days to Minutes

NCFA Canada | Oct 9, 2020

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EP43:  Taking the Mortgage Process From 40 Days to Minutes

GUEST: CHRIS GRIMES, Co-Founder and CEO, FundMore.ai (Linkedin)

BIO: Chris has worked in the financial industry for 20 years, gaining experience in wealth management, credit lending, and mortgage origination. He is passionate about advancing the mortgage industry through technology and forward-thinking initiatives.  Chris spent 12 years managing a local mortgage team. He is actively involved in real estate investment and other entrepreneurial ventures.

Links:

Chris Grimes, Co-founder and CEO (LinkedIn)

FundMore.ai (website| twitter)

 

About this episode:

Chris Grimes, Co-founder, and CEO of FundMore.ai chats with Tristram Waye about the mortgage market, inefficiencies, and entrepreneurship. Vetting mortgages by lending companies is a complex process involving several parties and considerable time. Whether a first-time buyer or doing a refinancing, this process can last up to 40 days. The conversation explores the mortgage process, its deficiencies, and how technology is being used to enhance this financial transaction.Fundmore.ai logo - Fintech Fridays EP43:  Taking the Mortgage Process From 40 Days to Minutes

 

 

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Fintech Friday Transcript: Chris Grimes of FundMore.ai

 

Intro: Welcome to fintech Friday's a weekly podcast brought to you by the National Crowdfunding and Fintech Association of Canada and partners. Covering all things fintech, blockchain, AI and alternative finance.

 

Tristram Waye: Welcome to the FinTech Friday podcast. My name is Tristram Waye, and I'm your host for today's session on behalf of the National Crowdfunding and FinTech Association of Canada. FinTech Friday gives us a chance to talk to interesting personalities from the FinTech space. Today, my guest is Chris Grimes from Fundmore.ai. Chris, great to have you here.

 

Chris Grimes: I appreciate that. Tristram, I'm looking forward to the conversation today.

 

Tristram Waye: Let's, let's start off with a bit about your background. What was your journey prior to Fundmore?

 

Chris Grimes: As I probably, you know, like most technology founders, I had zero coding experience, zero technology experience, and decided I would start a technology company. I actually - my background started in banking. So when I was going to school, I started as a teller at one of the big banks and then jumped ship to the green-colored ship. And we drove on the investment side of the world and then eventually into CIBC, where I sort of got my footing in the mortgage space. I was there for a few months and realized, you know, there was this cool world and mortgage brokering. I didn't know very much about mortgages. I'd only been in it for about six months. But I said, this was a cool industry, and I was going to go and dive headfirst into it. So I left the security of the bank started a mortgage team in Ottawa, back in 2006, and into 2007. And sort of a way I went, traveled through a couple of different brokerages and got to experience what it was like at different brokerage houses here in Canada. But really started to understand the mortgage process that both a lender goes through and, more importantly, with the consumers going through.

 

And just to quickly summarize, what I found was, every single time the government came out and added a new regulatory change or every single time there was a bit of a change in the market, it really impacted the borrowers' experience. And as a team, we started realizing that there had to be better ways of processing mortgages. And we began to sort of journey on the broker side of the space and looking at helping my actual mortgage team become more efficient at processing more mortgage files. And as we did that, we started realizing that this is actually stemmed, not necessarily from the broker side, or even the consumer side, but really it fell back on the lending side. The impact that they had, based on the regulatory guidelines and the underwriting guidelines that these lenders had to underwrite, it became an extremely arduous process. They have huge workforces spending hours, and hours a day, going through paperwork, analyzing applications for credit risk. And as this process goes on, it becomes more and more of a time-consuming exercise. If you look today, I think it takes roughly 40 days to fund a mortgage. Costs to the underwriter, going and funding in particular, going through the roof. There's a lot of factors that go into that. But especially if you look at, you know, in the US there, the numbers are more than $9,000 to fund a mortgage today. It's staggering. Profitability on mortgages are going down year over year. And it's becoming much more...and really, it's all driven by labor costs. And a lot of it is just simple inefficiencies because they're forced to do certain things that automation can do a really good job. And not necessarily replacing people, but really assisting people and making them more efficient. And that's really where we see Fundmore as a bit of a game-changer for these mortgage lending companies. Being able to leverage machine learning, artificial intelligence, and automation to give them a better head start when they're when they get the application in the door

 

Tristram Waye: For people that maybe have had some interaction with a mortgage broker and have been through the process, but you know, don't really get to see all the other things that go through during those 40 days. What what does that process look like? And why does it take so much time?

 

Chris Grimes: So if you're, pick a first-time homebuyer as an example. So you've decided you're going to buy your first home. You've chosen to work with a mortgage broker, or maybe even just go right to the big banks, and you walk in the door, and you say, I want to get a mortgage. Thanks. That's great. We're here to help you. We're excited. And we're gonna hand you a mortgage application. And you're going to complete the mortgage application. This might be done in person. Today, there are tools that maybe allow you to do it online, and it feels like the experience is getting better because maybe they don't ask you 20 or 30 minutes worth of questions. They might only ask you 10 or 15 minutes worth of questions to start with. But it's only a starting point. After you completed the mortgage application, they have to actually do all the due diligence to validate that mortgage application. And what that means is today, roughly 60 documents are required to actually validate that information. So you will tell your lender, I make X amount of dollars. You have to validate that with anywhere up to five or six pieces of documentation today to actually confirm that. Same with the down payment. There are anti-money laundering laws. There are counterterrorism funding laws. There are Know Your Client requirements that these lenders have to do to actually validate you as somebody that could have a mortgage. This is all before they've even thought about, you know, whether, on the credit guidelines, they can even meet their credit guidelines or even lend to you. Or you know, the affordability factors. So you can see how all this starts compiling. And you know, to look at downpayment and then meet all those checkmarks, I just talked about AML, CTF, and KYC documents. You know, you're looking at least probably another half dozen to a dozen documents to verify that information, especially today. Cost of housing is going up. And there's some housing shortages and things like that that's occurring. And, you know, people looking to get into the market today are, are faced with these challenges. That, you know, they may not have all that money sitting in their bank account, where traditionally, if you're buying a home and it was $250,000, you probably could save that 5% or 10% or 20% quite quickly. Today, it's a lot more difficult. And so you rely on parents, or you rely on other sources of funding to be able to help secure your downpayment. And all of these little things you're going to do to actually buy your home actually make it more difficult for the lender today to actually approve you because they have to collect more documents. So this is really the biggest driving time factor behind the 40 days.

 

We were talking to one of the large lenders this summer. And they were telling us they employ 50 people simply to look at documents and then go through a document checklist. They look at an appraisal. They have four pages of four letter-size pages of one line checkmarks that somebody has to go through to validate that appraisal, as an example. So you can see it's quite - that's really what's driving a lot of that the time factor. There's also the issue of Equifax, and Home Trust did a study last year, and they found that 70% of mortgage applications have some sort of fraud involved with them. I mean, it can be as simple as you misstated your income, which coming from the mortgage broker background, and any other mortgage brokers listen to this, they'll know most people will say they make $100,000 when the truth is they make, you know, $96,500. It's not a big glaring, you know, error, but it does require additional time on the back end, and even on the on the front end to validate that information. So if there was ways to go about this, you know, i.e., looking at some of the technology solutions in the industry today, Flinx in Canada, Stripe in the US. Now they have these tools where you can scrape bank account data, and it has some analytics built-in, where it can help sort of validate this information at source. Rather than having to go through the phase of first-time homebuyer, gives you an application with a number. Lender asked for a bunch of documentation. Someone's manually checking it. So a simple solution like that would save quite a bit of time in the process. Once you've gone through the app, Oh, go ahead.

 

Tristram Waye: No, no, go ahead.

 

Chris Grimes: I was gonna say what once you've gone through that documentation process, the application process, you're now in a bit of a waiting period. And this is a period where the lender is going to make a final credit decision on you. So you know, they've taken into account your credit. They've taken into your income your down payment sources. And now they're going to take a bet on you that you are a good risk or you're not a good risk. And a lot of this is based on you know, your, your credit profile. And then that'll take -  could take up to two or three days, depending on how busy the lenders are. And you'll get an approval. Assuming you get an approval, you're really you're in a position to maybe waive that condition or go out and find that property if you hadn't found one already. And then we have another phase where now the lender has to validate the property. So the first day is all about you. The next phase is about the property and some of this if it's insured the mortgage insurance default insurance company like CMHC, or Genworth, or Canada Guarantee. They have some automated tools in their systems to help with that. But sometimes it becomes another manual process, especially if the property is slightly unique. So this can now add two or three or four or five days in a process when they're validating the property. And making sure that, you know, if things go sideways, they have the ability to recoup their costs. After that phase is done, we know we know typically get lawyers involved. They're doing title searches, and they're looking for anything else that might be might come up as a potential risk. And that could take several days. And then, the lender validates that information. It keeps going back and forth with the different parties that are involved. And eventually, 40 days go by and you can - the lenders done all their processes, and they're ready to find your mortgage.

 

Tristram Waye: So basically, there's, you know, there are at least five or six different groups by the sounds of it involved in this process. And they all do completely different things. And there's a ton of paperwork that needs to be moved around. Sounds like a pain in the butt.

 

Chris Grimes: That's how I would describe it today, for sure. I mean, it was a pain in the butt whenever it was 12 years ago when I bought my first property. But, going through it now, even knowing everything I know about this industry, it's still a pain.

 

Tristram Waye: And this is a similar process for people that are doing refinancings and stuff like that, is that right?

 

Chris Grimes: It is absolutely. Sometimes it can be even more challenging with those the B20 guidelines that came out in 2018 and 2016, restricting how lenders can ensure refinances is really put a damper or really restricted, you know, some lenders and what they can actually offer you. So in some ways, it's can almost be worse because you have a smaller lending pool that was willing to do that. And now you're at the mercy of several lenders instead of several hundred lenders.

 

Tristram Waye: And what is the difference between, let's say, a bank approach to this versus a versus a private lender? What is like, Is there some crossover there? Are they totally different in terms of their approach to the mortgage market?

 

Chris Grimes: Yeah, I often say this. I do a lot of training with our agents on our, in our team. And this question comes up a lot. And the best way I always think to look at this is there's you know if you look at the sort of the key driving factors of our mortgage approval today, it's credit and your credit history. You're basically what your credit report says. Then you have the affordability factor. Can you actually afford to live in that property or, or at least afford the mortgage? And then the third thing being the property. And if you look at the way, you know, schedule one banks, the large TDs, the Scotias, the RBC's, etc., would underwrite something like that, it's really credit first, affordability second, property third. They're really betting on the covenant on the applicants to being a good suitor, assuming it meets their criteria. On the private lending side, it's flipped. It goes property number one, affordability number two, and credit number three. And the reason for that is typically they have a lower loan to value and what they're willing to how much money they're willing to put up. And then two,  they want to make sure that their asset is - can be flipped back on the street if something goes wrong with a mortgage. They don't want to be holding a property that needs a lot of work. They don't want to be holding unique properties or properties out in rural areas. And most private lenders, you'll see, will have very defined geographic areas, but not so much credit guidelines. Where a lender will not care so much about geography but really care talking about the schedule one banks will really care about the applicant. So the credit, the income, things like that.

 

Tristram Waye: Okay, and so let's talk about Fundmore. You know, how - you were saying a little bit about how it got started, but, you know, where did the idea evolve from? And how does it help address some of the problems in this area?

 

Chris Grimes: So, Fundmore, I started saying before, really came about from this idea that I had a mortgage team of, we had 15 agents at the time, and how could we make them more efficient? We basically - I mean, there are certainly exceptions to this rule, and the top brokers in Canada are going to exceed what I'm about to say. But, you know, the average broker that we found over the last seven or eight years of running mortgage teams are really capped at about four files, maybe five files a month, personally. This is without extra team support and things like that. And, you know, some certainly could do a lot more. Some were doing a lot less. But it was sort of the average number is about four or five a month. And so we wanted to see what would it take to make them more efficient. What can we do to turn the needle from four or five to 10, 12, or 20, or 50 files at any given time? And so we started scouring the world. I started looking in Canada realized that we were really behind the ball - is what I actually realized, eventually. There wasn't a lot of great solutions to make them more efficient. Certainly, there are newer loan origination systems out there. And there are some good ones, and people do, companies do some great things around that. But it wasn't changing anything. It was just making the wheel shinier.

 

And, and then, when I started looking at the US and Australia, in the UK, I started realizing that they were much further ahead on simple things that made a mortgage agent's life easier. And they started negotiating with them and saying, Hey, I know you don't offer product in Canada. What would it take to bring a product to Canada? And it started with a document management system. And slowly rolled out, and we ended up bringing in about four or five different platforms. And so what I was trying to do was make my team more efficient. What I ended up doing was giving them five platforms, and nobody was using them because there were too many. So we had all these tools, which were meant to save time and no way of actually making it efficient. And that's how Fundmore was born, to be honest with you. We brought in some - we hired a couple of Co-Op students and brought in someone on the technology side and said, you know, here's our - here's what I want. I have all these platforms. I need to aggregate it into one platform so that somebody can go in access all these data points to make their job easier. And so you know, parts of that were validating income. Parts of this were validating property details. Part of this was validating down payment information.  All these things we talked about earlier about what -  somebody through a mortgage process has to go through. And so that's what we did, we started building on this platform.

 

We realized relatively shortly into the process, I guess that what we were building probably had way more value in the lending space. Particularly in the private and alternative lending spaces. And this is going to be companies like credit unions, mortgage investment corporations, private lending, and private lenders. A lot of real estate lawyers represent a lot of private lenders. Things like that, where their job was to actually underwrite these files, to be able to provide them a solution that could do many of these tasks for them. And in seconds, rather than hours or minutes and saving them hiring additional staff and things like that. And so we went out to the market, and we said, Hey, we had this idea, we've built half of it. What is it in there that you would need to actually make this a viable product for you? And so we did a lot of research, spoke to dozens of lenders, of all different sizes. And took their feedback and then built out Fundmore. What happened through that journey, though, is that we realized it's great for the small private lending institutions, you know, companies that were maybe running under $200 million in assets under management. But once you sort of exceeded that number, and then you got into the larger credit unions and you got into big the large mortgage finance companies was that they had these legacy-based systems that - I will be shocked in our lifetime, if they ever actually can replace them, they've invested too much time, they're very fragmented. But that didn't mean that our solution couldn't be available to them. They just had to be exposed in a different way. So through conversations with them, we've now launched our fund or relaunching our Fundmore Score, which has three key components to it. One is it, it triages, and it triages based on the idea that every application that comes in the door, you know, has a lender will have a set of credit guidelines. But credit guidelines, as I said, are really based on credit, first, income second, or property third, or maybe flipped, depending if it's a private investor or a large company. And were there other opportunities to make lending decisions outside of that scope. So bringing in additional data. Better understanding that applicant to then give them an opportunity to potentially approve files that may not have even been in their scope. And then on the flip side is files that will never - should never have come into that lender they don't have to spend time actually underwriting. So that's why we see this sort of triage function of our Fundmore Score. A second component is around the idea of risk and fraud identification. So we know we'll highlight, you know if we think there are some issues with the application, or we think there are issues with the documents we're gathering, we can flag that, and, you know, provide some analytics around the risk metric, and of that applicant. And then the third part is understanding the funding ratio. And this is a big challenge. One of the reasons why the cost of underfunding mortgages and underwriting mortgages have gone up so much is because, you know, on top of all the due diligence work, a lot of files just don't fund. I mean, some of the biggest lenders in Canada have funny ratios at 65%. And what that means is, when they get a mortgage application in the door, they get the documents, that file doesn't actually get closed, even if it meets their lending criteria. So everything else they've sent out a commitment, they're happy to fund the mortgage, the client doesn't actually go there. They may go off to another lender. Maybe they just don't even, maybe they decide they don't want to buy a home, or they decide they don't want to refinance the property anymore. But the lender is completely blind to that decision making. And what we're really looking at right now is through the data, we have to be able to better understand that score for that idea for them and provide that in our Fundmore Score. Which ultimately, again, helps drive profitability because one, they can work on files that are going to absolutely fund and maybe the ones that were at a much lower funding ratio or funding score opportunity, they may just pass. But I actually believe that the biggest value there is that it allows them to change the conversation, maybe change the narrative with a potential applicant, and have a conversation around, you know, what is it going to take for us to close this, this file with you. As opposed to letting them walk out the door and go to another lender or go to another broker or go to another or change their mind and altogether.

 

Tristram Waye: Is a part of that just like the amount of time that it takes to get this stuff done?

 

Chris Grimes: It is absolutely timing. Some of it is, you know, other factors. Sometimes it's as simple as another lender offering a promotion. But a lot of this, you know that the lender doesn't have a better -  have a full picture of that applicant, outside of what comes in the application and the documents. They can't see that. And so we're looking at data points now that can be able to start predicting some of these metrics,

 

Tristram Waye: And you were mentioning that there were some other elements that the system can help identify that by, you know, clarify or, you know, help approve a mortgage that may not otherwise have been approved. Can you talk a little bit about those?

 

Chris Grimes: Yeah, I mean, some of that falls in the secret sauce. But I mean, absolutely. We're just looking at,

 

Tristram Waye: You don't want to give anything away.

 

Chris Grimes: No, no, but we're certainly looking at it - we now have access to more data points on when mortgage applications - and part of it. Absolutely. So here's how I have been sort of talking about Fundmore from another perspective. And maybe this answers this question. So if we look at Europe, and you look at the UK, and you look at their advancements in open banking. You look at the US in the way they're interpreting open banking. And you look at Canada, how we've just put a stick in the mud and said, Well, I don't really know what to do. I don't know if we want to do it - I think we should, it's probably great - we're not really sure - and we're gonna maybe leave it up to the Big Five banks - but I don't think so we should let the government handle it. This is sort of where the discussions have been, even though the government has a mandate to really open up the discussions around open banking in Canada. And really, what we've designed with our platform, is an open banking type model where, you know, we, because we've aggregated so many different data sets, a lot of it is through consumer consent. So it's not - we don't, we don't have access to this information, just by you know, flipping a switch. We have to get that consent from the consumer. But it gives the control and the power to the consumer to, you know, to provide the information that they want to provide for us to help them make a better, almost a better proposal to the lender. So the lender can see a much bigger scope and a much bigger picture potentially, of that lender of that applicant, sorry, a direct, you know, direct with the application opposed to the traditional method, which is, you know, application goes in, lender asked for the documents validates the application and we go back and forth for several weeks. So allowing the consumer to control the data and putting forward as much data points as they believe they want to. I mean, obviously, we're interpreting that within our own algorithms, but it gives that, it does give them a bit more power in the application process. And gives the lender a bigger picture of the applicant in themselves if that makes sense.

 

Tristram Waye: Yeah. And so in terms of your target market, are you focused primarily on Canada now and with, you know, North America, Europe as a potential expansion point, or what are your thoughts there?

 

Chris Grimes: Right now, we're really focused on Canada, and, in delivering this, getting this product out to - we have a goal of hopefully, every, almost every mortgage application or every mortgage application in Canada will have a Fundmore Score attached to it with the ability for the lenders to better understand and take a deeper dive through our data by us revealing it. That actually means our 2021 goal is to enter the US market with the scoring system and our key platforms. And we also have, as I said, because of the relationships we've built early on with these third party companies, in Europe, Australia. We're looking at delivering some of rather core products to their markets through those through some channel partners there.

 

Tristram Waye: That's great. Now, tell me a little bit about the, you know, the evolving nature of the mortgage market as a result of, you know, 2020 and all the things that have been going on there? How is that market changing? And, and how can you know, how is Fundmore helping in this environment?

 

Chris Grimes: So, I think one of the biggest hurdles, early on in 2020, with a pandemic, was the idea of how are lenders going to process applications in a remote environment? Most lenders send their staff home, March, whatever it was, March 18, like everyone else, and, you know, there was quite a bit of a backlog early on because it was still a very manual process. And Fundmore really provides a - can provide a key - an important tool to expedite that process, especially in this remote environment. You know, being able to provide that sort of instant picture. Not only if you look at underwriting, it's typically a point in time, but not only looking at that point in time, which, you know, maybe March 18, wasn't so great, but also looking, you know, forward in that application. So, you know, being with the way we, we make our predictions with our AI, that we can take that application, and then look forward in the future. So the lender not only gets there sort of static point in time picture, but they also get a sense of where the file and where that applicant would be headed. In times like this doesn't make it, it does make it challenging. So that was sort of the first, the first thing they were, you know, we would have provided probably a much easier transition from many lenders if they were using our technology at the time. And but also, you know, with the, with this, and I think the continuation of remote working and, you know, wanting to provide their clients with a better experience, a faster experience, you know, we're in this reality, in this digital age now, where, you know, it's not good enough anymore to stick a mobile app up on your website and say, Well, you know, we have an application. You can fill it out online, or you can go on our website and fill out an application because it doesn't actually help the client. Sure it's a different way of ingesting information. But for me, you know, this is information that probably should have been done in 2000, not 2020. And so, you know, how would you so that the next version of this is how do you turn that application into an instant approval? So if you look at the US, there are companies like Figure.co m and Better. com and they're providing solutions, blending solutions to their clients, almost instantly. And they're doing that by using analytics. They're doing that by understanding their - you know, by understanding as much as they can from their applicant on application. Not on the underwriting process. Now, if you look at this, and you say - if you look at the insurance industry about ten years ago, and you started getting these online applications, and you'd fill them out, and, you know, go to an underwriting desk, and underwriting would still underwrite it, and it would be approved. Today, and companies like standards and things like this that are coming out in the marketplace. And they're underwritten on application. And they're done mostly using AI, some sort of machine learning component in the background. You know, so this is where I think the mortgage industry is right now that, you know, we are where the insurance industry was ten years ago. You know, we're trying to provide better solutions. But it's not actually changing the story, where I believe in 10 years from now, you know, what we're trying to provide as a solution today will be the norm across the board. That if you expect to get a mortgage, you should have a mortgage. It shouldn't take 40 days. It shouldn't take a week, frankly. It should be the same day. There's a lot that goes into it. Absolutely. And it's one of the, if you look at lending as a whole SME lending, credit card lending, a lot of this stuff is gone the analytics route and offer instant approvals. Again, a lot is driven by credit. The mortgage application process, short of maybe commercial lending, or large development lending, is probably the most complex. And there's a lot more that goes into it, which is why it's not here today. But you know, it's coming in, you know, with what we're doing today, we can already turn a mortgage application in what would have been, you know, maybe a full week of work, or several hours of work into several minutes of work. And so we're not that far away from being able to actually tell you, as a consumer as an applicant for a mortgage, you have your mortgage approved. You can have the money in your account within two or three business days.

 

Tristram Waye: A whole lot of people with a lot of fingernail left. Right?

 

Chris Grimes: Exactly. Exactly. It's a great analogy.

 

Tristram Waye: Now, tell me. You know, I'd like to hear more about your entrepreneurial journey, you know, what, what does that been like as a founder? I mean, you're a subject matter expert. But what is it been like developing a company, exploring an idea? You know, how's that gone?

 

Chris Grimes: It's been - I'd be lying if I said it wasn't challenging at times, for sure. You know, several late nights, and, you know, my partner sitting there, and she's, you know, basically saying, what the heck are you doing?

 

You know, but coming from a comment, you said, I mean, I've understood the mortgage space, have been in for a long time. I've had some banking experience, but I didn't have any technology experience. And, and I was lucky, early on. I didn't go through my full history and background, but through another company I was involved with, I had met my one of my co-founders. And his background was in technology. He launched and successfully exited multiple businesses, some through IPO t through private sale, things like that. And mostly in the health tech and security tech space. And he also ran a technology company, which was useful. And so we started talking about the mortgage industry, and you know, and his personal experiences and some of my personal experiences, like I said, just getting a mortgage today is not easy, even for people that understand it. And, you know, we were just basically chatting about the difficulties in the space. And he started to get more and more interested in it. And he's done a lot of real estate investment and things like that, as well. So he did understand it from that perspective. But he did give me that opportunity to just sort of pitch in the idea of, you know, what if things were like this? And he thought it was kind of an interesting idea, and we went out and started building something. Spent about, I think we threw maybe five or $10,000 at something, and three months, and we realized, well, that was fun, but that's not going to go anywhere. And but, you know, we're both sort of invested at this point in this idea of what fun work could be eventually. And we've probably pivoted at least a half dozen times in the 18 months we've been in existence. And a lot of that has to do with you know, first trying to develop products for the broker side. Realizing that the challenges were on the lender side, and then pivoting into that space, as our product evolved. And then realizing, well, this is great, we built out a platform that only a select group of lenders can even use, because, you know, their legacy systems are so entrenched in their organizations that they can't even replace what they have. And then we have a pivot again to so that they can ingest our systems or analytics into their platforms. So that is sort of been one of the things I realized when you start a technology company that what you believe you have at the beginning is probably nowhere near what you're going to have when, you know, you're six months, 12 months, 18 months into your journey. The second challenge we've obviously, or we've had is delivering, you know, the sort of technology on time. It's, uh, it's interesting, because, you know, as much as I've said, it takes a long time to get a mortgage, I'm pretty - I can tell someone pretty early on in the application phase, okay, I need this much time to get you approved. I have that just from being in it for so long when I look at an application, okay, I need a week. I need two weeks. This is extra complicated. I mean, three months, four,  now, maybe I do 24 hours. But on the technology side, I've learned that if you - if someone tells you it's a month, it actually means three. If someone tells me it's three, it might mean six.

 

Tristram Waye: Right.

 

Chris Grimes: But, you know, on the other side, though, it's been an amazing sort of experience. You know, we've got to work with already a lot of different organizations. We were part of the invest Ottawa pre-accelerator program that turned into a pitch contest win, which turned into being part of their accelerator program for a while. And most recently, because of the AI work we're starting to do on a really dive into, I should say, we were just accepted into Creative Destruction Labs, which is one of the largest AI accelerator programs in Canada. And now they're actually offering their program to universities across the world. They have launched one in Paris, UK, three, I think, in the US and, and three or four in Canada now. So

 

Tristram Waye: It's a tremendous organization. The people that they collect for that, it's incredible—dream Team.

 

Chris Grimes: Yeah. Yeah. We were quite excited about that news. We just found out actually last Friday. So it's been it was exciting kind of weekend.

 

Tristram Waye: Congratulations. That's Great.

 

Chris Grimes: Thank you. Yeah. So we're excited to get started with that. And it starts in a couple weeks. And yeah, we've had, we've had lots of, we said, there's been a lot of -  Going through this entrepreneurial journey, I think that my biggest takeaway on top of the learning experiences about how technology companies actually work was, you know, the opportunity to meet and work with so many different people and different mentors and advisors and leading in different spaces. So it's been quite a journey so far.

 

Tristram Waye: Now what

 

Chris Grimes: Fraction of the way there.

 

Tristram Waye: Okay, and so what are your plans for the future?

 

Chris Grimes: So we're going to go into this program, and we're about to partner with the University on some on another research project around AI. And then really, for us, it's driving our product into more lenders' hands, to be able to provide our solution to make their processes easier and make their lives simpler, but ultimately impacting the end consumer, which is the person getting the mortgage. We don't want it to take 40 days. We want - if somebody wants to get a mortgage, we want them to be able to have that entire, as you said, nailbiting, stress, anxiety, wiped away because they know that they have an approval. They're sitting there driving around on a Sunday afternoon; they're looking at an open house sign. They pull out their phone, and their phone says, oh, I can afford that. I could fund this mortgage tomorrow if I decided I like that house, and I want to sign a purchase offer. That you know, that's sort of the ultimate vision of how we want to be able to provide our tools to lending platforms to lending companies to loan origination systems across North America, and then we'll see what the next phase is.

 

Tristram Waye: Terrific. Now, if anybody wants to get ahold of you or connect, where can they do that, Chris?

 

Chris Grimes: Yeah, I mean, you can always find me on LinkedIn. I think it's Chris M. Grimes. But our websites Fundmore.ai. And my email is Chris at Fundmore.ai. So anytime you want to reach me feel free. I'm out there. And can always call me too.

 

Tristram Waye: Fantastic. Well, Chris, it's been great to chat with you. Very informative to get, you know, for people that didn't have a full understanding of how the mortgage market works and its complexity. That was very informative. Thank you very much for taking the time.

 

Chris Grimes: Again, I appreciate your time, Tristram, and it was awesome speaking with you. And as you said, if anyone has any questions about the mortgage industry or wants to ask questions about what we're doing, I'm always open to have a discussion. So thanks. Thanks for your time.

Outro : you've been listening to Fintech Fridays brought to you by NCFA and partners. Tune in weekly for the latest fintech Friday podcast by subscribing to this channel. The National crowdfunding and Fintech Association of Canada is a non-profit actively engaged with social and investment fintech sectors around the globe and provide education research industry stewardship services and networking opportunities to thousands of members and subscribers. For more information please visit ncfacanada.org. Oh yeah.

 

End of Podcast

 

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NCFA Jan 2018 resize - Fintech Fridays EP43:  Taking the Mortgage Process From 40 Days to Minutes The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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How Fintech is Changing the Mortgage Industry

Guest Post | Sep 8, 2020

Fintech innovation - How Fintech is Changing the Mortgage IndustryWhen it comes to changing the way we utilise financial services, fintech is beginning to significantly impact the mortgage industry. With new companies continuously redeveloping approaches to home buying, future homeowners are being provided with convenience, quality, and personalisation.

Using Tech to Address the Downsides of Buying a Home

As of right now, the housing sector continues to depend principally on the traditional mortgage market – for prospective homeowners, this is a complex and bloated process with significant room for growth.

Where in particular is there room for improvement? There are a number of answers, according to various fintech firms worldwide. Tic:Toc home loans is such an example, with the start-up aiming to offer 22-minute home loan applications through the use of digital technology that processes an application automatically, in real time.

For another point of difference, REALas is a digital platform that has highlighted the need for predictable and accurate property pricing. Their claim involves a proprietary algorithm that accurately speculates sale prices, with predictions averaging within 5.4% of the actual price.

See:  Where are the Biggest Fintech Startup Hotspots Around the World?

With a different approach to the industry, Effi utilises AI in offering what they claim to be “the smartest mortgage broker platform ever built”. This focus on integrated efficiency, effectiveness and customisation aims to move the industry beyond traditional CRMs and lead management tools, automating and streamlining the mortgage broker job process.

A final example, Lucas, provides an innovative approach to addressing the problem consumers face when raising a deposit for a mortgage. Lucas has redefined the concept of the mortgage, facilitating home ownership through renting. The company purchases properties from real estate funds, before making them available to pre-vetted tenants who will initially contribute as little as five percent towards the property purchase price.

 

The Impact of Fintech Businesses Transforming Consumer Experiences

Given the extremely high value of property markets in any given country, online only fintech businesses are threatening a significant impact on banks and credit unions that have traditionally dominated the mortgage market.

Not only does fintech hold a remarkable percentage of refinanced loans (in the US, fintechs originate more refinanced loans than a combination of their 5 largest banks), but US market share of traditional lenders decreased by 22% from 2007 to 2014. Lower mortgage closing times, higher innovation and flexibility, and more targeted offerings are aspects and goals that traditional lenders will need to work towards in order to remain competitive, and many are doing so.

 

Big Bank Fintech Investment

It is clear that not only start-ups that are showing interest in fintech within the mortgage industry - when it comes to Canada, there is significant disruption within the financial services and mortgage sectors. Despite ranking a low 23 out of 27 countries in the market adoption of fintech, Canada is ahead of the US, France, and Japan. In particular, the Bank of Nova Scotia has developed ‘eHOME’, a tool that digitises the entire mortgage process in real time, allowing the elimination of contact with financial advisors and mortgage specialists.

Overseas, big banks such as Westpac in Australia are making significant investments. Both in the form of big commitments such as backing venture capital firm Reinventure, and in small features like their flexible mortgage calculator (click here to check it out), Westpac is making a point of demonstrating the feasibility of fintech services within the banking and mortgage industries.

US banks are also getting involved, with 24 equity deals to fintech’s in 2019. Some mortgage start-ups that have been backed by US banks include Built, Rabbet, and Trussle.

 

The Future of the Mortgage Industry

The commitment to innovation and fintech by a range of companies across the mortgage industry highlights the increasing role that technology is having in reshaping financial markets.

The various service offerings that are becoming available within the property market are continuing to shape business models, push new customer experiences, and scale companies more rapidly. Ultimately, the mortgage industry is in the process of exciting change – being a previously underdeveloped area within the financial sector, there is still much to look forward to when it comes to fintech and property.

 


NCFA Jan 2018 resize - How Fintech is Changing the Mortgage Industry The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Bank On It Podcast: Turning a Funding Failure Into a Win

Bank On It podcast | John Siracusa | March 11, 2020

peerstreet - Bank On It Podcast:  Turning a Funding Failure Into a Win

This nugget was pulled from episode 160 from an interview with Brett Crosby,  co-founder & COO of PeerStreet. This nugget is on turning a funding failure into a win.

About Brett Crosby:

Brett is the co-founder and COO of PeerStreet, a platform for investing in real estate-backed loans. Crosby was previously the director of product marketing at Google, where he co-founded Google Analytics, helped start Google’s mobile advertising business and recently ran the global marketing teams responsible for the growth of Chrome, Gmail, Docs and Drive.

Continue to the full article --> here

 


NCFA Jan 2018 resize - Bank On It Podcast:  Turning a Funding Failure Into a Win The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Fintech Canada Directory Category: Real Estate

 

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NCFA Jan 2018 resize - Fintech Canada Directory Category:  Real Estate The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

Latest news - Fintech Canada Directory Category:  Real EstateFF Logo 400 v3 - Fintech Canada Directory Category:  Real Estatecommunity social impact - Fintech Canada Directory Category:  Real Estate

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Crypto Pioneer Buys Penthouse in Former Toronto Trump Tower

Bloomberg | By Natalie Wong and Gerrit De Vynck | June 20, 2018

Diiiorio new condo penthouse - Crypto Pioneer Buys Penthouse in Former Toronto Trump TowerA cryptocurrency baron has bought the largest and one of the most expensive condos in Canada, paying for it partly with digital money.

Anthony Di Iorio purchased the three-story penthouse for C$28 million ($21 million) at the St. Regis Residences Toronto, the former Trump International Hotel & Tower in the downtown business district. The unit totals 16,178 square feet (1,502 square meters) and includes a wrap-around patio overlooking the city’s skyline at the corner of Bay and Adelaide Streets.

Di Iorio didn’t take out a mortgage for the property because he doesn’t “like being in debt.” Instead, he cashed out some of his cryptocurrency and made a wire transfer to pay the price.

“I don’t remember exactly which ones I cashed in but this is my safety net, real estate right?” he said in an interview with Bloomberg at his new condo. He now owns two condos units in Toronto for a total investment of about C$34 million, he said. “I decided to take a bunch out and put it in real estate.”

The hotel is owned by InnVest Hotels LP and operated by Marriott International Inc. as the Adelaide Hotel Toronto, and will be rebranded the St. Regis once a renovation is complete. Residences in the building are owned by JCF Capital ULC.

See:  $57.9B deployed into fintech so far this year, Canada one to watch

Di Iorio got into the cryptocurrency craze on the ground floor as a co-founder of Ethereum. He was active in Toronto’s early blockchain community and was on the initial team that put together Ethereum, now the leading alternative to the Bitcoin platform. Ether, the currency that runs on Ethereum, now has a market value of around $50 billion compared with Bitcoin’s $115 billion. Di Iorio now runs Decentral, an “innovation hub’ in Toronto focused on blockchain projects. It’s the creator of the popular cryptocurrency wallet Jaxx.

If you’re on the hunt for a condo unit in Toronto, check out new condo units in Richmond Hill for some excellent options.

 

Continue to the full article --> here

 


NCFA Jan 2018 resize - Crypto Pioneer Buys Penthouse in Former Toronto Trump TowerThe National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with fintech, alternative finance, blockchain, cryptocurrency, crowdfunding and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to thousands of members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: ncfacanada.org

Latest news - Crypto Pioneer Buys Penthouse in Former Toronto Trump TowerFF Logo 400 v3 - Crypto Pioneer Buys Penthouse in Former Toronto Trump Towercommunity social impact - Crypto Pioneer Buys Penthouse in Former Toronto Trump Tower

Crowdfund Insider | JD Alois | Nov 24, 2020 The exempt securities marketplace can be arcane and challenging to manage for entrepreneurs seeking to raise capital. The advent of online capital formation has helped to democratize access to capital as well as streamline securities offerings but hurdles do remain. A new startup co-founded by several prominent names in the investment crowdfunding industry seeks to facilitate secondary transactions for private securities. Sherwood “Woodie” Neiss, co-founder of Crowdfund Capital Advisors, Doug Ellenoff, Managing Partner of Manhattan law firm of Ellenoff, Grossman, and Schole, and Jim Dowd, founder and CEO of North Capital Private Securities, have joined to launch GUARDD:  A Fintech designed to support secondary market trading for private company securities, including digital assets/tokens to facilitate compliance with both federal transparency requirements and state blue sky laws. According to a note from the company, GUARDD enables the necessary disclosure and dissemination of private company information for investors, regulators, and market participants.  This allows issuers to comply with federal and state financial disclosure requirements related to the trading of private company securities in secondary markets, thus addressing a challenge regarding exempt securities that tend to be illiquid. Overall, more liquidity can help price discovery ...
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Paul | Weiss | Nov 18, 2020 China’s competition regulator, the State Administration for Market Regulation (“SAMR”), issued a consultation draft of the Anti-Monopoly Guidelines on the Sector of Platform Economies (the “Draft Guidelines”) on November 10, 2020. This marks China’s first major step in formulating a comprehensive regime to regulate competition among platform businesses operated on the Internet (the “Platform Economy”) and signals SAMR’s changed regulatory priorities with a focus on anti-competitive behavior in the Platform Economy. The Draft Guidelines attempt to address perceived shortcomings in applying traditional antitrust analysis to the Platform Economy. SAMR has drawn upon the experience of regulators and academics in this emerging area and attempted to consolidate the lessons learnt in various jurisdictions. The Draft Guidelines set out in detail the considerations that may be taken into account and the defenses that may be available, providing some guidance to platform businesses on how to achieve compliance. See:  China Stops Jack Ma’s $35 Billion Ant IPO From Going Ahead DOJ files antitrust lawesuit challenging Visa’s $5.3 billion acquisition of Plaid While the Draft Guidelines are brief in length, only 23 provisions in total, they are wide‑ranging in their scope. Rather than an exhaustive review of ...
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The New York Times | Steven Lee Myers and Keith Bradsher | Nov 24, 2020 China’s leader, Xi Jinping, is pursuing a strategy to make the country’s economy more self-sufficient, while making other places more dependent on it than ever. After Australia dared last spring to call for an investigation into the origins of the coronavirus, China began quietly blocking one import after another from Australia — coal, wine, barley and cotton — in violation of free-trade norms. Then this month, with no clear explanation, China left $3 million worth of Australian rock lobsters dying in Shanghai customs. Australia nonetheless joined 14 Asian nations and just signed a new regional free-trade deal brokered by China. The agreement covers nearly a third of the world’s population and output, reinforcing China’s position as the dominant economic and diplomatic power in Asia. See:  What to expect from Biden-Harris on tech policy, platform regulation, and China It’s globalization with Communist characteristics: The Chinese government promotes the country’s openness to the world, even as it adopts increasingly aggressive and at times punitive policies that force countries to play by its rules. With the United States and others wary of its growing dominance in areas like ...
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Gowling WLG | Tara Amiri-Khaledi | Nov 24, 2020 As an entrepreneur trying to get your business off the ground, there are many factors to think about and the legal "stuff" may easily be forgotten. In this article, we touch on the top 5 considerations entrepreneurs need to think about when starting out. Term Sheets Once you have structured your business, you will have your idea tested (hopefully) and you will need capital. One typical way is to look for parties that will invest in start-ups such as angel or venture capital investors ("VC"). At this point, you will hear the term "Term Sheet" a lot. See:  Debt vs. Equity Financing: Pros And Cons For Entrepreneurs 7 Types of Investors to Avoid Like The Plague When Trying To Raise Capital For Your Startup Convertible Debt vs. Equity: Which Is Right for Your Startup? At its simplest form a term sheet is a summary big picture document of key terms agreed upon between the entrepreneur and the VC in contemplation of a financing and will cover, at a minimum, "economics issues" (valuation of the company, i.e. how much money for what percentage of the company) and "control issues" (who will run ...
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Bloomberg | Katie Roof and Scott Deveau | Nov 24, 2020 Private financial technology business Stripe Inc. is in talks to raise a new funding round valuing it higher than its last private valuation of $36 billion, according to people familiar with the matter. The valuation being discussed could be more than $70 billion or significantly higher, at as much as $100 billion, said one of the people, who asked not be identified because the matter is private. That would make it currently the most valuable venture-backed startup in the U.S., according to CB Insights. Stripe’s software, which competes with Square Inc. and Paypal Holdings Inc., is used by businesses to accept payments. According to its website, Stripe’s customers include Amazon.com Inc., Salesforce.com Inc., Lyft Inc. and Instacart Inc. See:  Lightspeed and Stripe Partner to Launch New Payments Feature Stripe, the world’s most valuable private fintech company, is getting into lending The company has benefited during the pandemic with more shoppers turning to e-commerce. It’s gone on offense during the downturn this year, starting a card-issuing service for U.S. clients and agreeing to acquire a Nigerian startup to expand in Africa. Brother Founders Irish brothers John and Patrick Collison founded Stripe ...
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Mayer Brown | Paul Forrester | Nov 18, 2020 In its recent report “Holistic Review of the March Market Turmoil” (Report), the Financial Stability Board (FSB) notes that “[t]he March [2020] turmoil has reinforced the need to better understand interconnections and amplification channels in the financial system and to consider the nature of vulnerabilities in non-bank financial intermediation (NBFI) in relation to the liquidity stress and the implications of central bank liquidity support, and draw lessons about overall resilience of the NBFI sector.”1 The Report also notes the need “for further work to increase the resilience of NBFI.”2 The Report also notes that “non-bank financial entities – comprising investment funds, insurance companies, pension funds and other financial intermediaries – have different structures and are subject to distinct regulatory frameworks within and across jurisdictions. Their asset share has increased to almost half of global financial assets, compared to 42% in 2008, due to both inflows and valuation increases. One factor behind this increase has been the growth of investment funds, whose assets have expanded from roughly US$21 trillion in 2008 to US$53 trillion in 2018.”3 See:  OSFI launches consultation on technology risks in the financial sector (Deadline: Dec 15) The Report ...
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Silicon Public | Lisa Ardill | Nov 24, 2020 Learn how to kickstart your career in fintech and what to expect of the field from people working in it, from software developers to blockchain engineers. Wondering what it takes to carve out a career in fintech? It’s an industry going from strength to strength with plenty of choice. You can opt to work for a specialised firm, such as Revolut or Stripe, or in-house at wider companies like Accenture or Aon. And there are plenty of jobs up for grabs in the sector. Recent announcements across the island of Ireland include Transact’s 110 jobs for Limerick, Overstock’s plans for a new tech team in Sligo and Lightyear’s expansion in Belfast. If you’re hoping to take your own career down a fintech route, read on to learn from others in the industry. Who can pursue a career in fintech? As with any field today, it takes a village to make fintech work – and a diverse one, at that. Danny Buckley of EY, for example, started out in law before switching paths. See:  AI Will Transform 500 Million White-Collar Jobs In 5 Years; Silicon Valley Must Help He’s now the company’s ...
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Financial News  | Will Hadfield and Emily Nicolle | Nov 20, 2020 There is now 'a greater urgency by institutional investors to not miss out — to invest some of their assets in bitcoin, because this time looks different' It may be hedge funds, rather than retail investors, that are driving this autumn’s rally in the price of bitcoin. And this time round, the institutional investors are buying exchange-traded products as well as the underlying cryptocurrency. A bitcoin ETP managed by Swiss issuer 21Shares is receiving creations — the equivalent of inflows — of as much as $3 million a day. In November last year, it took all month to attract the same amount of new money. See:  Canada’s first public Bitcoin fund hits $100M mark Investors in bitcoin ETPs are overwhelmingly institutions, rather than individuals. “This is purely us targeting institutional investors,” Laurent Kssis, managing director at 21Shares, told Financial News. “Our business is focused solely on institutional investors’ mandate to add crypto to their portfolio strategies and we have not really touched the retail market yet.” Many institutional investors sat on the sidelines when bitcoin experienced its first dramatic rally in 2017 — the cryptocurrency surged to $19,783 before collapsing ...
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Startup Genome | Nov 24, 2020 The Global Fintech Ecosystem Report 2020 by Startup Genome is launching today at FinTech Abu Dhabi, a conference focused on the latest launches, pioneers, brands, and insights that are powering the world of financial technology. The Global Fintech Ecosystem Report is an extension of Startup Genome’s Global Startup Ecosystem Report and the first installment of the annual sub-sector report series. The Report ranks the global top 20 and runner-up Fintech startup ecosystems on five Success Factors, including Performance, Talent, Funding, Focus and Legacy. The top five Fintech startup ecosystems globally in 2020 are Silicon Valley, New York City, London, Singapore and Beijing, respectively. See: Using ecosystems to reach higher: An interview with the co-CEO of Ping An View Canadian Fintech markets on FintechCanada.io Highlights: The top 5 global Fintech ecosystems are Silicon Valley, New York City, London,Singapore and Beijing. Europe and North America no longer dominate the Top 20 Fintech ecosystems with the Asia-Pacific region contributing as many globally leading hubs as North America. Overall, the growth in Fintech funding is slowing down globally. Early-stage funding (pre-seed, seed and Series A) has plateaued almost everywhere. China in particular has seen a drop. The notable exceptions ...
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When banks balk, ordinary investors can become city builders with ‘small change’

The Globe and Mail | | June 22, 2018

Eve picker small change - When banks balk, ordinary investors can become city builders with ‘small change’

In today’s new model of real estate investment, a prospective investor can search for projects of interest on a laptop and, several mouse clicks later, send funds along. With no middlemen and no banks to decide which projects are worthy of financing, investment opportunities are no longer restricted to the very wealthy or the tried-and-true.

“This is investing democratized, and this is how capital will be formed going forward,” said Eve Picker, a Pittsburgh-based architect, city planner and founder of a real estate equity crowdfunding platform called Small Change.

Ms. Picker was a keynote speaker at the recent Building a Better City forum at the Westin Hotel in Ottawa, co-hosted by The Globe and Mail and Dream REIT. She was among a diverse group of panellists who discussed the challenges of progressive development as urban populations continue to grow around the world.

According to Statistics Canada, more than 80 per cent of Canadians live in cities, which is one of the highest rates of urbanization in the G7. And as municipalities across the country tackle challenges that range from protecting heritage to improving road safety, finding capital to create more liveable cities is an ongoing challenge.

Ms. Picker believes crowdfunding is the answer, citing figures from the World Bank that estimate a global crowdfunding market potential of up to $96-billion by 2025.

“In 2010, that figure was under $1-billion. In 2016, crowdfunding surpassed all investments made by venture capital,” she said.

See:  Real estate crowdfunding in Canada: portal insights for 2017/18

At Small Change, Ms. Picker uses crowdfunding to fill the financing gap by matching investors with developers, raising funds for transformative real estate projects with the goal of making cities more vibrant and liveable.

When she first arrived in Pittsburgh to work as an urban designer for its planning department, the city had lost half of its population due to the relocation of the steel mill industry. She began purchasing and remaking buildings in abandoned neighbourhoods in which no one else was ready to invest.

What she found was that making abandoned buildings functional and attractive again was the easy part. Despite the success of ground-breaking and innovative improvements that paved the way for the city’s revitalization, she struggled to find enough capital.

As banks became more skittish and federal community-building funds dried up, it became increasingly impossible to continue. Her financial partners evaporated, leading her to create Small Change.

“Innovation makes banks really nervous. They want to finance tried-and-true solutions, not new ones. But we need innovation – lots and lots of it – to build better cities,” she said.

“So how do we break the cycle? How can we finance change?”

Cue the arrival of fintech – the merger of finance with technology that has made possible now-ubiquitous products and services such as shopping on Amazon, online bank transfers and the ability to purchase bitcoin. As one of the fastest growing areas for venture capital, fintech is all about innovation.

“Banks won’t lend to tiny houses, your village on a barge, or your condos on a cruise ship, but the crowd just might,” she said.

“This rapidly growing tiny industry is the future of capital formation.”

So how does crowdfunding build better cities? Ms. Picker cited several of her own success stories when banks refused credit, which include funding a construction loan to build Pittsburgh’s first tiny house in an underserved neighbourhood.

With the use of crowdfunding, Small Change helped to convert a historic building to a premier co-working space, build affordable starter homes in New Orleans, and bring to fruition an artist co-op bed and breakfast that will provide affordable housing to artists.

Along with the need to provide more affordable housing and reimagine public spaces, other panellists at the forum spoke of the need to be more intentional in reflecting diverse cultures and meeting the needs of local populations.

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NCFA Jan 2018 resize - When banks balk, ordinary investors can become city builders with ‘small change’The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, STO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to thousands of members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: ncfacanada.org

Real Estate Crowdfunding Platforms: What to Look For

Equities.com | By Equity Multiple Team | August 8, 2017

Equity Platform 300x147 - Real Estate Crowdfunding Platforms: What to Look For

Since the JOBS Act of 2012 opened the door for equity crowdfunding, dozens of startups have taken up the mantle of “real estate crowdfunding” – depending on your definition, there are now dozens to well over 100 platforms offering some form of real estate micro-investing, affording retail investors unprecedented access to real estate investments. For individual investors managing their own portfolios, the vast array of options can be overwhelming. Discerning investors are right to evaluate the landscape critically, and only pursue those investments and investing platforms that align with their strategy.

While each offers a unique focus and value proposition to investors, platforms have now consolidated into several main categories of the business model:

eREITs: Fundrise and RealtyMogul, two of the original players the real estate crowdfunding space, have pivoted to offering semi-blind funds that aggregate properties throughout the country. These investments offer built-in diversity and very low minimums, making them appropriate for less experienced investors.

Commercial equity investing: probably the closest to the original idea of real estate crowdfunding, these platforms offer CRE equity opportunities to accredited investors, allowing them to participate in high-upside, larger commercial projects. While the return potential is often great, these tend to be the long term and riskier than other RECF investments. Thus, these kinds of investments are most appropriate for investors who have time to really understand the risk factors in play, and who have at least a working knowledge of real estate equity investing

Debt investing: Some platforms take some or all of an existing real estate loan, secured by a deed on the underlying property, and syndicate it out to a network of individual investors at a fixed rate of return. Other platforms act as the lender, issuing a loan to a real estate developer or flipper. In either case, the platform’s network of investors are offered a flat annual rate of return - typically between 7% and 12% - over a relatively short term - generally 6 to 18 months. Since these investments are secured by the property and short in a term, they tend to be a good fit for more risk-averse investors.

See:

Understanding the spectrum of models can help investors prioritize those offerings that best fit their portfolio objectives, whether that be stable cash flow, preserving wealth for retirement, or opportunistic pursuit of high upside. Given the relatively low minimums, many platforms offer, there may be room in an individual’s portfolio to invest through several platforms and achieve further diversification.

Regardless of what model a platform operates under, investors are advised to take a close look at the track record and experience of the people behind the platform. Attentive customer service is a must – platforms should practice transparency and be willing and able to answer any questions investors have.

Individual Deals - What to Look For

Some platforms perform their own diligence on investments, which should give you some comfort as an investor. Even so, you’ll want to understand some key components of any deal you consider and be sure it aligns with your investing objectives before pulling the trigger. Here are some of the main things to consider:

Risk Factors - No investment is without risk, even fixed-rate, short-term debt investments. Examples of risk factors are tight construction timelines, a precarious labour market in the area, an unsubstantial track record or aggressive leverage on the part of the Sponsor who originated the deal. Again, if risk factors aren’t presented transparently, or the platform is unable or unwilling to field questions about risk factors, this should raise a red flag.

Payout Structure - While debt deals are mostly straightforward, equity investments can be much more complex. Be sure to understand where your investments fit in the capital stack, and what order you will be repaid principal and profits relative to the Sponsor and other LP investors.

Cash Flow and Liquidity - Simply looking at how many dollars you’re expected to receive over the lifetime of a deal (the simple return) or even a time-weighted return (IRR - internal rate of return), won’t give a complete picture of the timing and magnitude of returns. Depending on the business plan for the project and how the platform has negotiated and deal, you may receive distributions monthly or quarterly, and you may begin receiving cash flow from rent immediately, at some point partway through the term, or not at all in the case of a ground-up development or rehab. Similarly, repayment of principal may be projected for the end of the term, partway through the term, or piecemeal in the case of partial sales or a refinance. Be sure that the schedule of distributions and principal repayment is palatable to you given your liquidity needs.

Once again, if any aspect of the deal is unclear or doesn’t pass the sniff test, don’t hesitate to ask questions of the platform offering it.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.