Bridging & Commercial Magazine — The Innovation And Tech Issue

ISSUE 27 MAY/JUN 2023

+ ‘Lenders need to take the first stride forward’ when it comes to sustainable development p20

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Why make bridging difficult

BRIDGING FINANCE

Get ahead with Fast Track Bridging the specialist effect At UTB we understand that performance is everything and by combining a premiership team with the very latest in Tech, we deliver quick, flexible, and reliable outcomes for our broker partners.

R E G & U N R E G | R E F U R B I S H M E N T | I N S TA N T D I P S | AV M | S E L F  S E R V I C E P O R TA L

U T B A N K . C O. U K Email: bridging@utbank.co.uk Telephone: 020 3862 1002

Acknowledgments Editor-in-chief Beth Fisher Deputy editor Andreea Dulgheru Creative direction Beth Fisher Andreea Dulgheru Sub editor Christy Lawrance Contributors Stephanie Baxter Tim Cooper Andrew Gething Illustration Valf Sales and marketing Beth Fisher beth@medianett.co.uk Special thanks Debbie Staveley, bClear Ashley Robertson, bClear Paul Hunt, Square1 Media Alena Vogt, HTB Rachel Bartlett, MSP Capital Printing The Magazine Printing Company Design and image editing Jana Rade, Impact Studios Bridging & Commercial Magazine is published by Medianett Publishing Ltd Managing director Beth Fisher beth@medianett.co.uk 0203 818 0160 Follow us: Twitter @BandCNews | Instagram @BridgingCommercialMagazine

To read about our commitment to the environment and sustainable print publishing, please visit https://bridgingandcommercial.co.uk/page_magazine.

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echnology has become an indispensable thing for most of us. From the use of smartphones and laptops in our day-to-day life, to the numerous fintech innovations we have seen in the specialist finance market over the years—such as AVMs, desktop valuations and digital ID verification—it’s hard to imagine a world without these solutions. And it seems there’s a new player set to shake things up massively: AI is taking the world by storm. Ever since its launch in November last year, the world became captivated by generative AI platform ChatGPT, and you’d find it hard to find somebody that hasn’t used it at least once. And with this technology disrupting almost all major industries—including art and music—could we see it revolutionise our sector as well? Our cover story sets out to find the answer to this burning question, as we explore the transformative power of AI in the specialist finance market. With the help of numerous industry experts, we find out whether this technology has indeed room in our sector, if we’re ready for it, and how it can unlock new opportunities and drive growth [p44].

We then turn our attention to the role of drones and virtual and augmented reality in property valuations, and how—or if—these immersive technologies are revolutionising the way valuations are conducted [p72]. Continuing on our path of exploration, we also delve into the fascinating realm of 3D printing in the construction industry. This article shines a spotlight on the rapid production of complex building components, leading to reduced costs, enhanced sustainability, and increased design flexibility. We unravel the various applications of 3D printing, providing a glimpse into a future where buildings are constructed with unprecedented speed and precision [p28].

Our issue wouldn’t be complete without a number of exclusive interviews. We speak with Century Capital’s founder and CEO Paul Munford [p56], Colenko’s CEO Rob Roscoe and head of sales Mark Marlow [p35], and Finanze Group’s founder and CEO Alastair Hoyne [p64]. Plus, Knowledge Bank’s founder Nicola Firth shares the secret behind the fintech company’s success over the years, including its recent achievement of reaching five million searches [p38].

We are also honoured to feature an in-depth conversation between the leaders of the British Property Federation and the UK Proptech Association, Melanie Leech and Sammy Pahal [p81]. The two share their valuable insights on the intersection of technology and the property industry, offering perspectives on the challenges, prospects, and the symbiotic relationship between innovation and real estate. Just like the rest of this issue, it weighs in on the transformative potential of proptech in our industry.

Andreea Dulgheru ChatGPT

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May/Jun 2023

We might not be there at the moment, but MMC has to be the way forward” p20 Bridging & Commercial

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8 14 17 20 28 35 44 56 72 81 90

The Cut News Column Exclusive View Feature Cover Story Interview Zeitgeist In Conversation One Day Which fintech has hit the mark?

The lender promising a pure bridging experience

Why tech is essential for consumer duty compliance

The next steps for sustainable development

Can the housing crisis be solved by a printer?

A new way of lending / A peek behind the Knowledge Bank curtain

Rethinking what is possible

Paul Munford / Alastair Hoyne

Can AR and VR revolutionise property valuations?

A crash course in AI and digital ID&V

Melanie Leech and Sammy Pahal

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THE CUT

The Cut

Best tech forward In recent years, the specialist finance sector has seen waves of new fintech promising to revolutionise the market. But which solutions are hitting the mark? Industry experts weigh in on the most impactful technology to date, and what they would like to see in the future

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May/Jun 2023

The Cut

2 1 Tom Renwick Head of business lending at Atom Bank

Charissa Chang Head of sales (North and Midlands) at Allica Bank

Automation has been transformative for the lending experience over the past few years. This innovation has improved ID verification, AML and property valuations, creating a significant jump forward for brokers, letting them focus more on relationships rather than admin. Automation also enables lenders to cut back on timeconsuming administrative tasks for staff, brokers and customers, and spend their time instead on what they’re best at. Our instant DIP tool, for example, automates that decision-making process and generates a PDF instantly, cutting hours of waiting time for brokers. It saves our team thousands of admin hours, too, which they can then invest back into added value, full applications and building relationships.

The winners in the specialist finance space will be those that embrace technology in a way that strengthens their broker and customer relationships rather than replaces them. Those that don’t adopt fintech solutions, or do so at the expense of proper relationships, will soon find themselves falling behind.

Bridging & Commercial

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It is hard to look past the rise of open financial data. Open Banking and, more broadly, the provision of richer data sets within the industry, are giving lenders better information on borrowers, improving credit decisions and reducing the probability of default. This, combined with real-time monitoring and advanced decision making, is enabling lenders, such as Atom Bank, to make faster and better credit decisions: realtime transactional data can be mined to verify income; derive affordability; identify risk indications, such as high-cost lending; and mitigate dangers associated with outdated information. The opening up of transactional data is slowly leading to increased competition in UK banking and facilitating the creation of innovative customer propositions. The benefits of leveraging new technology to automate archaic processes and reimagine the provision of services to customers are too big to ignore. It is a case of adapt or die—firms that resist change or are reticent over leveraging new technology may find themselves left behind.

Miranda Khadr Founder of Provide Finance

At the heart of the expansion of tech use is the ability to combine streamlined software solutions with the unique problem-solving ability of humans. When combined, the scalability of opportunities

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and completions become endless. I have no doubt that more firms across the specialist market will increase their use of technology in the years ahead, as it becomes impossible to deny the way that the smart utilisation of these innovations allows us all to work more efficiently.

However, technology providers will really have to earn the trust of brokers and lenders, and demonstrate that their systems can deliver tangible benefits to them and their clients over the short- and long-term. Providers will also have to continue to innovate in order to stand out from the crowd. Most importantly, it’ll be crucial to ensure that technology is seen as a tool, rather than a solution in and of itself.

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The Cut

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Jaffer Abbas

Ian Humphreys Founder and CEO of Brickflow

The biggest tech innovation we’ve seen in the past few years is the application programming interface (API)—this is the digital glue that connects software, enabling programmes to talk to each other. Having the ability to transfer information from adviser to lender seamlessly is a huge timesaver for all. AVMs are another big fintech innovation; for a broker and lender to be able to understand a ballpark valuation before undertaking detailed due diligence is a huge timesaver and allows loans to be completed in hours where needed. It’s important to adopt fintech as there’s a lot of inefficiency in the sector. More efficiency means reduced costs, cheaper loans and thus a better outcome for the borrower and more investment in property.

Construction is the engine room for any economy, so more tech eventually delivers a fullcircle win for the UK economy.

Chief technology officer at FinSpace

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loan applications. It is key that new technologies are considered and adopted by all stakeholders within the specialist finance industry, however it is equally important to remain sympathetic to the importance of individuals’ input and the need for human touch in the areas that fall outside the black-and-white predictable that is data entry and processing. Any tech advancements that remove unnecessary delays to processes or negate the risk of mistakes being made should be considered on a product-by-product basis.

We should strive to avoid adopting technology just for the sake of it, but rather focus on improving efficiencies and the customer journey with the introduction of any fintech.

Alice Williams Regional director at Ultimate Finance

Rather than any one technological innovation, I believe an amalgamation of fintech solutions—such as Nivo’s software and DocuSign—is greatly assisting the speed at which certain areas of the specialist finance market handles and progresses

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The past few years have probably seen the biggest leap in adoption of technology within the specialist finance sector.

There has not been a great deal of innovation though, as most of the technology has been repurposed from consumer finance, which is where most of the solutions originate.

The real transformation is yet to come with intelligent sourcing systems and automated appraisal evaluations within specialist finance. The value in integrations also presents new ways of doing business through digitally signing documents to online payments and automated valuations. The future of specialist finance lies in tech—the sooner businesses can leverage the right fintech tools, the more successful they will be. Using technology wisely can help brokers today as well as lay the foundation for the future.

Fintech tools are becoming increasingly popular among businesses, and partnerships are being formed. For lenders, this means improving service levels, speeding up transactions, and automating and streamlining administrative processes. In contrast, intermediaries will require fintech tools to provide uniform packaging. It is inevitable that delays will occur without the use of technology.

May/Jun 2023

The Cut

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Arya Taware CEO and founder of FutureBricks

The biggest tech innovation in the specialist finance sector supporting real estate is crowdfunding in its different forms.

Through AML/KYC, investor onboarding,

Bridging & Commercial

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project publishing and money transfers, we see the implications of innovation on a day-to-day basis at FutureBricks. The adoption of fintech is a question of time and is heavily reliant on education and the key players adopting it. I expect more fintech to be brought into the specialist finance sector, but I see this being spread out over a number of years.

The bigger firms will set the example and the education for the end-users will take place over time—once someone sees the benefits, it’s very hard to go back.

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Jays Shortt

Louise Chapman

Chief product officer at Landbay

Commercial director at VAS Group

We’ve seen advancements in mortgage broker portals in recent years that make the application process quicker and easier, which is key for specialist lending, which can be complex. If technology makes the process more efficient, transparent and customer focused, that’s good news for everyone—lender, broker and client. Most finance providers use thirdparty technology firms to supply their broker portals, but some have created IT teams to build their own in-house, which has so many advantages for the lender as it gives complete control and puts you in charge of your own destiny. What is needed is a way to improve the housebuying process by joining up all parties—from estate agents to brokers, lenders, surveyors, conveyancers and the Land Registry—in a more coherent manner. This has been talked about for years, and there has been some progress, but there is a long way to go and fintech will be at the forefront.

A lot has been mentioned around Open Banking, APIs and, more recently, open-source AI. However, they are still some way off being used every day in the specialist finance market.

The biggest innovation over this period has been the access to good-quality information—like Land Registry links, postcode data, and mapping—fast.

This has improved the time it takes to research a valuation and given underwriters better information, quicker, to make the lending journey more streamlined. Technology is about improving accuracy, making processes more efficient, and freeing people to do more added-value tasks—we don’t see it as a replacement for people or a cost-saving exercise. Ultimately, technology is a journey, not a destination.

There will be innovations hitting the market regularly, but the real test will be seeing if they solve a problem and make the lending process speedier and easier. True utopia will be when we are all linked and data is passed between all parties.

This is some way off, but recent articles around AI have shone a light on what could be possible in the future.

The Cut

10 Sahil Thapa

Chief technology officer at Recognise Bank

New technology develop­ ments in finance have been made possible due to wide-ranging improvements and access to cloud infrastructure, open data, and modern composable architectures. The move towards Software as a Service (SaaS) has allowed firms to use advanced software without the cost and effort of building it. No-code and low-code platforms allow for quicker application development and integration, which lead to faster product development. Process automation and access to data analytics help with faster decision making. The adoption of Banking as a Service (BaaS) has created a novel business model that makes it easier and quicker to enter the market. Specialist finance banks are increasingly adopting digitisation to take advantage of innovation in customer experience, new products, data analytics, and technology advancements.

I do expect this trend to continue as more investments are made into the sector globally. End customers now expect easy access to financial products and services, and technology allows firms to build a holistic view of the financial health of end customers, allowing firms to offer them a more personalised experience.

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Neal Jannels Managing director at One Mortgage System

I think that new entrants to the specialist lending markets have really pushed the tech envelope in recent times and served to challenge more established players to up their tech game. There is no longer the excuse that the specialist markets are too complex, as we can now see how the best tech solutions can reduce some of these complexities, making this a more accessible lending arena as a whole. We also can’t ignore how much other tech solutions, such as Zoom and general API integrations, have enhanced the customer experience in the mortgage markets. Technology can often be seen as an expensive, intimidating and complex entity which is only available for large firms with deep pockets. However, in the modern age, this is far from the truth. The right kind of tech solutions are available right now to support intermediary firms of all shapes and sizes to increase efficiency levels, streamline processes, and match the ever-shifting needs of their clients. Fundamentally, the requirements of borrowers across the UK are changing, as too are the demands of the intermediary market from an availability, simplicity and efficiency perspective. Technology, when implemented correctly and backed by market expertise, will continue to provide brokers and their clients with a gateway to a range of products that might not have been as widely accessible.

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12 Jonathan Samuels

Founder and CEO of Octane Capital

One of the big changes we have noticed over the past few years has been the automation of applications and the capturing of borrower ID documents. Several firms, including Octane, have moved away from paper, favouring the use of online applications to gather the required information from borrowers, thus saving time and reducing the administrative burden on their brokers. ID verification apps are now also embedded in the application process with facial recognition and address documentation analysis. With the market as turbulent as it has been over the past 12 months, brokers’ time has never been more valuable; the need for sound professional advice is paramount for landlords. For this reason, it is important lenders do what they can to reduce the administrative burden that brokers face when processing applications. I do expect to see more fintech adopted in the specialist finance sector in the future. That being said, specialist lending is, by definition, more involved than traditional mortgage lending, so technology should not remove the participation of people when underwriting an application. Automating too much of the process would do more bad than good.

May/Jun 2023

Bringing back the essence of bridging WORDS BY ANDREEA DULGHERU

New bridging lender Hana Capital promises to move quickly on big-ticket loans, avoiding complex requirements thanks to being privately backed.

Founder and CEO Hersh Patel explains how its flexibility and speed will bring back ‘true’ bridging finance

H

aving worked in specialist lending for over a decade, Hersh has seen the ins and outs of bridging finance up close—and there is one big issue he was keen to fix. “To be quite frank, you get some entrants coming in to exploit borrowers for the high fees and rates you can get,” he states, adding that he wanted to offer fast bridging finance, without the expensive fees.

After hearing complaints from brokers, largely about lenders altering loan terms and pulling funding at the last minute, he was determined to take matters into his own hands and establish a lender that would “stand out in a crowded market” and change negative perceptions. Thus, Hana Capital was born.

The firm offers first-charge facilities from £1m-50m at up to 70% of OMV, secured against residential, commercial, semi-commercial, and land with planning in England. It will also consider loans for light and heavy refurbishments at a maximum 90% LTC. Borrowers, including those with all types of adverse credit, can secure funding on terms of up to two years, with interest rates from 0.89% per month; facilities include a 2% arrangement fee and a minimum broker fee of 1%. Hana Capital prides itself on not charging fees for processing, extensions or early repayment. “We are confident in our ability to complete loans, and are committed to helping borrowers without any hidden fees or expenses. We recognise clients may occasionally need an extension or early redemption, and we don't view this as an opportunity to profit.”

Hana Capital is funded exclusively by family offices and UHNW individuals, which Hersh believes sets it apart and enables it to provide a faster, more flexible service. “When I first got into the industry, bridging was predominantly known for being very quick. But, because of institutional funding lines and as people have taken on underwriters from banks, procedures have become more bank led for some lenders.

They’re not as agile as they used to be, and the requirements are virtually the same as for a regular mortgage—this is where bridging has lost its way to a certain degree. As a privately backed firm, we have the unique advantage of not being bound by the constantly shifting funding line criteria of larger institutions. We have complete control of the lending and drawdown process, which enables us to deliver a flexible service devoid of complex requirements,” explains Hersh,

News

adding that this also means the firm doesn’t have to drop products or deals suddenly when markets turn volatile: “There is no reason for us to pull a product or deal unless something doesn’t stack up—like the valuation, or if it turns out to be fraud.”

Its focus on loans from £1m and above also make it stand out, as Hersh believes this market is not well served. “We're trying to break into an area where I think there isn't too much competition. We're offering a fast, flexible, honest lending approach with competitive rates and doing larger-ticket deals. I don't think many lenders can tick all these boxes.”

Bridging lenders are not as agile as they used to be, and the requirements are virtually the same as for a regular mortgage The decision to move into the larger loan arena was based on two factors: the desire to lend large sums despite its small team, and wanting to attract experienced clients.

“With larger loans, you’re more likely to have entrepreneurs and HNW borrowers and, generally, their profiles will be much better and the likelihood of defaults should be a lot lower.” Its private funding also enables this—while no specific limit has been set by its investors, Hana Capital’s available loan pot is around £500m.

Fast underwriting

For a true bridging experience, speed is paramount. Despite its small team of six, the firm aims to provide a DIP within an hour of a loan application being submitted, and complete a deal within an average of two weeks. “Obviously, this can be delayed by valuers or if the borrower’s lawyers don’t respond to us, but this is the target, assuming we’re getting all the information.”

This speed boils down to its partnerships with third-party firms—Hana Capital has service level agreements with its law firm, and is currently negotiating a partnership with a valuer to receive reports more quickly. He explains Hana Capital is open to overlooking non-essential information, as long as everything complies with regulatory 15

commitments. “Our underwriting process might not be as stringent as other lenders’.

We’re trying to bring back a true bridging business, which is basically lending on a few core principles—like checking if the asset stacks up against the LTV and if the exit is reasonable—and the rest is just AML, KYC and anti-fraud checks. We’re more concerned with reviewing the asset because that's where our capital is tied up and where the risk lies, as opposed to looking at everything else to do with the borrower and the entire loan life cycle.”

Technology also plays a big role. In addition to the online application form brokers can access through its website, the firm has a bespoke system, created itself, that allows the lender—after collecting all the necessary information about the borrower and the deal from the application form—to pre-populate documents with the data, which can then be sent out.

Hana Capital opted to build its system itself, as Hersh felt many third-party options didn’t cater fully to the firm’s needs and were not flexible enough. “I’ve probably spent weeks demoing lots of software. I felt that those actually made the process slower as they were complicated with lots of different boxes to fill in, whereas our own internal fintech system did everything needed and was quicker,” says Hersh, adding that having to deal with a tech provider whenever lending criteria change could add delays.

Sole focus

Hana Capital’s initial lending target is to provide at least £20m of funding in its first few months, and Hersh tells me the business is already processing £30m of deals. It is also looking to expand its fintech system by adding a broker portal, and to recruit up to five more staff this year.

It will remain focused solely on unregulated bridging. “I feel there is a niche to stay privately funded and just offer this core service so, at the moment, this is all we’re interested in doing. I’m not trying to dilute our offering,” he says, adding that his aspiration for Hana Capital is to be the go-to lender for this type of finance.

“I want to be able to provide that peace of mind to brokers and borrowers that we’re a trusted and reliable lender—that is the reputation we’re aiming for. It’s a challenging, exciting and scary time all at once, but it's something that I believe in.”

May/Jun 2023

South West & Wales Stephen Wrigley 07513 717 332 swrigley@glenhawk.com

Column

Data and tech THE KEYS TO CONSUMER DUTY COMPLIANCE Rules for the new consumer duty emphasise protecting vulnerable people.

To identify and protect these customers, reliable data and technology is essential 17

May/Jun 2023

Words by

ANDREW GETHING Managing director at MorganAsh

Put simply, the FCA’s consumer duty regulations are intended to ensure financial services firms are delivering good results for customers.

In particular, this new duty puts a clear emphasis on protecting those with vulnerable characteristics— people who are arguably the most susceptible to both potential harm and to poor outcomes.

Bridging & Commercial

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Column

his is certainly relevant in the field of specialist lending, which has offered a lifeline to many borrowers with niche requirements or a profile that is far from standard.

For this reason, the consumer duty rules may feel a little redundant for some. In their minds, they have long been treating their clients fairly and have looked after vulnerable customers all their professional lives.

Indeed, existing guidance had already raised the need to assess and consider the vulnerability of consumers. The consumer duty significantly expands on this, adding the need to evidence that vulnerabilities are assessed and monitored throughout the lifetime of the product. The scope of vulnerabilities has changed dramatically too, with firms now required to review all potential issues beyond just financial.

This includes health and lifestyle problems, divorce, domestic abuse, learning difficulties and many others.

F i nd i ng v ul nerabil it y d at a

It is true that firms have considered consumers’ situations and taken into account any issues that have come to light. However, despite the best of intentions, most of this activity has been subjective, inconsistent and rarely documented.

With the consumer duty enforced from July, this process needs to be made formal—just as, in the past, how fact-finds moved from a subjective, informal approach to a formal, documented process. This is simply not possible though without robust vulnerability data.

Many have searched for databases of vulnerable people but, unfortunately, these just do not exist. It is true that socioeconomic data that identifies cohorts of consumers exists, but this sits at a postcode level, not a personal one. And, yes, there is credit data, which is personal—but it’s limited to financial vulnerability and affordability.

Instead of waiting for vulnerability databases, the reality is that consumers are themselves the only true source of data— the challenge is how to acquire that. Many companies would have collected some data when consumers reach out to communicate, complain or make a claim, which can highlight potential vulnerability in the process—some larger tech firms may even use AI to interpret and assess voice and text interactions with consumers. This would certainly be beneficial for large lenders.

This seems like a fairly logical place to start, since the proportion of vulnerable people among this cohort is likely to be high. However, this is still just a subset of a firm’s customer base. The consumer duty 18

requires us to understand the vulnerability of all customers—not just those who get in contact. Since most identify vulnerabilities differently, there’s little consistency within and between financial companies with regard to who is registered as vulnerable.

C on si s tenc y i s ke y

A lack of consistency results far too easily from individual interpretations of vulnerability.

Much like deciding if someone is rich or poor, without some form of guidance, the answers vary based on a range of subjective viewpoints. When you also consider the vast number of characteristics and circumstances that can lead to vulnerability, the training required for staff to identify these becomes a massive undertaking—and requires considerable expense.

Data capture also needs to be consistent. While some firms may have added a vulnerability tick box to systems, the detail of the vulnerability is typically stored as unstructured, free text in a comment box.

Such results are extremely difficult to report on, and impossible to analyse. Different standards of assessment and data capture lead to inconsistencies and reduce the value of any data produced.

Directors of firms must demonstrate annually their compliance with consumer duty rules and guidance, and the FCA requires evidence of this. Good data is also essential for fair value and target market analysis. We can then understand if we are giving fair value to those with specific vulnerabilities and analyse how well we comply with the Equalities Act with regard to protected characteristics.

Usi ng te c h nolo g y

A far more robust approach is to adopt an assessment tool with an objective and consistent way of measuring vulnerability. Such tools already exist, whether as a standalone system or integrated within CRM systems, and help to automate much of the process and minimise administrative overheads.

For example, the MorganAsh Resilience System (MARS) generates a resilience rating; this is much like a credit score but for vulnerability. Brokers do not need to remember the specific level of vulnerability that applies to issues such as domestic abuse, illnesses, or divorce because these are all embedded directly within the assessment tool. Furthermore, firms can use different options to gather information either by a broker assessment or by the consumer completing an assessment online. There’s also an opportunity to configure tools to better align with different use cases and appetites to risk.

Column

The reality is that consumers are themselves the only true source of data— the challenge is how to acquire that Without an objective and consistent approach, many firms are reporting their proportion of vulnerable customers in single figures. In contrast, businesses using tools such as MARS are reporting nearer to 50%, which is closely in line with the FCA’s own Financial Lives survey. Such a clear disparity shows that it’s impossible to ensure fair value or that products meet the needs of clients—key areas of focus for firms.

Per s on al c h a nge s over t i me

A consumer’s vulnerability will almost certainly change throughout the lifetime of a product—it would be rare for it not to—so there is a need to continue to monitor the consumer to ensure the product remains suitable. While the FCA doesn’t specify how often this should be done, many are considering that annual

reviews on a proactive basis, as well as reviewing issues reactively, are sufficient.

Some have questioned whether the responsibility for this falls on the intermediary or lender. As far as the consumer duty is concerned, it doesn’t matter who undertakes the monitoring, just as long as it happens. Brokers may prefer to undertake this responsibility and plan in line with fixed-rate terms. One can assume the responsibility will fall to the party that wants to maintain the relationship for the long term.

What is clear is that consistent and unbiased processes will play a critical role not only in meeting this requirement, but also in ensuring that all parties can understand and account for vulnerabilities both today and in the future.

Since this is only possible through technology, it’s right that the FCA identifies its adoption as a key focus for firms.

The scope of vulnerabilities has changed dramatically, with firms now required to review all potential issues beyond just financial

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May/Jun 2023

Alex Upton

Bridging & Commercial

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Exclusive

‘Lenders need to take the first stride forward’ when it comes to sustainable development

There’s a lot to be positive about in the world of property development, says HTB’s managing director of development finance Alex Upton, who talks about getting your scheme right, creating the green homes buyers want, and why using MMC is the way forward

Words by

ANDREEA DULGHERU

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May/Jun 2023

Exclusive

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here is no denying that the infamous mini-Budget in autumn last year caused severe damage to t he specialist finance industry, including the property development sphere—a market that has been struggling since Brexit and the pandemic.

While some experts and media outlets have focused solely on the difficulties that UK developers and housebuilders are facing, Alex has a more optimistic perspective. “It’s very difficult for developers, obviously.

Nevertheless, I think the sector has been very resilient, as there’s still a massive shortage of homes, and that’s holding up the market.

Throughout 2022 and 2023, we’ve continued to see houses sell above the original GDV. We’re seeing strong demand for good homes so, if developers build the right stock in the right location and at the right price, there’s absolutely opportunity there.”

The resilience of the development finance sector is reflected in HTB’s 2023 performance; the lender has seen double the number of loan applications and completions it expected to witness in H1 2023, with its largest loan this year being a £21m facility. In April, the bank completed 12 deals in just 12 days. “It’s been amazing. I expected it to be a good year, but certainly not the volumes that we’re seeing.

I’m so proud of my team—it just goes to show that if you get the right people and you’re all pushing in the same direction, you can literally achieve anything.”

SHADES OF GREEN While Alex states the development space is abound with opportunities for those building the right homes—what exactly do these look like? She explains that there’s no blueprint or definition, and advises developers and housebuilders to assess the area where they’re looking to build to work out what homes would be best for the community.

Nonetheless, she does note that houses that incorporate at least some energy-efficiency measures, such as electric vehicle chargers, low-energy lighting and efficient heating, are very much in demand. “Consumers are looking at these, and this has been heightened by the Bridging & Commercial

“There’s a lot of greenwashing going on, and I don’t see that changing anytime soon unless lenders start considering the future household spend and factor that into

mortgage affordability” energy crisis. So, even if you’re not doing a fullblown, energy-efficient home, adding these small bits can make a property a bit more appealing for customers,” she explains. “Outdoor space is also something that people are looking for, although not as much as everyone thought—it’s not the be all and end all.”

With sustainable and energy-efficient homes being on many buyers’ wish lists, it would make sense for developers to produce them—and firms such as Ilke Homes, Orbit Homes, MRC Property Group and Dunedin Homes have already started to create such schemes. However, Alex believes there is a big barrier preventing more from building sustainable projects: the lack of green development finance. “Developers are keen to understand how they can build sustainable and energy-efficient homes. However, they are more expensive to build than traditional ones, as they incorporate energy-efficient features, renewable energy systems, and sustainable building materials. Plus I’m not sure there’s enough evidence yet to show that consumers will be willing to pay the higher price. So, inevitably, something isn’t quite working at the moment.

“Green finance products can incentivise developers to build sustainable homes by offering favourable terms such as lower interest rates, longer repayment periods, and reduced fees. This can help to lower the financial risk associated with building [these types of properties], making them a more attractive investment option for developers.

However, lenders need to make the products commercially viable for themselves too, which is another challenge.”

22

The grass is not always greener for people wanting to buy sustainable homes either, as Alex claims there is a lack of meaningful green mortgages available. “There’s a lot of greenwashing going on, and I don’t see that changing anytime soon unless lenders start considering the future household spend and factor that into mortgage affordability. For example, one of our housebuilder clients has produced family homes with an annual running cost of £250. So, you wouldn’t do the same affordability that you would on somebody buying a property with a D EPC rating. We need to get to a point where we [calculate] affordability based on the home as well, as opposed to just the individual, and lenders need to take the first stride forward,” she urges.

Determined to make a change, Alex tells me HTB is currently working in partnership with the client she mentioned to create a green finance product to help developers carry out and complete more sustainable schemes. “There’s nobody better to tell you what they need from a product [like this] than somebody who has already done this kind of project,” explains Alex.

Unlike its existing green finance option, which offers discounts on the exit fee for developers building projects with an

Exclusive

A EPC rating, the new product will offer preferential rates for clients developing schemes incorporating several sustainability features, rather than solely focusing on EPCs. In terms of lending criteria, it will be in line with HTB’s standard features of 65% LTGDV and 90% LTC. While the bank is still developing the option as we speak, Alex tells me the team aim to launch it in Q4 this year.

MODULAR HOMES: PIPE DREAM OR THE FUTURE?

Another current topic of discussion in the market is modern methods of construction (MMC)—particularly on the back of the news that Legal & General will be closing its modular housebuilding factory. “There have been some publicised issues with certain MMC providers going bust and losing money, but I think people are a bit too quick to ring that death knell. We might not be there at the moment, but MMC has to be the way forward,” states Alex. She is a firm believer that modular construction could help alleviate some of the biggest problems in the sector: labour and material shortages and costs. “A lot of these SME [developers] are having to look in local markets to find skilled tradesmen.

Modular construction takes that issue away.

This is just more efficient, saving costs and energy, and solving labour issues.”

Despite the benefits that MMC brings to the table, the UK has been relatively slow in adopting this—a major reason being the concerns around providing finance for these types of schemes. “There’s a huge risk, because the developer needs the money upfront to be paying for these modular builds in the factory, but there’s no security. So, if that factory goes bust, you have lent money and have nothing to show for it,” she explains.

To solve this, she believes that lenders need to find a different way of underwriting loans for modular builds. “There needs to be a different security package that incorporates some kind of commercial underwrite on the modular factory as well, so that you’ve got some security there.

Inevitably, it’s a whole different way of looking at the credit risk.” One alternative way to underwrite a loan for a modular development would be for finance providers to take additional security on a developer’s existing completed scheme—however, Alex notes that this might pose difficulties, as there are very few SME developers with unencumbered sites.

Although there are some obstacles to overcome, Alex truly believes that MMC is the future of the construction sector and thinks lenders and challenger banks have a big role to play in driving this agenda.

“There are challenges, but it doesn’t mean the path is wrong or that we should give up.

I think lenders, including HTB, need to step up to the plate on this. We need to spend some time understanding the risks and the problems so that we can develop products that suit the practices.”

KNOWING YOUR LENDER For years, the construction sector has been plagued by labour and materials shortages and high costs, as well as planning delays.

In addition, the numerous consecutive increases in the Bank of England base rate over the past year have brought on a new problem for both lenders and developers alike. Alex states that funders have tighter purse strings, which she expects to lead to more finance providers becoming increasingly restrictive when it comes to the development loans they offer. “I think we’re going to have a round of institutional and semi-institutional funding being reviewed, which obviously impacts non-bank lenders.

Development finance is a risky business, and the returns aren’t there at the moment for some of these funders, so the cost of risk is not stacking up,” explains Alex.

She advises developers to look in more depth at the way lenders—both banks and non-banks—are funded before making their choice, as this could impact them in

the long run. This, and to work with a good intermediary. “Brokers are worth their weight in gold. Good brokers who understand the development finance market should be able to advise their customers exactly how the lender is funded, and where the funding is coming from.”

ACTIVITY ANTICIPATED Looking ahead to what the future might look like for the construction sector, Alex believes the conversation around MMC and modular construction will continue. She is also optimistic the market and interest rates will stabilise, resulting in more developer activity in this space.

“I think we will start to see the increase in housing output and hopefully start to head towards to some of the numbers that we were seeing pre-pandemic.”

As for HTB, Alex tells me the bank will continue to develop its new sustainable development finance product, as well as scope out the possibility of creating a development finance broker portal and app—however, this proptech solution is further down the line for the lender, rather than an immediate plan. On top of that, the business will focus on further refining its processes to make its lending even more efficient. “We pride ourselves on our customer service, so next year for us will be just how we can take that to the next level.”

“We might not be there at the moment, but MMC has to be the

way forward” 23

May/Jun 2023

Strength Advertorial

in depth

How tech supports relationship-led lending Building strong and lasting partnerships with clients and intermediaries is a priority for the growing, 40-plus team of underwriters, valuers, compliance managers, accountants and other property professionals at MSP Capital

Bridging & Commercial

A

healthy throughput of referrals from satisfied clients, coupled with a strong percentage of repeat business, has enabled MSP Capital to double the value of its loan book in just two years.

B r o ke r s a n d b o r r owe r s s e e k i n g development or bridging finance are attracted by the team’s experience and ability to operate on a relationship-led, solutions-driven footing. Speed, flexibility and that all-important personal touch are coupled with a robust infrastructure that has helped the firm gain a competitive edge and drive organic growth.

As his job title suggests, head of broker relations Arian Manouchehri applies his deal experience and insight to help brokers seeking the best lending outcomes for their clients.

He says the headspace to deliver truly relationship-led lending is freed up by underlying process automation that does the heavy lifting on administrative tasks. “We have built our own internal software package, which is designed totally around how we work as a company and with our clients’ needs in mind. The platform has allowed us

to create an infrastructure to streamline the loan application process, swiftly implement agreed terms and manage loans once drawn.

“All teams within the organisation use this software to collaborate seamlessly with each other, delivering an excellent service for the client with speed and accuracy. We are known for our entrepreneurial approach, speed of decision making and ability to deliver funds as a principal lender, and the software we have introduced as part of the firm’s wider technology architecture is a crucial element in continuing to build on that strength.”

The 42-year-old lender’s ability to process high levels of volume in the market has seen the number of deal completions by the team reach triple digits in the past year. Finance of up to £20m is available for projects, though the bulk of business tends to be at the sub-£5m mark, where offering a swift turnaround of funds to capture competitive and fast-moving opportunities is vital.

Asked how MSP Capital has managed to embrace technology to maintain its personal, relationship-led approach at a time of expansion, Arian points to trust and collaboration as watchwords. “The directors are passionate about maintaining a culture that encourages

“The directors are passionate about maintaining a culture that encourages innovation, entrepreneurialism and never settling for the status quo”

24

Advertorial

innovation, entrepreneurialism and never settling for the status quo,” he says. “Continual improvement is a big factor. To achieve that despite a growing team and loan book, we look to trust one another and know each other’s skills and strengths so we can work collaboratively.

“We focus on lots of group activities and ensure that the team members are all aware of collective goals and the future vision of the company. Our software is part and parcel of innovation—it is purposefully designed to be scalable and enable us to turn to technology for the heavy lifting on elements of administration.

That allows the underwriters and valuation departments to focus on the commercially salient points—and the human touch, in turn, ensures our clients get the support they want from a reliable lender.

“One of our biggest USPs is that we enable certainty of funds because everyone sits together in the same office and can make real-time decisions collectively that we will stand by. Such a level of certainty is a hugely powerful advantage for both borrowers and brokers alike, and our software supports that capability.”

Arian’s comments are echoed by Becky Harris, director of strategic finance and operations. “Our IT infrastructure and software allow for automatic instructions to be sent, getting our professional partners up and running within minutes of acceptance of terms,” she says. “The cohesiveness of the software allows for the rapid, seamless flow of information between both internal teams involved in the loan and our professional partners and intermediaries.

“This is vital to success, as timing is everything in the property industry, especially when you are looking at development or bridging finance.

“We will always embrace technological change, but there is a danger too much automation could risk muddying the waters rather than supporting professional experts”

“If we can make transactions more efficient and easier for the client—whether they are a broker, developer or borrower—we can build a long-term business proposition as an active lender working on the basis of sound underwriting logic and an entrepreneurial, solutions-driven approach, backed by great IT.” While praising its advantages, the MSP Capital team emphasise that the technologies they use are merely a tool to help ensure continual delivery of personal, relationship-led lending. They see IT as a department that supports rather than replaces human activity in the property sector.

Chris Wright, MSP Capital’s associate director of valuation, says human experience and insight will remain essential despite our world of technological advancement. “People are naturally excited about new technologies coming on stream such as AVMs,” says Chris, who is also a RICS member. “Because decisions on whether and how much to lend hinge on valuation, we tread very carefully here.

“We believe human input from a qualified chartered surveyor remains vital. You can take a data-driven approach for property types that are similar to each other and widely traded, but most valuers will continue to undertake physical 25

site inspections and apply local knowledge to ensure accuracy in their reports. Not all properties lend themselves to AVMs and there is also uncertainty about how AVMs can operate in periods of sudden market volatility and shifting prices. Markets are so nuanced around physical characteristics, location, access issues and many other bespoke factors, so you need human input to analyse and assess. That’s why valuation is both an art and a science.

“At MSP Capital, we underwrite loans only after we have thoroughly reviewed reports provided by an approved valuation panel with the necessary expert local knowledge. We will always embrace technological change, but there is a danger that too much automation could risk muddying the waters rather than supporting the input of professional experts with first-hand experience and knowledge.

“We will continue to play to our strengths as an experienced team known for how we help clients find solutions that work for them swiftly, effectively and personally. Our technology frees us up to do precisely that.

And, if we can continue being as flexible and agile as we can, we will encourage more clients to keep returning to us to fund their next projects.”

May/Jun 2023

Good ideas come from experience MSP Capital has been lending for over 40 years. That experience allows us to maintain a flexible and solution focused approach for our clients and intermediary partners.

As a principal lender offering specialist bridging and development finance for sums up to £20 million, we can provide clients with swift access to funding they can depend on.

From standard deals to complicated lending, we’re here to assist you and your clients.

Call us on 01202 743400

Team of Experts

Reliable Decisions

Specialist Lender

We understand the complexities of the industry and recognise potential.

Speak to the decision makers directly for swift finance you can rely on.

We have the experience and lending power to tailor our terms and meet your client’s needs.

Experience Beyond Finance mspcapital.co.uk

COBOD International’s BOD2 printer used in Florida by US-based start-up Printed Farms (Copyright: COBOD International)

HOUSING THAT’S FIT TO PRINT 3D construction printing promises to halve build times, cut labour and material costs, and allow more flexible designs. We discuss whether this innovation could help solve the UK’s housing crisis

Words by

TIM COOPER

3D printer used in construction

3D

construction printing is a much-hy ped emerging technology that has potential to build houses on the moon—yes, NASA has already backed the project. Others have high hopes the UK can eventually print enough homes to help solve its housing crisis. However, 3D construction printing (3DCP) faces a long road to mainstream adoption.

The first 3D-printed buildings were completed in Asia in 2015. Fast forward to late 2022, and more than 130 projects were finished or nearing completion worldwide, according to printer provider COBOD. In the UK, it’s a different story: there are currently no completed 3D printed houses and only one project—a 46-home scheme in Accrington, Lancashire taken on by Building for Humanity—for which works are planned to start later this year.

Bridging & Commercial

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FASTER, FLEXIBLE AND CHEAPER The UK is still falling short of building 300,000 new homes a year, as was initially pledged by the government. Housebuilders face many problems still, such as being unable to find sufficient land, post-Brexit labour shortages, and construction costs that have outstripped headline inflation for many years.

3DCP could help resolve these challenges, particularly around speed, a dearth of labour, and rising prices. Under this approach, a printing machine is used to build structures such as walls with mouldable material— usually concrete or mortar. Some printers can also use polymers, plastics and metals.

Such automation promises many benefits, such as halving build times and cutting labour and materials costs by 5-15%, as COBOD estimates just two to four people could do the job, depending on the materials used. And the savings could be substantial; according to Henrik Lund-Nielsen, founder and general manager of COBOD, the industry has hopes to reduce costs by 20-30% by enabling the printer to do more, such as painting and insulation. “3DCP 30

allows for intricate and complex designs at little to no extra costs, which would be difficult and expensive to achieve with traditional methods.

On top of this, it enables precise material usage and generates less waste compared to traditional methods,” adds Marchant van den Heever, chief technology officer at Harcourt Technologies (HTL).

“The UK doesn’t have the skills or labour to deliver anywhere near the housing levels we need. 3D printing doesn’t need lots of skilled labour to run the machine once operational,” says Scott Moon, founder of Building for Humanity. “More housing developments will use this technology as it has the potential to make housebuilding faster and more affordable.

We aim to prove it works.”

MEETING THE STANDARDS 3DCP has faced legal and regulatory barriers, for example in matching building element types to standard Eurocode 2 and proving they are strong enough to bear loads. But technology and practice have evolved to fit the rules.

HTL, which will manage the Accrington project, says it had no problem getting the

View

relevant planning and building control permissions from local authorities using COBOD machines.

Marchant says 3DCP technology initially used mortars that were not able to support loadbearing requirements. A traditional reinforced Eurocode 2-compliant concrete was therefore used for loadbearing and structural stability. However, recent developments in the application of concrete using larger aggregates are set to change that, he states.

“3DCP materials used in a structural capacity are governed by BS EN206 and BS 8500, as with any traditional method,” he explains. “HTL has now developed printable concrete materials that comply with the strength, durability, and other performance requirements of these standards.”

Another issue has been a lack of quality and safety standards around 3DCP. However, an imminent international standard (ISO 52939) should address this. The draft of this outlines the requirements for producing and delivering highquality additively manufactured (3D printed) structures for residential or infrastructure on- or off-site. It also defines controlled and monitored steps for ensuring quality in the 3DCP process. “The lack of standards for 3D printing in construction needs to be addressed to ensure consistent quality and safety across projects. The ISO 52939 standard, which has recently been put forward for public comment and subsequently accepted, has taken a big step in the right direction,” comments Marchant.

In the meantime, 3DCP is still mostly used in small-scale and pilot projects as its benefits are explored, evaluated and showcased. For example, 14Trees in Africa, a joint venture between cement giant Holcim and British International Investment, recently printed 10 houses in just 10 weeks. In addition, German construction company PERI has used 3D printing to deliver residential dwellings, and is now using the technology to construct a 600 sq m building to host an IT server hotel in Heidelberg.

One major barrier to adoption in the UK is that large housebuilders seem to show little interest in the technology, at least publicly—no major housebuilders responded to requests to comment for this article. According to Marchant, this could be because they have

3DCP ALLOWS FOR INTRICATE AND COMPLEX DESIGNS AT LITTLE TO NO EXTRA COSTS, WHICH WOULD BE DIFFICULT AND EXPENSIVE TO ACHIEVE WITH TRADITIONAL METHODS. ON TOP OF THIS, IT ENABLES PRECISE MATERIAL USAGE AND GENERATES LESS WASTE” 31

May/Jun 2023

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well-established business models with strong supply and demand for traditional building methods, so may feel no need to pilot innovations.

Even if 3DCP becomes mainstream, Marchant clarifies this will not be a panacea for the housing crisis, as this is also influenced by factors such as land availability and zoning laws. Nonetheless, printing can contribute to increasing efficiency and cutting costs.

Marchant suggests government subsidies or tax incentives for 3DCP may help grow acceptance. “For example, if developers received a grant of 10% of the construction cost for all houses made with the new technology, widespread adoption is bound to happen earlier, and then the whole supply chain will move faster [through] the learning curve, thus leading to lower prices to the benefit of all involved,” he explains.

Continued investment in developing technology and materials will also be crucial, as will collaboration between contractors and suppliers.

Marchant would like to see further development of low-carbon cements as well as 3D printable concrete made with a combination of cement and fly ash or blast-furnace slag as low-carbon footprint binders.

In addition, training in 3DCP construction will be vital; there is a UK shortage of construction workers who understand 3D printing technology and the advantages it offers. To help, HTL has partnered with a college in Accrington to set up a 3DCP training course, and plans to develop more courses across the UK.

LENDERS SHOW INTEREST Chris Gardner, joint CEO at Atelier, says his firm is interested in backing 3DCP projects. The lender recently created a framework for lending to offsite and modular construction methods for residential buildings, due to the different risks it poses for lenders. On-site builds protect finance providers as loans can be secured on the materials and the development, while off-site builds require components to be funded outside that security net, which can add complexity. “We see these new methods as the direction of travel, so we have to find new ways to support them,” highlights Chris. “We are methodology agnostic as a lender, so we would have no particular comment to add to a developer that may wish to use 3D printing over any other construction method, if it can be demonstrated from the outset that it meets basic requirements. Our appetite for this is no less nor greater than it is for any other method of construction.”

The guidance tries to simplify these complexities by setting core requirements, such as properties needing to be mortgageable through a mainstream lender and covered by standard buildings insurance.

To ensure safety and durability, they must be BOPAS accredited or comply with NHBC Accepts.

WHAT CAN 3DCP ACHIEVE? Henrik believes developments in 3D printing for commercial builds should encourage its uptake more generally. He highlights that big global projects, such as Siam Cement Group’s medical centre and L&T Construction’s large public service buildings, will instil confidence in housebuilders and the public that this technology can be trusted and taken seriously.

“We have partnered with several large companies worldwide because they realise this is part of the future. Also, some cement and equipment manufacturers have bought into our firm, as they believe in this and they invest in us for the same reason,” says Henrik, adding that this will eventually make this technology more mainstream.

Scott agrees: “Seeing projects in other countries get off the ground, plus seeing COBOD is respected and has [attracted] some large partners, give confidence.”

Trust and credibility for 3D printing are slowly being built within the housing sector. Though it will take time—and may not sound as exciting as building houses on the moon—the potential to alleviate the UK housing deficit is there.

Bridging & Commercial

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Feature

Digital lending— from start to finish

Words by

ANDREEA DULGHERU 35

May/Jun 2023

Feature

Is end-to-end digital lending feasible?

Colenko believes so. The specialist finance lender’s CEO Rob Roscoe and head of sales Mark Marlow talk about how they have harnessed fintech to achieve this, and its effects on service, speed and staffing

F

rom ID verification to broker portals, most finance providers have implemented some sort of fintech; Colenko, however, has taken this a step further.

The specialist finance lender has extended this with one goal in mind: to offer a fully digital lending process.

This journey started back in 2018 when Colenko was established. From the outset, Rob knew he wanted a lending process that incorporated fintech to scrap time-consuming paperwork. “Historically, bridging lending has been very paper heavy, with tons of files all over the place. So, when we created Colenko, a key part was setting up a paperless operation—we just felt that this offered us a competitive advantage,” he explains. Apart from the desire to stand out, Colenko wanted to use a paperless system to provide a high-quality, flexible service to brokers and borrowers.

A completely digital route became reality once the Covid-19 and lockdowns hit the UK. “It was when the Land Registry introduced the ability to register charges with e-signatures [in 2020] that we were really able to deliver an end-to-end digital process,” Rob explains.

While some may have struggled with revamping systems to enable remote working, this was not the case for Colenko, as it had been set up for this. However, as the firm’s lending process incorporates several SaaS products (such as CRM software Salesforce) as well as its own bespoke system, putting these puzzle pieces together was difficult and time consuming.

Bridging & Commercial

“We’re not trying to force clients into using the end-to-end digital service. There’s not an enormous demand, but the ability to do it when you do need it is invaluable”

How it works The process starts with the broker completing an enquiry form through Colenko’s online system or by completing a PDF. Once this data has been logged, it is captured by the lender’s systems, then passed through a pricing algorithm that takes various factors into account, such as the experience of the borrower or developer. “That gives us an instant view of how the case is set up, and will flag any problems that might upset the process later on. The system assesses the metrics of the case using a high level of detail. And, because we have a collaborative online system, Mark will share this with an underwriter, who will also review the case and give it a soft approval. This allows us to be really accurate about how we price and the leverage we offer so, by the time we’re sending out an initial quote, we’re really sending out credit-backed terms—and the outcome further down the line is that we rarely have to change terms.”

Once the broker has received the DIP and is happy to go ahead, they will complete an application form, in a similar manner to the enquiry stage. This is when the fintech used for the initial stage comes into play, as Rob tells me the application form given to the broker is partly pre-populated by the digital system, using the information from the previous enquiry form—thus saving everyone time.

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Feature

Turnaround and tracking According to Rob and Mark, the benefits of this are significant. It enables Colenko to halve the number of staff needed to complete a deal, and the time they need to put in. In addition, Rob tells me that a loan can be closed in a few hours. “Another benefit of this is that you can then operate at a lower cost, and pass on those savings through competitively priced products,” explains Rob. The lender’s technology also allows it to oversee the progress of a development. “By putting the data in our systems, we can easily track exactly what’s happening with that project—we’ve got the full, clear picture. So, if there are any cost overruns the scheme has slowed down, we know exactly at what stage it’s been delayed or where the additional costs sit, so we can address any issues very quickly,” says Mark.

Adding all the time

While fintech increases efficiency, it demands constant attention. “There are so many variables in specialist lending and you’re just perpetually finding more that you can do to enhance and customise, so we’re frequently building and reiterating as we go, based on experience,” highlights Rob. Colenko is now looking to implement technology that allows integration with its solicitor partners to ensure everyone is operating in the same, collaborative environment.

There’s no denying fintech brings plenty of benefits.

However, both Rob and Mark say it is just one piece of the efficiency puzzle—not the whole solution. “You’re always going to need manual oversight—this is not a market you can standardise to one single online form,” says Rob, concluding: “Technology is there as a tool to help drive efficiency; that said, I think its use is here to stay and will only improve our processes.”

With the application form received, the lender’s underwriter begins digital checking, using third-party digital ID and verification software. “A standard set of requirements are generated for the underwriters, and the system will lead them through this,” Rob states, adding that the software leaves room for additional checks, such as bank statement verification using Open Banking.

Colenko also uses an automatic generator to create legal documents tailored to each case. “With this, we don’t have to wait 2-3 days for the solicitors to produce those documents, and the knock-on effect of that is [reducing] the cost of borrowing for the client in terms of legal fees,” Mark explains. Once this digital paperwork is sent out, the lender can use e-signatures to complete the deal.

While the end-to-end digital process is available for all types of specialist products Colenko offers—including bridging and development finance—Rob emphasises that it is an alternative for brokers who want to use it, rather than the only option; he estimates that one in 20 transactions are fully digital. “We’re not trying to force clients into using the end-to-end digital service.

Our focus is solely on giving the best level of service and making life as easy as possible for brokers and borrowers,” he says. “There’s not an enormous demand for [a fully digital process], but the ability to do it when you do need it is invaluable.”

37

May/Jun 2023

Feature

searches, Words by

ANDREEA DULGHERU

Knowledge Bank has revolutionised how brokers track lending criteria, with over five million searches conducted in less than six years. The firm’s CEO and founder Nicola Firth details how the platform’s upcoming innovations will further help lenders and intermediaries do business

Bridging & Commercial

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Feature

It’s helping them to understand what kind of business is out there.

Essentially, we’re telling lenders where to fish, rather than guess Over a decade ago, Nicola was running her brokerage, Firth Financial Services. However, one thing was always bothering her: the struggle of tracking lending criteria using spreadsheets. When her search for a tracking system that could do this for her was proving fruitless, Nicola decided to create this from scratch in 2015—a risky decision, as she had no background in technology nor any funding from investors. “It was even wilder, as my husband left his job outside this industry, took his CeMAP, and became a self-employed broker at the same time. He took over my clients to keep earning so I could do this.

When you put all this together, it’s absolutely crazy, but I just had this unwavering belief that this was the right thing to do for the industry,” states Nicola.

With Craig Flannigan, a tech expert she had known for over 20 years, she created Knowledge Bank. The first iteration— which was tested with around 15 of Nicola’s broker contacts—allowed intermediaries to “bank” and share lending criteria knowledge with each other. That quickly morphed into the fintech system of today, as lenders wanted to feature directly. “Lenders will follow where brokers go, so they are happy to pop their full criteria on Knowledge Bank,” says Nicola. After a few months of testing and improvements, Knowledge Bank was launched to the wider market in September 2017, featuring 18,000 pieces of criteria from 65 lenders.

Over t he years, K nowledge B a n k has grown from strength to strength.

In almost six years, it has amassed over 140,000 criteria for seven types of lending

(including bridging, commercial and BTL) and onboarded over 260 finance providers.

In March, the total number of broker criteria searches recorded since Knowledge Bank’s inception surpassed a staggering five million. While the platform saw monthly peaks and troughs, primarily driven by macroeconomics, the number of searches doubled almost every year. The significant increase in brokers, lenders and criteria searches illustrates the extent of its success.

“If you'd have told me we’d reach five million searches back in September 2017, that would’ve seemed ridiculous. But here we are, and to see how many searches go on every day, it’s amazing,” she says.

Nicola credits the success of the business to the desire to help clients: “The evolution has been organic, partly because we're watching what the market's doing and to some extent [because we’re] driving it. We’ve always been very reactive. Of course, we’re proactive as well, but we listen to what people want. With the exception of the tech team, everyone [here] has either been a broker or worked for lenders.

We’re constantly questioning what challenges brokers and lenders are facing and how we can address these and make things better.”

R a pi d r e s p on se to n e e d s

Nicola recalls an incident a couple of years ago, when an intermediary on Twitter tagged Knowledge Bank and Criteria Hub—another criteria sourcing system—to suggest a SVR search field to enable brokers to keep up with all SVR changes from residential and BTL mortgage lenders. “The guys worked through the night and launched it the next morning

39

Total number of lenders on the Knowledge Bank system

261 May/Jun 2023

Feature

Bridging

2017 Minimum property value 2018 Distressed sales 2019 Lending up to 100% of purchase price 2020 Development finance 2021 Regulated bridging 2022 Development bridging—maximum LTGDV against end value 2023 Development bridging—minimum borrowing/loan amount

Commercial

2017 Multi-let property 2018 Postcode/location acceptable areas for lending 2019 Maximum LTV for a business with investment properties 2020 Commercial owner occupier 2021 Maximum period for interest only 2022 Maximum LTV 2023 Maximum LTV

BTL

Knowledge Bank’s most searched for criteria terms for bridging, commercial and BTL for each year

2017 Day-one remortgage 2018 Minimum property value 2019 Leasehold remaining term/ beginning of term 2020 Vendor gifted deposit 2021 Non-EU foreign nationals 2022 Concessionary purchase 2023 Portfolio landlords—maximum loan amount

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because there was such a buzz around it—I believe we launched it before Criteria Hub even saw the tweet. We get such a kick out of doing things quickly.”

Similarly, when the pandemic hit and lenders starting offering mortgage payment holidays and altering criteria, Nicola and her team created a free-to-access tool for brokers—which went live within 24 hours—to keep them informed of what lenders were doing. Around 1,800 people used it in the first week. “Lenders were really grateful because they were being inundated by customers and brokers asking what the situation was and how to get a mortgage payment holiday.

It wasn’t for the general public, but everyone in the industry could access it with no barriers,” comments Nicola.

During this time, Knowledge Bank sent out criteria update emails every night to brokers—something it did during the miniBudget too. It also put a ‘lender banner’ on the platform, so users could easily see which providers were set to change criteria or pull products. “We take a lot of pride in making sure we’re always at the forefront of what’s needed,” says Nicola.

The developments during the pandemic reinforced the value of Knowledge Bank, although that was never the motivation behind creating these new features. “It was brilliant because we ended up getting a lot more support from lenders and an uptick in broker users, but that's not why we did it.

We did it because we saw an opportunity to help quickly. This was a by-product of us doing the right thing. I’ve always said, even as a broker: if you do the right thing for your customer, you’ll earn a living.”

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We’re constantly questioning what challenges brokers and lenders are facing and how we can address these and make things better

Knowledge Bank’s most searched terms of all time for bridging, commercial and BTL (items rounded down to nearest 1,000)

COMMERCIAL 65,000 Multi-let property BRIDGING 85,000 Minimum property value BTL 1.8 million Day-one remortgage 41

C on sta n t a ddi t ion s

This attitude has driven Knowledge Bank’s evolution; on 26th January this year, the business unveiled an interactive guide for lenders to promote their criteria to brokers across additional media channels.

In February, it introduced its KB PRO system, which aims to improve how finance providers manage criteria data and communicate this with brokers.

A nother innovation it has brought forward in May is its Notify service for brokers and lenders—this is included in intermediaries’ Knowledge Bank subscription, while lenders will have to sign up for a fee for access. This is designed to help brokers place more complex cases that fall outside regular criteria; with a click of a button, brokers can select the lenders they want to send an enquiry to. The financier then receives a notification to assess the case, after which they can tell the broker whether or not they will accept the case.

In real time, the provider can invite the intermediary to place the business via a DIP. If the broker accepts, all other lenders contacted will be notified that the deal is no longer available. Knowledge Bank will be carrying out a beta test with 41 lenders from the end of May, with the goal of launching the service in July/August.

Being proactive and staying on top of market trends and feedback has been reflected in changes such as adding criteria about cladding and green mortgages. While most terms are included depending on user and market demand, Nicola lets me in on a trade secret: “We do put some things in to

May/Jun 2023

2017

2018

2019

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1,839,931 2020

1,339,291

765,292

377,789

202,597

122,926

Number of criteria searches on Knowledge Bank registered each year

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2022

see if we get searches for them, [especially if you] see [a buzz] on social media [about it].” For example, one of the first criteria terms the platform integrated was ‘deposits from cryptocurrency’—a search phrase that was unfamiliar back then, but which has grown in popularity once Knowledge Bank introduced it on the platform. “Now, if you go on [Knowledge Bank], there are lenders that will accept cryptocurrency as deposit,” she adds. According to Nicola, introducing unpopular criteria, like cryptocurrency, allows brokers to see whether finance providers are lending on them. Meanwhile, if a term becomes popular, this helps lenders identify a potentially untapped market.

Looking ahead, Nicola and her team are planning to define two new criteria categories: one for development finance (currently within the bridging section on the platform) and one for HNW borrowers.

The company is also set to introduce a tool for lenders and brokers in July to support them with the consumer duty regulation compliance. To create this, the team thoroughly assessed the FCA guidelines and added these into the system to flag any potential borrower vulnerabilities and warning points to brokers. The areas of lending relevant to consumer duty will be alerted to brokers, noting that additional questions or care may be needed with that particular case. This will also be highlighted on the broker’s 'evidence of research’ document, included in their compliance file. Furthermore, it will inform financiers how often certain consumer duty-related criteria are searched.

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The second innovation Nicola and her team are working on is Broker Insights, which is tailored to lenders. This will provide an overview of what types of business and criteria brokers are searching for, so lenders ca n better showcase and target USPs. “It's helping them to understand what kind of business is out there. Essentially, we're telling lenders where to fish, rather than guess.”

AI and machine learning are also being considered and could be implemented in some services as early as this year. For example, the platform is looking into using AI technology to predict the effects of criteria changes on a lender’s business. “We think there's such an opportunity for AI and machine learning to really help [firms] anticipate what's coming down the line.”

While Nicola feels immense pride at the success of Knowledge Bank, she admits the team are self-critical: “We tend to focus on what we've not done well or quick enough and what we can improve on. But it’s moments like reaching five million searches that make us stop in our tracks and reflect, which we probably should do more of.”

She divulges that when she walks down the street, she looks at people and asks herself how many of them secured a mortgage as a result of Knowledge Bank. “That gives me a real kick and makes me proud.”

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Are we ready for AI? 45

May/Jun 2023

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ould a relationship-driven industry such as ours be driven by artificial intelligence?

Will it mean faster, more accurate decisions, or raise security risks? As the industry embraces its potential, it has to rethink what is possible Words by BETH FISHER Illustration by VALF

In a whirlwind over the past year, artificial intelligence (AI) has transcended mere buzz to enter the realm of the surreal. From the ceaseless flood of social media posts showcasing its tantalising potential to revolutionise our work habits to the terrifying debates predicting widespread job displacement by 2030, AI has become an inescapable topic.

With generative AI now firmly in the public eye, thanks to ground-breaking platforms such as ChatGPT amassing a staggering 100 million users within a mere two months, the landscape has shifted. Not only are individuals in both their professional and personal lives discovering newfound efficiency in tackling laborious tasks, but also they are capitalising on the time saved to embrace more empathetic and creative capacities that are innately human. The tide of change, driven by major players such as Microsoft, Amazon, Google and Bloomberg with their large language models is reshaping the way we operate and unlocking a world of possibilities.

“In the modern world, too much of our professional lives are taken up by monotonous tasks: inputting data, filling out paperwork, scanning through documents for one piece of Bridging & Commercial

information and so on. AI in the workplace has the potential to free us up from these tasks, allowing us to spend more time doing the things we trained for,” reports secretary of state for science, innovation and technology, Michelle Donelan.

In a momentous move, a policy paper on AI regulation landed on parliament's doorstep in March, signalling a turning point for the future of AI. With a staggering £2.5bn already poured into AI investments since 2014, the government has spared no expense, allocating a substantial £117m to foster the emergence of a new generation of AI researchers through hundreds of coveted PhD positions. The vision? To establish the UK as the “smartest, healthiest, safest and happiest” place to live and work. As the reverberations of this ambitious endeavour spread, industries across the board stand to reap the rewards.

From the healthcare delivered by tireless NHS heroes to law and order, global climate scientists and the intricate web of transport networks, AI is poised to transform the very fabric of society—economically and socially.

The UK has firmly established itself as a global powerhouse for AI research and 46

development, claiming an impressive third place on the world stage. With an unrivalled concentration of AI companies—one-third of Europe's total—the UK outshines its continental counterparts by an astounding margin. Behind the scenes, it tirelessly safeguards our hard-earned money by swiftly detecting fraudulent activities lurking around our bank accounts; on bustling roads, it monitors traffic patterns to ease commutes; and in our laboratories and hospitals, it propels scientific and medical breakthroughs at an unprecedented pace.

But how could it transform the most human-centric aspects of the specialist finance market? With its ability to analyse vast amounts of data, automate arduous tasks and provide valuable insights, AI has the potential to enhance decision-making, streamline processes and unlock new opportunities in this traditionally relationship-driven sector.

To get a better understanding of how industry professionals are viewing the AI phenomenon, I tap into the minds of numerous experts to share how this technological juggernaut is reshaping their businesses.

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How is generative and traditional AI being used?

First of all, what is the difference between traditional and generative AI? The former focuses on solving specific problems and tasks based on predefined rules and algorithms, relying on swathes of labelled data and explicit programming. The latter uses machine learning techniques to generate new and original content.

When canvassing for examples of how AI is used to assist businesses in the specialist finance industry, I was pleasantly surprised to hear from so many lenders and brokers already adopting a multitude of tools and planning for wider adoption.

Specialist lender Fiduciam—which uses generative AI for improving general editing and extracting core information, and traditional AI for fraud, AML and cashflow matching—is implementing its own internal AI architecture so that it can use non-public data without having to worry about data protection. Co-founder Johan Groothaert says it provides “a usefulness of a different order of magnitude” when it comes to underwriting loans and lifecycle management.

He believes this will help strengthen the lender’s underwriting processes and make it more efficient. “As a multi-jurisdictional lender, we also need to make sure it works in all languages.

Our first internal AI application will go live this summer. The data it will process is massive.”

According to Chris Gardner, joint CEO at development lender Atelier, AI is going through a “very public big bang”, generating excitement and anxiety in equal measure.

“I see it as an opportunity rather than a threat,” he stipulates. “AI’s ability to synthesise and analyse vast amounts of data will be a powerful ally for underwriting teams, automating laborious tasks and slashing the time required to complete an initial fact-find and identify any red flags. We’re exploring how to use AI to help us make better decisions, rather than make the decisions for us.”

Specialist bank Shawbrook—which recently ran a hackathon focused on using AI to better serve customers—is actively trialling and adopting solutions such as ChatGPT and Microsoft Azure OpenAI services. For example, the lender is exploring and using generative AI to help accelerate software development using templated examples, debug code, and write test cases to check the quality of software. It is also being expanded into product management to design better user experiences and for manual writing tasks, such as creating detailed job descriptions. “Throughout all these use cases, our colleagues are fully in control of these tools and are using them to jumpstart or accelerate work that they would have had to do entirely manually before,” says chief product officer

Arthur​Leung. “Given the nature of our business, risk management underpins all of our activity.

We recognise the power and rapid development of AI, so its use is being managed conservatively, with senior leaders guiding and implementing carefully and responsibly.”

Bridging lender TAB also employs generative AI to assist with training and developing code, primarily using it to generate a skeleton framework for blog posts and social media content and produce basic code structures to speed up development. Duncan Kreeger, founder and CEO of TAB, states: “One potential application is using AI to analyse a variety of document-based data to improve our lending decision-making process. Additionally, we are exploring the possibility of implementing a chatbot in our customer relations department to assist with answering simple questions and handling initial enquiries. As we build more meaningful data, we can use AI to analyse this against the markets and look at how we compare against trends.”

Glenhawk is using ChatGPT to help develop its IT systems and is carrying out an R&D project to develop a broker chatbot to answer their questions about cases and products. Commercial director Michael Clifford describes AI as an “incorrect mnemonic”, with people confusing it with systems that will do mundane tasks which involve zero intelligence. “The intelligence comes in responding to questions such as, ‘Does this case look fraudulent?’ Getting the credit history of a borrower is not AI. Being able to spot patterns in large amounts of data is, and is where we will first see AI being adopted.”

Rob Johnson, head of underwriting at Somo, says that while AI is part of the finance provider’s toolbox, his firm does not use it to make final lending decisions. “It simply helps us build a picture of the client’s profile because, like all lenders, we need systems in place to identify reasons to say yes or detect anything that could be deemed irregular or problematic.”

Brokers are also unleashing the power of AI to support them in navigating cases and expediting administrative tasks and, in turn, altering the landscape of their profession.

Finance brokerage www.mortgageshop.com uses generative AI: in its IT systems, linking its remote telephone support to its underwriting team, without interrupting an adviser's time; for analysing clients’ bank statement data; and for its Open Banking systems. “This helps us confirm disclosures made by applicants in the fact-finding processes to assess client identity, existing financial commitments, incomes, general outgoings, and any financial difficulties they have suffered,” says managing director Gary Bush. “It allows our systems to learn from any 47

new transactions so that it can alter its future analysis for this client and others.” This system automatically chases borrowers for responses to any anomalies and advises the “human handlers” at the business of its concerns. “We are currently also working on two new pieces of AI code,” he divulges, sharing that one will analyse its clients’ credit reports to work in conjunction with its Open Banking analysis systems to verify existing financial commitments, adverse credit, client identity data, and locate anomalies. The other will examine the brokerage’s clients’ potential vulnerability at the start and end of a live financial transaction—which is part of the company’s consumer duty work. “This system will take a view across all areas of data that we hold on clients and automatically assess vulnerability on an ongoing basis to attempt to guide human users to factors that often don't get analysed on a global basis when working by hand on a client case. The areas it will automatically look at are medical conditions, medications, adverse credit status, Open Banking transactions, existing financial commitments, marital status, dependants, start and end of transaction status, feedback on communications and general affordability before and after the transaction.”

Real estate advisory firm Pure Structured Finance has begun looking at using ChatGPT and Midjourney for content creation and marketing. Managing director Tom Lee has hopes it can be used further: “We’d like to see AI incorporated by the portals and software our partners use for time saving, accuracy and general efficiency. There are plenty of manual data input exercises that could be streamlined with the help of AI. It didn’t take long after the switch to digital form filling that we saw technology ensure accuracy with autocorrect and speed things up with autofill, so why wouldn’t we expect further advancements with AI?” Tom believes AI could also aid with compliance. He explains how it could write a comprehensive vulnerable persons policy for a mortgage advice business by considering the FCA’s FG21/1 guidance document, existing risk assessment and management frameworks within UK financial services, and various sections of the FCA Handbook. “AI and process automation in general also have the potential to considerably lighten the load of monitoring tasks, whereby tools such as speech recognition could be used to listen to key words within a call, or generative language models could be asked to write some code/a script to periodically download and analyse datasets from a firm’s CRM, or assess the risk associated with a particular application based on parameters such as individual adviser and product risk,” says Tom. With capitalist incentive and government investment to date, May/Jun 2023

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“Getting the credit history of a borrower is not AI. Being able to spot patterns in large amounts of data is, and is where we will first see AI being adopted”

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he expects AI to progress at an “extraordinary pace”, but warns that regulatory bodies will need to keep up with the advancements. “As with most things, you can expect teething problems as inaccuracies and customer expectations need to be managed accordingly. Once we get to that stage, it’s off to the races!”

Imogen Sporle, managing director at Finanze, expresses her admiration for AI as a powerful tool that is continuously advancing at an astonishing pace. She believes that companies not leveraging this technology are missing out on its immense benefits. At Finanze, tools such as ChatGPT have become indispensable to staff, lightening the load of content creation and facilitating the gathering of ideas and checklists. Imogen personally utilises ChatGPT as an administrative assistant, relying on it to proofread emails and refine her wording. Additionally, she highlights the widespread adoption of resources such as Open Banking and ID verification apps, which have transformed the industry by dramatically reducing the time-consuming tasks of scouring through bank statements for irregular transactions and ensuring data alignment. With the efficiency and time savings brought about by these innovations, professionals can accomplish these tasks in a fraction of the time they used to.

Specialist adviser largemortgageloans.com is also embracing AI to help with marketing, namely to generate ideas. “We wanted to come up with some interesting and catchy subject lines around a recent email campaign to our clients and we fed the information into ChatGPT and requested five suggestions for attention-grabbing subject titles. It was a real eye-opener and gave us a starting place for us to get creative from,” notes founder and CEO Paul Welch. “On a personal level, I have started using Motion—an AI calendar that automatically plans my day, schedules meetings, creates to-do lists and intuitively organises my life—brilliant for those who need help with time management and prioritising tasks. You can also use it as a team for projects that you’re working on together, [as] it helps with workflow and a whole host of other activities.”

Brokerage FinSpace Group uses AI tools in its marketing and technology functions, and co-founder and director Jaffer Abbas finds it “extremely valuable”. For example, the firm’s technology team uses AI to develop code frameworks quicker, increasing its overall output by 20-30%. “These are generally not deployment ready, but [it] optimises the release cycles. Through implementing tools like Copilot and CodeWhisperer, we have been able to get more done in our sprint cycles.” In the future, the business aims to use internal AI tools to improve compliance, validate projects so it

is only working on viable opportunities, and identify bottlenecks in completions. Jaffer adds: “The aim here is to plug in a sentiment analysis engine and monitor customer and consultant interaction through notes. This will help bubble up cases and identify issues in time.”

Hesitation

However, some companies have not implemented AI into their frameworks and are getting to grips with how it can be used in the future; others have given it a wide berth.

For example, bridging lender Market Financial Solutions (MFS) doesn’t use generative AI or automated technologies in its processes, in part due to the type of property investors it lends to and also because it rarely deals with straightforward investments. “Our offering is bespoke,” says head of underwriting Scott Lord.

“Our loans are tailored to fit in with a range of scenarios and complicated set-ups. There’s just no way to incorporate all the variables we have to deal with in AI technologies as they exist today.” Scott tells me it will be obvious where AI programs are writing blogs and other educational content: “Marketers will need to be very careful with their fact-checking before pressing publish. It’s not something we will be using at MFS in this capacity.” However, for ID checking and verification, he agrees that there is potential to look at a tried and tested option to make this process simpler and quicker for its clients.

While specialist finance provider Avamore Capital doesn’t formally use generative AI, most of the team has toyed with ChatGPT. Director of operations Sabinder RobinsonSandhu expands: “It is becoming increasingly mainstream and the power is huge; the danger, however, is that it can encourage complacency and, very quickly, it will become clear if there is an over-dependency on a digital tool.” She confirms the lender is in the early stages of research and testing for a tool to help its analysts decipher information at the front end. “Brokers package deals in a number of different ways and what we are working on will help our team identify what has been provided, flag what’s missing and, ultimately, cut straight to the detail required to assess the deal. We want to pursue more pathways like this which are dedicated to improve processing times and elevate our customer experience, and free up our team from admin so that they have the opportunity to apply their skills more day to day.”

Before bridging lender Roma Finance decides on using AI, Michael Allison, its operations director, wants to understand exactly what it can bring to the business. “Can it enhance what we already do without us losing our human touch? It’s really important 49

to us that we maintain the human side of our business, despite being a tech-focused lender.”

Kris Corns, operations director at Crystal Specialist Finance—which isn’t actively using generative AI—is exploring how it can adopt it to better support its broker community by increasing the time it can dedicate to them personally. “We see AI picking up the quantity so that we focus more on the quality.”

While generative AI is not a big part of Allica Bank’s current operations, the business identifies its potential to be a game changer for how brokers and customers work with banks. “We’re exploring how it can be adopted across multiple areas. For example, we have been working on machine learning models for our lending products to automate credit decisions,” shares chief technology officer Ravneet Shah. The bank has also been looking at: credit risk assessments and automated decision-making; customer and broker support; enhancing customer segmentation and prediction analysis capabilities; fraud detection; and improving the efficiency and productivity of its engineering team.

Ben Sampson, director of transformation at Yorkshire Building Society, says: “[AI is] not something we currently use and we don’t have any confirmed plans in place, but is part of our continued review of ways to make our practices leaner and more efficient. It’s certainly not something we would rule out in the future as the concept could revolutionise certain aspects of our business if deployed well.”

What the revolution looks like

AI could be used in a plethora of ways to support the specialist lending community, such as through data analysis, automation of routine tasks, underwriting, dissecting information from loan books, compliance, and customer support—and the industry is starting to see the opportunities.

According to Johan, the implications will be massive.“Lending processes, risk assessment and fraud defence will all be revolutionised,” he declares.

According to Paul, there is “no limit” to how AI will transform the market. “The biggest challenge is our lack of creativity and imagination. We need to be open to the infinite possibilities ahead.” When it comes to product development, he expects AI will be able to analyse customer preferences, needs and market trends, helping institutions to develop personalised and innovative products tailored to specific customer segments, he says. “Using AI, financial providers will be better equipped to comply with regulatory requirements by automatically monitoring transactions, detecting anomalies and flagging May/Jun 2023

“Generative AI will never really be able to replace a decent adviser from seeing ways around technical scenarios… or will it?” potential compliance issues. This should reduce the risk of regulatory fines and reputational damage. In addition, AI can detect unusual patterns and potential fraud in real time, raising the alarm early with providers so that they can take immediate action and protect their customers. Machine learning algorithms can continuously learn from new data, refining their ability to identify and prevent fraud.” In addition, he anticipates automated approvals, credit assessments, and document verification—all reducing operational costs.

Samantha Demuth, director and head of regulated and term finance at Finanze, agrees that time-heavy tasks—such as keying client data into multiple systems, chasing lenders, fraud checking and criteria matching with lenders—could be dramatically alleviated, freeing up more time for brokers to work closely with clients and lenders on complex deals. “The opportunities AI can provide are really exciting but, [instead of] jumping headfirst into delivery, it’s really important we source and implement tech that confidently and efficiently solves real business issues while delivering value, rather than deploying the latest tools and hoping for the best without solid foundations and assured expectations,” adds Ben. Duncan agrees this technology is set to transform the lending process: “In the finance industry, AI will soon provisionally assess the risk of a loan and borrower by using information Bridging & Commercial

from bank accounts, bank statements and legal documents to generate comprehensive risk assessments that will support lending decisions.

AI systems will learn by identifying the factors that influence loan approvals, such as credit history, income and debt-to-income ratios.

By sifting through massive volumes of data, AI-enabled tools will automate credit scoring, fraud detection and loan underwriting, thereby improving the accuracy of risk assessments and simplifying the lending process.”

Brian Sathianathan, co-founder of AI-powered, low-code software developer Iterate.ai, highlights how AI could automate processes such as loan origination, underwriting and credit monitoring, reducing the manual effort required and increasing efficiency. “[It could also] provide predictive analytics to help forecast market trends, customer behaviour and industry developments, helping lenders to be more proactive in managing risk and adapting to changing market conditions.”

Arthur recognises the importance of explainable and transparent lending decisions: “We can leverage explainable AI, also known as ‘white-box models’, to make faster, more consistent decisions with greater transparency.”

Shawbrook has identified several other areas in which AI could improve performance and service delivery. For example, it can be used to: spot new opportunities and markets 50

to expand into; understand customer needs and various challenges around these; and use natural language processing to create large volumes of reports and documents—both internally and externally—to better evidence regulatory requirements

Critical challenges

According to the government’s policy paper ‘A Pro-innovation Approach to AI Regulation’, the risks posed by AI can include anything from physical and mental harm to ethical problems such as an undermining of national security, the privacy of individuals and human rights.

“Unless we build public trust, we will miss out on many of the benefits on offer,” warns MP Michelle Donelan.

The specialist finance market has a limited pool of talent when it comes to people who can implement AI. It is also expensive and there are risks around cyber and data security.

In addition, its application is limited unless a business can contribute all the relevant data it has collected to the AI tools. “As a lender, most of the data we work with is non-public,” explains Johan. “As these advanced AI tools are external, a major data protection issue arises.”

He questions whether the data is deleted once used and whether it can be used for anything other than the processing task. Consequently, the finance provider doesn’t share personal or sensitive data with external AI tools. “When evaluating this data protection topic, one has

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to keep in mind the massive evolution AI will go through over the next few years and the poor track record of IT firms in respect of protecting data. I do not believe obligors would be very comfortable with us contributing all their personal and other sensitive data to an external AI machine. Therefore, we have come to the strategic decision that we need our internal AI implementation with the data not being contributed to third-party AI tools and services.”

However, this solution may not be useful to newer or more boutique businesses. “AI needs a large amount of high-quality data to perform to a high standard,” says Ravneet.

“This will be difficult to source for smaller lenders with limited data available.”

Are we confident also in the data sets AI uses? “There is so much false data in the public domain; it’s a concern that tech may not yet have learnt to filter the truth,” notes Ben. “We [also] need to question how we make AI transparent to give customers a choice should they wish to execute their right to a human in the decision-making process.”

Jaffer urges the sector to be cautious when dealing with any autonomous piece of technology: “The fact that this industry has many manual and repetitive processes, as well as checks, means that relying purely on AI tools could be a risky proposition if the underlying AI engine is not well trained or does not have access to all required data points. AI is still a moderately new force, so only a few business leaders have had the opportunity to assess the full scope of probable risks and to gain a thorough understanding of their drivers, ranging from the data fed into AI systems to the algorithms used and the way individuals communicate with AI systems.”

Automated lending decisions are also subject to heated debate. Michael Allison argues that experts should be the only ones making lending decisions—after all, it’s always based on understanding the applicant’s story. “I don’t think AI will ever replace the lending decision in the specialist sector.

A borrower comes to a specialist lender because they can’t get a mortgage with a lender that uses automated or tick-box underwriting. These are more complex borrowers, circumstances and projects and we need to understand the dynamics and story behind every case.” Sabinder makes a good point: “Brokers, borrowers and service providers get comfort from the people behind the lender; we are in a business of trust, communication and applying commerciality to get the deal done. [Consequently], I can’t see AI replacing areas like customer service, risk assessment and decision making.”

There is also the risk of bias in decision-making, which could lead to discriminatory lending practices that disadvantage certain individuals or groups. “If AI algorithms are trained on historical data that is biased, such as data that under-represents certain demographics, the resulting decisions may perpetuate that bias,” explains Brian. “Another challenge is the difficulty in interpreting and explaining the decisions made by AI algorithms. This can create concerns about transparency and accountability, especially when these decisions have significant impacts on people's lives.”

Rob agrees that the human approach is vital: “When it comes to underwriting, it’s important that we have a direct relationship with our clients and are able to talk to them in person or over the phone. AI will give you information, but it’s not a rounded reflection of a person. When we talk to clients, the conversation is much more nuanced.”

Another major hazard of AI in our market seems to be around compliance. Tom claims that a tool like Midjourney could create what would (to the untrained eye) appear to be a legitimate income document—like a payslip or bank statement—and, as voice generators improve, we could also see a rise in bogus phone calls to obtain personal information by impersonating a firm’s client, as we are already seeing via email. “It will only be a matter of time before fraudsters have adopted AI tools to benefit their purposes.”

Mark Hawthorn, CEO at sales guarantees firm LDS, adds that if people become too reliant or “dumbed down” by AI, they could blindly embed risk. “Experience can only be gained by living through situations and cannot be devolved to tech,” he says. His colleague, marketing director Gareth Cameron, worries that content, communication and ideas will become extremely generic. “It is vitally important for brands to remain relevant, keep their unique identity and make sure they still have a personality. While research and structure is a huge benefit of using AI, this should only be a starting point to develop strong and meaningful content that resonates with the audience.”

AI also brings up concerns around integration and connectivity with internal systems and third-party applications. “The biggest challenge with legacy IT is to get it talking to any new application,” says Kris. Michael Allison agrees and highlights how it needs to be implemented industry wide for it to work best: “It needs to be adopted throughout the lending journey, not just in pockets by some providers. It needs to be embraced across the industry, including lenders and brokers but also valuers and solicitors.”

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Jobs—and more—at risk

Under the right conditions, it is anticipated that AI will transform all areas of life and stimulate the UK economy by driving productivity and creating jobs.

However, recent news reports have sounded the alarm that AI could lead to the demise of humanity. Prominent voices in the field, including OpenAI CEO Sam Altman, alongside notable public figures, rally behind an ominous statement released by the Centre for AI Safety. Their collective plea urges: “Mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war.”

When asked whether the adoption of AI in specialist finance puts jobs at risk, Johan answers with unwavering conviction: “Could? It will.”

Gary admits that, as www.mortgageshop. com no longer has to handle half the documents or client queries it used to as a result of the technology, it has paused recruitment in certain areas. “I suppose what it will do, however, is increase our recruitment at the top end of our business as volumes increase. So, although basic staffing can be reduced, generative AI will never really be able to replace a decent adviser from seeing ways around technical scenarios… or will it? I guess this remains to be seen.”

Despite the gloomy prognosis, there is a positive ripple effect. Johan thinks humans being more efficient and productive will lead to higher salaries. And, according to Michael Allison, if AI is adopted, we will see a skills gap in the specialist lending sector that will require people to be upskilled to use this technology—which could also be seen as beneficial.

For complex cases, human interaction will undoubtedly still be needed, but administrative roles—involving tasks such as data entry and analysis—could become obsolete.

But this isn’t new. “Those people who were telephonists and production line workers in the 20th century are now the parents and grandparents of data scientists, renewable energy engineers and cyber security experts,” highlights Paul.

It could also improve working conditions. An international study by Partnership on AI called ‘AI and Job Quality: Insights from Frontline Workers’, found a multitude of benefits experienced firsthand. It reported that workers met time savings on tedious, repetitive work and better physical wellbeing. For example, less time entering data meant reduced eye strain and stress injuries to wrists.

Chris says that while AI will replace some jobs, it will create many others. “Stories May/Jun 2023

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of ChatGPT bots passing law exams and writing poetry make for good headlines, but they overlook that the technology is merely playing back knowledge that already exists. They are categorically not signs of consciousness and, for all its sophistication, the technology cannot empathise with or relate to individual human behaviour. This matters in development finance, where the structuring and underwriting of a deal relies on more than data alone.” He believes that when it comes to the pressurised and complex business of building homes, the best lending decisions will continue to be made by humans. “This is more than gut instinct; it’s the cornerstone of trust between two professionals. People can and do gauge a counterparty’s integrity from what they say and do—and these judgments often go on to be the foundation of their relationship. Yes, the AI machines may crunch the numbers better than humans can, but they can’t make the final decision to lend.”

Mark Hawthorn draws a parallel between this and the industrial revolution as a period of wide-scale change which, ultimately, created more human jobs and transformed the world forever. “History has shown that most major innovations are seen as threats to human jobs, yet the reality doesn’t quite play out, and tech is a net creator of jobs,” he states. “We need to embrace the unknown if we are to move forward as an industry.”

With AI and machine learning in place, Jaffer believes we may see job reductions over the next few decades as processes become less manual and more automated. “These roles, however, will spawn into other roles and opportunities. The retail industry is a prime example where the rise of e-commerce giants has created a bigger market for logistics and other support services.”

Consequently, new jobs around data and AI programming could open up. “AI systems require human experts to design, build and maintain them, meaning that there could be an increase in demand for skilled workers with expertise in these areas,” says Brian.

“It's also essential to recognise that the impact of AI on jobs will ultimately depend on how extensively it is adopted in the industry and the specific tasks it is utilised for.”

According to Tom, the worry that AI will put jobs at risk is not limited to the specialist finance industry. “As a company and a sector, we need to do our best to ride the wave and not get wiped out,” he says. “Human creativity—at the moment at least—is still superior, and relying on this is critical to ensure your job role isn’t affected; think about how you can use these tools to Bridging & Commercial

better your job, rather than lose it. Taking on board forward-thinking and technically capable individuals who can work with these tools should be the focus of anyone hiring for a role in finance.”

Rob adds that, while AI has its place, it can’t replace underwriters who put personal relationships at the centre of all cases. “Our loans are for a wide variety of business purposes and can be secured in several ways, so a portal just won’t do when we’re making important lending decisions. Experienced underwriters are key, and I believe this would resonate with our whole sector.”

Ready, steady, no?

Compared to the residential mortgage market, Michael Clifford highlights that the specialist finance industry does not have extensive amounts of data, casting a shadow over the prospects of swift AI adoption. In addition, more than one-fifth (21%) of respondents in the 2023 EY UK Bridging Finance Market Survey said that implementing technology was one of the three biggest challenges for their business this year. Consequently, we are left to ponder whether we are teetering on the precipice of a future where the full potential of AI remains out of reach.

“The specialist market is so far overdue in adopting decent technology it makes me weep,” states Gary. “I often find that the small advice firms, like us, are way out in front of what their lender partners are doing. Surely it should be the other way round?”

The industry’s fragmented market, which involves many small and highly specialised lenders, clearly presents a challenge for them when thinking about ROI for their own AI solutions.

Mark Hawthorn says that change is often seen by many as an immediate risk, yet the lack of evolution over the medium term is usually the death knell for businesses and industries. “The fact that 79% didn’t think the adoption of tech was a major challenge is a far more encouraging representation,” he notes. “If the majority of the market isn’t concerned and is likely embracing it, then the minority need to adopt or suffer the consequences.”

Mark Lusted, CEO at MagiClick UK, comments that, as many specialist lenders still rely on paper-based applications and heavily manual processes, establishing a robust digital foundation should be their primary focus for now.

Samantha agrees that we still have a long way to go to get the finance market ready for AI. “With the various regulations, compliance, and AML checks, I can't see these areas being signed off very quickly.” However, she 52

believes we are ready to use it for automation, systemisation and marketing and should embrace this as much as possible.

Arthur doesn’t think any market is ready for AI. “The lightning speed of its evolution took everyone by surprise,” he says. “There is always apprehension when new technology emerges and businesses across all sectors are still grappling with basic digitalisation, let alone AI, so it’s unsurprising it’s considered a challenge rather than an opportunity.”

Although the sector isn’t quick to accept technology, Jaffer is of the opinion this is changing rapidly. “With customers demanding more transparency, brokers requiring more efficiency and lenders wanting more qualified applications, it is inevitable that adoption will increase… The use cases are there; it is only a matter of conviction, investment and execution before we begin to see true transformation.”

Kris recalls technology gimmicks being made before in the industry, but notes that AI is fundamentally different. “It has taken many years to develop to this point and it is now the power of processing speed and memory that has enabled it to be adopted across different industries and sectors. So, for me the question isn’t is the specialist finance market ready for AI, but how best we can utilise it to become better at what we do?”

Paul agrees that there could be “amazing opportunities” for the specialist finance market if lenders are willing to embrace it.

“Already, we have big tech tracking our every move, picking up on our conversations and reacting with notifications to our personal devices. As a result, AI may be already profiling consumers so accurately that, in the very near future, big tech will be in a position to predict our needs and wants even better than we can. What does this mean for specialist finance? Well, traditional banks are a stickler for criteria, particularly when it comes to lending money, and for good reason. But, as we know, there isn't such a thing as one size fits all, particularly when it comes to HNW individuals and those with complex finances. And this is where big tech and AI have the advantage.”

From the data it is constantly collecting and analysing, Paul believes that finance providers could find a niche for themselves by using AI data to help develop and create lending solutions that are as bespoke and unique as the borrowers on the end of their smartphones.

“You will never be able to replace the human touch and there will always be a place for face-to-face contact and human input, but the specialist finance market needs to wake up and smell the oat milk flat white if we are to thrive in this new AI world.”

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“Taking on board forwardthinking and technically capable individuals who can work with these tools should be the focus of anyone hiring for a role in finance” 53

May/Jun 2023

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Paul Munford

Interview

Realising dreams since before the turn of the Century Words by

ANDREEA DULGHERU

A market awash with cash, a sharp change after the 2008 crash, and working with property tycoon Christian Candy and a New York fund—Paul Munford has seen it all. On a rainy Thursday morning, I sit down with Century Capital’s founder and CEO to discover what three decades in specialist finance teaches you

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fter leaving university, Paul Munford was offered two career choices: to either follow his passion and work for T he Jockey Club in horse racing, or to learn everything about insurance and finance as a management trainee. With a bit of persuasion from his parents, Paul decided to take the latter role at Norwich Union—a defining moment that would set h im on h is pat h to reaching his ultimate goal of owning a successful finance business.

During some 12 months spent training in different divisions, Paul was inspired by the many brokers whom he had interacted with and resolved—at the young age of 22—that this was going to be his next career move. “I liked the brokers I met there, their energy and the fact that they were in charge of their destiny. I decided I wanted to be on that side of the fence, changing things, arranging deals, and making things happen.” Paul went on to join a brokerage in the 1980s during the property ownership boom driven by then prime minister Margaret Thatcher.

“When you’re running a business that has helped build multi-billion-pound schemes, you realise you’ve got to have good habits. If you cut corners and don’t report or deliver on time, you fail” Lenders of the Wild West A year later, Paul’s life-long dream of running his own company became a priority.

Together with a business partner—Mark Ahearne, now director at Heron Capital— Paul went on to set up brokerage Mortgage Centre IFA in 1987. This was around the time when American banks had entered the UK market and were offering consumers more options. “A broker is only helpful to a customer if there’s a lot of choice.

There wasn’t much of this in the 80s, but that changed in the 90s with new sorts of products, such as 100% and self-certified mortgages. I was very fortunate to have gone into running my business in a boom

Bridging & Commercial

like this, when property prices were cheap as well,” says Paul.

Thanks to the economic environment, the brokerage—which consolidated its operations to focus on prime central London and the HNW mortgage sector by the late 1990s—saw phenomenal success, growing its team from a few staff members to over 60 strong by the early 2000s. “It was a great time for brokers—there was no doubt about it,” Paul reminisces. “The market was full of these niches and lenders were full of cash; they had more money than they knew what to do with it. It was the Wild West, in a good way.”

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Regroup, rethink, restart As we all know, the soaring success of the UK-wide property market ended abruptly in 2008, with the global financial crisis taking the world by storm, including niche short-term mortgage brokers such as Mortgage Centre IFA. “We had gone from dealing with 50 lenders regularly to just having one that was genuinely open for business for our clients.

But you can’t run a business when you have no choices. A crash of that magnitude was never going to be over in a year or two—we’re still feeling the aftershocks even now—so we had to regroup and think long and hard about the best way forward,” Paul recounts.

With limited specialist finance products available at the time, he decided to take matters into his own hands and fill the gap himself. In 2010, Paul and Mortgage Centre IFA partnered with close friend and property tycoon Christian Candy to launch short-term lender Omni Capital (now known as Fortwell Capital). “Christian is one of the smartest guys I’ve ever met, which is always a good reason to go into business with someone. My decision to move into lending and my skill set complemented his understanding of real estate and access to substantial cash. On top of that, we had a mutual understanding of what customers wanted, which was great

service and fast delivery. And we did things much quicker than anyone else in the market at the time—a private bank might have taken 3-6 months to process an application, whereas we’d take 3-6 days.”

Omni Capital was set up with one intention: to quench the thirst for short-term bridging loans and help people get back on their feet.

“The idea was to lend people—like those behind hedge funds that couldn’t pay their staff—money on a short-term basis against properties to give them a year or two to sort their business out and recoup,” Paul explains, adding that the lack of choice in the market at the time made borrowers more open to considering higher than average rates.

During its first two years of operation, Omni Capital became a major player in the market—lending £700m in its first two years—and made headlines after hiring former Apprentice contestant Liz Locke.

However, while Christian was determined to scale up Omni Capital in the development finance sector, this didn’t align with Paul’s desire to focus on bridging, and therefore he decided to sell his shares in 2012 and embark on a new journey: setting up bridging lender Century Capital.

Mistakes and good habits In the summer of 2012, Paul’s aspiration of owning a finance firm was realised once again.

Century Capital’s team’s extensive experience in the specialist finance market (which includes former executives from Barclays and FTSE

100 firms)—and all the lessons Paul learned during his career—went on to influence many implemented processes at the lender. “Obviously, everyone makes mistakes; they are a good part of a learning curve. There are transactions that

“There are also a lot more transparent and better practices now. Years ago, you had firms that would lend with the expectation they were going to take the property back, but you don’t see that now” 59

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“Without those failures and mistakes, we wouldn’t have the knowledge that we’ve got now.

We’re a much safer pair of hands because of our experience” Bridging & Commercial

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have failed, and from those we learned what not to do going forward. Without those [missteps], we wouldn’t have the knowledge we’ve got now. We’re a much safer pair of hands because of our experience,” he explains, adding that his time at Omni Capital, in particular, shaped much of how Century Capital works. “When you’re running a business that has helped build multi-billion-pound schemes, you realise you’ve got to have good habits. If you cut corners and don’t report or deliver on time, you fail. Good habits define our business.”

Among these practices are the finance provider’s dedication to sticking to agreed terms and not moving goalposts, and its focus on ensuring its borrowers receive great service. “Treating customers fairly is our biggest thing. This is why we’re still dealing with clients we worked with 12 years ago back at Omni Capital; we look after our clients and want to build a business around our existing borrowers,” Paul notes. “Achieving a good outcome is the best thing we can do for the borrower. It’s very important we show

flexibility and work with our customers and they work with us; we see this as a partnership.”

Over the years, the business has continued its steady growth, going from lending £10m in its first year to over £100m of new lending in 2020, and a current loan book of the same value. Currently, the lender has five funding lines it has secured over the years, including a £100m partnership with a major New York credit fund in autumn 2021. Century Capital has also recently completed its biggest loan on record, totalling a staggering £30m.

Paul cites the partnership with the American fund—which has been upsized twice—as one of the biggest achievements of his career, particularly as Century Capital was the first UK lender sponsored by that investor.

“We really clicked with them; we have a global understanding of finance and shared values and sophisticated financial systems that are capable of delivering extensive information,” says Paul. “These people want to know 800 fields of information and detailed reporting, and we can deliver that.”

Evolution: competition and transparency Looking back at his career and achievements to date, Paul shares his enthusiasm and gratitude: “It makes me very happy that we’ve taken on and trained a lot of staff on our journey, helping them to establish fulfilling careers. Throughout my work life, I've met some amazing people and helped on some amazing transactions, and I'm very grateful for everything the industry has done for me.”

He is also pleased to see how the specialist finance market has developed. “The market has become a lot more professional and consumers are much better served. There are also a lot more transparent and better practices now;

years ago, you had firms that would lend to somebody with the knowledge or expectation that they were going to take the property back, but you don’t see that now, which is obviously a good thing,” elaborates Paul.

He also notes the rise in competition between lenders, which he believes improves standards, as well as the increasing number of intermediaries in the sector. “You have a lot of brokers and packagers who specialise in bridging and commercial finance, which is a good thing. Historically, a lot of introducers didn’t understand short-term finance, which was bad for the customer. You don’t see that now.”

Scaling up and a Brexit opportunity Paul is determined to continue Century Capital’s upwards growth trajectory, telling me that the team has just finalised its business plan for the next three years—and ‘scaling up’ is the key message. “We are increasing our exposure into areas such as second-charge bridging loans, as well as more standard prime lending between £500,000 and £2m,” states Paul, adding that the business is also working on securing a new funding line. In terms of lending targets, the finance provider aims to lend around £200m over the next 12 months.

Despite the current macroeconomic challenges surrounding the climbing Bank

of England base rate, Paul is optimistic about the future for both the specialist finance market and Century Capital. “I think there’s a very positive outlook, as more borrowers are coming into this space. Post Brexit, we’ve seen some of the smaller European players leave the UK, but their borrowers have to go somewhere. This is where we see Century Capital as the first port of call for lenders that are leaving the market and want to find someone to take over their loan book.” And in this lies what Paul describes as the “big opportunity” for the business to expand its position in the market.

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Interview

Despite being in the UK specialist finance space for only two years after over a decade in Asia, Finanze’s CEO and founder Alastair Hoyne has launched several successful businesses—with yet more planned. While taking us on a trip down memory lane, he shares his desire to make the brokerage a household name Words by

ANDREEA DULGHERU Bridging & Commercial

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There’s no denying that business and finance are in Alastair’s blood. His first entrepreneurial endeavour started in his 20s while he was still in university, when he created a concierge club offering members discounts in nightclubs and restaurants. He also he set up an online portal called SavvyHome Sell in 2005—which he describes as being similar to R ightmove. “ I ended up getting a big sponsorship from Hiscox, t he home i nsura nce compa ny, a nd eventually sold the website to a private buyer. At the time, I didn’t understand why they bought it, but then I realised that it was for the data, as we had about 20,000 listings. That was an interesting lesson.”

“It was a risky game, but I went from earning about £40,000 a year to £150,000 overnight”

A

management. He tells me that it was his extensive experience, having looked after a range of big clients—including banks, asset managers, hedge funds, insurance companies, sovereign wealth funds and others—that made him attractive for the position.

“Fortunately, my boss at Société Générale put an NDA on my current salary.

So, when Standard Chartered asked for the last three payslips to work out what they’d offer me, I couldn’t do that, so I asked them to give me what they thought I was worth based on the job requirement.

When they said they’d offer me £130,000, I put the phone on mute, jumped up and down from joy, picked up the phone again and asked, ‘Can we go to £150,000?’, and they said yes. It was a risky game, but I went from earning about £40,000 a year to £150,000 overnight.”

Alastair went on to work at Standard Chartered for two years, during which he was in charge of managing and maintaining the relationships of the firm’s clients, as well as transactional banking. “We also had lines into the private bank, which was critical for us because, when it comes to a hedge fund or asset manager, for them to spend money with the bank, we needed to get them more access to investors,” he elaborates. After two years, one of his Hong Kong clients offered him a consultancy job to help their company build institutional teams around the world, which took Alastair back to Hong Kong for nine months and

fter his first year of studying business at Aston University, Alastair suddenly got bored.

To change that, he decided to take a summer job opening mail for Société Générale in London. When the opportunity for a fulltime data entry role in the main office opened up, Alastair ended up taking it while still in university, attending classes remotely and communting for exams. “Eventually, they asked me if I wanted to stay [in this job], even though I was at university. This is when I started making my bargaining moves: I got them to pay me a daily housing allowance to work in London, which was like £100 a day just for a place to stay in. But, instead of the Holiday Inn I told them about, I was staying in a bunk bed in a youth hostel for £8 a night, saving all that money,” recalls Alastair.

OVER TO ASIA Alastair’s next big career move came shortly after he graduated from university a few years after, when he was offered the chance to move to Hong Kong to run Société Générale’s client management for Asia. This took him by surprise, as the possibility of working so far abroad had never crossed his mind.

Nevertheless, he took the job as a key client manager and worked there for around nine months, before being headhunted by Standard Chartered Bank in Singapore for the role of director and global head of investor client 65

May/Jun 2023

Interview

“It showed me that if something isn’t working, you have to stop; don’t beat a dead horse. You need to move on and try something else” HONG KONG, HEDGE FUNDS AND HOMES When this position came to an end, Alastair decided to take career matters into his own hands and set up his own consultancy firm focused on advising hedge funds—something he did for the next six years. “I set up my own online real estate agency in Hong Kong called Candid Homes, which I modelled off Redfin in America—Purplebricks is a very similar concept. The idea was that you could sell your house for a fixed estate agency fee, instead of a percentage.”

The company looked as if it was heading for success, with vast numbers of customers interested in buying or renting homes; Alastair was even featured on Bloomberg Asia for “revolutionising property in Hong Kong”.

However, a critical spanner was thrown in the works. “The largest and richest men and companies in Hong Kong all owned property companies, and they didn’t like the idea of me cannibalising their business model, so they didn’t give me any stock. I had a situation where thousands of customers wanted to buy or rent homes, but I was unable to get property to show them. The only thing that kept the agency going was the fact I was still running my consulting business,” explains Alastair. “This was my first big mistake but,

Alastair Hoyne

saw him build an institutional sales team for a private equity real estate fund—his first foray into the property finance world. He was offered a permanent job there, but this involved relocating to Canada—a move that did not appeal. Instead, he became the COO and managing director at a $32bn Korean asset manager called Korea Investment Management—a role that was short lived, as its international office was soon closed due to the firm’s decision to focus solely on domestic affairs.

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funnily enough, my dad was pleased that the company had failed, as he believed I needed to taste failure to understand what success is.”

At the time, Alastair did not understand his father’s feelings. Now looking back at it, he knows it was a valuable lesson that helped him in the long run. “It showed me that if something isn’t working, you have to stop; don’t beat a dead horse. You need to move on and try something else.”

Despite the failure of the real estate agency, Alastair kept his consultancy firm running up until 2021, during which time he travelled across the world advising companies on how to run their business—and even wrote a white paper for a stablecoin in South America. However, after hearing the shocking news that his father had had a heart attack, he realised it was time for him to return home. After selling his shares in his consulting company—as it was too Asia-centric for the UK—Alastair packed a suitcase and flew back to England.

and his mum—things weren’t so rosy in his career, as he returned right in the midst of the Covid 19 pandemic, when many were still on furlough or working from home.

While his extensive experience in the Asian finance sector had been worth its weight in gold before, it did not have the same value in England, something he learned from speaking to banks and fund managers in the hope of securing a new role.

Nevertheless, he continued his job hunt undeterred. “I applied to hundreds of jobs—I think the people at Reed must’ve hated me,” he jokes. After an extensive search, he ended up getting two offers: an account manager role for a business that manufactured prefabricated toilets for £22,000 a year—a far cry from his previous £400,000 salary in Asia—or an office manager role at 978 Bridging that would provide the opportunity to learn about mortgage broking and property finance. Alastair ended up taking the latter.

“I remember having to travel between two offices to fix printers and do data entry, and it was actually enjoyable, and I am grateful to Simon Das [managing director at 978 Bridging] for helping me find a career that I love. But, after six months or so, I decided that I was going to look for something a bit bigger,” he reminisces.

STARTING AGAIN After over a decade of working in the Asian finance market, Alastair was back on British land in 2021. Although his return was positive from a personal point of view—he was able to spend time with his dad, who recovered,

“The idea is to have an ever-growing library of resources that will aid our clients in getting the information they need” 67

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“I knew that eventually some large brokerage would come along and use its relationships with some large lenders to create replica products. I figured it would be much easier if I lent the products, so the brokers are getting them from the person who made them”

Interview

“There will be no stone left unturned to find the right solution for our clients, whether it’s an existing product that we can tailor to their needs or a new one that we create for them specifically” After a conversation with Nick Wilcox, co-founding director at recruitment firm Valorem Partners, who explained his next career options: join a large brokerage or lender, or set up his own firm, Alastair chose the latter. And so, the brokerage Finanze was born—a name that pays homage to his time spent in Italy when he was younger and a play on the word ‘finance’. The firm’s slogan, “It’s personal”, also has a double rationale behind it. One is the brokerage’s aim to deliver a personalised, tailored service for its clients, while the other goes back to Alastair’s experience of working as a broker on his own for the first time in the UK. As he began to make a name for himself, talking to numerous lenders, attending trade events, and speaking at some, an industry expert tried to sabotage his career by spreading ill rumours about him—this, however, ended up backfiring in Alastair’s favour. “At the beginning, I worried the community would believe this but, thankfully, people stood up for me. So the slogan is a bit of a sneaky message—that I’ve done this because they made it personal.”

ENTERING THE LENDING MARKET Despite being a new name in the industry, Finanze experienced strong performance from the start, reaching £250,000 in total revenue in its first year of operation—with the profits being reinvested into the company. And it only grew stronger over the years, as the company began designing bespoke specialist finance products in partnership with lenders such as Elysium Bridging and Albatross Capital. However, Alastair had set his eyes on a bigger prize and, in April 2023, he launched his own lending arm, Finanze Capital, as part of the Finanze Group umbrella. Two reasons motivated this business endeavour: to help more customers access his bespoke products and to cement his space in the market as the go-to provider for these offerings. “I knew that eventually some large brokerage would come along and use its relationships with some large lenders to create a replica product so they’re not missing out. I figured it would be much easier if I lent the products, so the brokers are getting them from the person who made them,” explains Alastair.

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Finanze Capital will provide a range of bridging, commercial and development finance solutions, including those already desig ned a nd bu ilt by t he Fina nze brokerage—such as its revolving credit facility, SSAS development offering, titlesplit finance option, and experience-building bridging product designed for foreign nationals without a credit history in the UK. The team has also developed new offerings available through Finanze Capital, including a commercial bridge-to-lease option with an automatic exit to a commercial mortgage, and a development-to-exit/let facility for clients looking to retain their schemes as residential BTL or commercial properties on completion, both of which provide loans between £1m and £25m. The former offers facilities from 0.80% per month for bridging and 7% per annum for the commercial term, with LTVs going up to 70%. Meanwhile, the development-to-let product is priced at 0.80% per month for the development finance part, moving to rates from 6% per annum for BTL or 7% per annum for the commercial portion, and available at up to 90% LTC and 70% LTGDV. In addition, Alastair tells me that he is developing a third product, which will combine its existing title-splitting facility with a BTL term loan at the end, for which he is currently negotiating a funding line to complement its existing funding model.

While owning both a brokerage and a lender might spark concern there is a conflict of interest, Alastair states that Finanze and Finanze Capital are two separate, independent entities, with no staffing overlap apart from himself as owner. “At present, we are generally focusing on lending on products that no other finance provider carries anyway, so there’s no conflict in that sense,” he adds. With the new lending arm now fully operational, Alastair confirms Finanze Capital is looking to deploy £50m of loans in 2023, with ambitions to grow it to £250m the following year.

unveiled his R&D division, Finanze Strategy— run by Alastair alone—at the end of May. He describes it as the design studio for creating bespoke products for Finanze Capital and for the group’s clients. He explains that the firm will be responsible for researching the latest market trends and client demands and creating a bespoke finance offering that meets those needs.

Aside from this, Finanze Strategy will focus on providing custom-tailored advisory services for clients borrowing £1m-plus facilities for business or property finance.

Alastair explains the reason for separating these customers from the regular brokerage is down to the complexity that often arises with such cases. “When it’s more than £1m [being borrowed], it’s quite complicated and something that might take six to nine months to arrange. I don’t want my brokers to have to wait that long to get their commission. We’ll still be following similar principles that we would in our vanilla transactions, but we’ll go that much further. There will be no stone left unturned to find the right solution for our clients, whether it’s an existing product that we can tailor to their needs or a new one that we create for them specifically.”

With multiple brands under the Finanze Group umbrella, it’s safe to say that Alastair is building his own empire, one that he plans to expand even further by unveiling a new division this summer—the group’s own education, publishing and events business, Finanze Success. The firm will collate information from numerous industry experts for a variety of topics—including bridging, development and BTL finance, and conveyancing—and provide it to property investors and brokers on a paid subscription basis to enhance their knowledge. “We're building a university of knowledge for people within the property space that they can go to and watch lectures from relevant experts. The idea is to have an ever-growing library of resources that will aid our clients in getting the information they need.”

This continuous expansion is part of Alastair’s vision for Finanze Group to become the provider of a holistic, all-encompassing finance service. “My ultimate goal would be to become a household brand. I want to continue to innovate and look after clients and be counted as among the best in the industry.”

RESEARCH AND EDUCATION On top of a successful brokerage, a new lender, and estate planning finance service firm Finanze Legacy—launched in March this year after acquiring a 50% stake in Cheshire estate planning company U-Plan Online—Alastair

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Zeitgeist

VIRTUAL VA

Words by

STEPHANIE BAXTER Bridging & Commercial

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Zeitgeist

VALUATIONS Revolutionary, or just a pipe dream?

DRONES AND AUGMENTED AND VIRTUAL REALITY MAY PROMISE EFFICIENCY, BUT COULD THEY BECOME A ROUTINE PART OF VALUATION INSPECTIONS? THE SPECIALIST FINANCE SECTOR SEEMS CAUTIOUS—FOR NOW

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D

isruptive technology is changing the way we live and work, and the property market is no exception. Augmented reality (AR), virtual reality (VR) and drones are being considered in property valuations to improve efficiency, so could they revolutionise valuations for bridging and commercial loans?

Currently, most valuations for specialist finance facilities are carried out via physical inspection, traditional methodology and surveyor visits, albeit rather desktop and AVMs have been making traction in recent years. This market has lagged behind the traditional mortgage sector in moving towards other valuation methods—and AR, VR and drones are not very prevalent in the UK. According to Guy Harris, head surveyor at Maitlands Acorn Professional Chartered Surveyors, drones are primarily used for physical surveys, such as the RICS home survey standard levels 2 and 3 and as a follow-up where additional information or another inspection is required. However, he states there is not a huge demand for drone use in mortgage valuations.

The journey towards adopting modern technologies has started, and while the sector is still figuring out how to apply it, some firms have already begun. For example, Carpenter Surveyors uses drones for condition and building defect analysis and is exploring other areas. The firm’s managing director Ian Bullock says drones have a key part to play in all areas of surveying: “As we stand today, a lot of the drone-related work is for condition analysis, so for services such as building and structural surveys, but some of that work links in with valuation advice. From our point of view, a lot of what we do is related to pre-acquisition rather than specialist, secured bridging finance work, but I can see it being a service provision that will start to creep in more over time.”

“DRONES CAN ONLY PROVIDE AN AERIAL VIEW—THEY DON’T OFFER THE BENEFIT OF WALKING THE SITE AND COMPARING IT TO A SITE PLAN”

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Zeitgeist

DIFFERENT PERSPECTIVE There are strict laws about drone use in residential areas—London being a particularly difficult place. But in more remote locations or industrial parks, drones could play a role in valuations, particularly for non-physical inspection work, like AVMs. A hybrid approach could be adopted to reduce the burden on the building’s occupants, or if safety is a consideration, says Ian. “Drones will always give you another dynamic to the inspection of an asset—for instance, they can offer an aerial view—and also provide you access in unsafe and perhaps difficult-to-reach areas,” Ian explains. “But also, with things like Pixel 4D—a photogrammetry software for drone mapping and surveying—a different dynamic and perspective of an asset,

whether that is land or building, will certainly help provide a more accurate valuation dataset.

It’s about capturing different datasets—such as thermal imagery, pixel 3D modelling etc— other than just historical transactional and/ or ground-level inspection data with AVMs and desktop valuations based on Google Street View for example. This just gives slightly different elements to the mix.”

As for AR and VR, Ian believes these solutions have the potential to unlock and add significant value to the lending process, as surveyors could conduct a real-time inspection of the site remotely through this technology.

Kharla Mullen, chief operating officer at Countrywide Surveying Services, shares the

same view: “Both AR and VR enable surveyors to create immersive virtual walk arounds, allowing potential buyers or investors to experience properties and their condition remotely. This eliminates the need for a physical visit, saving time and resources for both the surveying firm, lenders and their clients,” she explains, adding that AR and VR enable a comprehensive and informed assessment of the property. “However, this does not negate the need for a physical valuation in all circumstances, whether that be by necessity, risk based or consumer choice. We believe there is enough room in the industry to deliver both based on the property in question and the customer journey.”

“WITHOUT COSTS AND A PHYSICAL SPEED VALUATION, IT’S There is a cost consideration for the industry in terms of the hardware integration, but Ian IMPOSSIBLE TO BE claims it is becoming more accessible for every surveying element, with entry-level VR and AR headsets starting at £300-£400. Based on this, and over 95% are turned around on the same CERTAIN THAT THERE Ian doesn’t believe the expense is a significant day, to keep within the lenders’ service level burden on businesses, and will certainly not agreements,” he claims. “With property IS NO SUSPICIOUS prevent the technology being adopted within transactions taking around 150 days in the the survey, valuation and financial markets. “I UK according to Rightmove, I don’t think the ACTIVITY IN see it as a value add. There’s been a slower use of AR or VR would speed up the process adoption rate among some surveying firms, in terms of the property transaction.”

AND AROUND A but I think it’s about trying to figure out where it fits within your service provision.”

Could AR, VR and drones speed up transPROPERTY AND I actions, particularly for specialist finance where time is precious? Guy doesn’t think JUST DON’T SEE so: “In specialist finance, most valuations are undertaken within a week of the instruction LENDERS TAKING THIS TYPE OF RISK“

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MISSING ISSUES The problem with this type of inspection is the level of risk, as AR, VR, and drones may not take into consideration building defects or matters, such as Japanese knotweed.

Helen Scorer, operations director at Pure Panel Management, says the risks attached to a primary valuation done in this manner are exceptionally high. “Without a physical valuation, it’s impossible for lenders to be certain that there is no suspicious activity in and around the property and I just don’t see them taking this type of risk—especially when there are firms that can provide physical valuations in a matter of days.”

Guy agrees, adding that drones, AR and VR would also not be able to discover most health and safety risks, illegal activity—such as people trafficking and use of drugs—and commercial use. He recalls having seen fraud several times through in-person property inspections: “Through traditional physical valuations, it’s common to reveal fraud on multiple levels, such as non-compliant HMOs, and properties sold to a friend for over the market value. The use of drones, AR and VR will not identify any of this. The lender client often refers to the surveyor as being their eyes and ears for property risk, so if these types of circumstances cannot be identified with the use of additional technology, it could impair the whole lending community.”

Guy doesn’t see these technologies being used alongside in-person valuations either.

“Physical inspections are pretty much undertaken on all new housing stock for [lender] clients, whether that’s for property purchases or refinances. I cannot see VR, AR or drones used in conjunction for valuation purposes because for all new stock, you’re going to be out there looking at it with your own eyes.”

However, he thinks it could help in conjunction with desktop-based valuation work for housing in the countryside. “Resources such

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as Google Earth or Google Street View may be limited or non-existent in very rural locations.

In city centres or suburbs, 3D imaging on Google Earth is there, which can really provide perspective to the property being overviewed.”

Ian argues the adoption of VR, AR and drones is limited only by the users, time constraints, cost limits, and what data is required: “Due to the dynamics of what goes into a specialist valuation, and because it’s much more complex and there are so many more key considerations, it will be more difficult to adopt that level of non-physical, non-human interaction in [valuers’] data collection, report writing, and valuation rationale. But, at the very least, it can be seen as a value add to the lender client and consumer alike.”

Another issue preventing the adoption is the lack of support on the use of these technologies in valuations. The RICS says it does not have guidance on the matter and that this is not on the agenda.

In addition, a lot of surveyors will not want to use them because the risk on specialist lending work is high, while professional indemnity insurance (PII) is very expensive.

“Because surveying firms must declare on their PII the type of work they have undertaken throughout the course of the previous year, this can greatly affect associated premiums moving forward,” explains Guy. “The use of drone, VR or AR has not been tested with insurance as a large proportion of submitted work. However, if you were to take PII on the whole for many SMEs, valuation work is as smaller percentage as you can possibly get away with. Claims for valuation work tend to run into tens of thousands, while those for defect-related work is normally well under £5,000. The fewer percentage of valuation undertaken, the lower the risk, and the lower the premium.”

Zeitgeist

WARY LENDERS Perhaps the main barrier to AR, VR and drones really taking off in valuation work is the lack of willingness on the part of specialist finance lenders, as many still only accept in-person valuations.

Guy says: “Specialist finance lenders almost certainly won’t be interested in anything along the lines of VR, AR and drones, because these transactions tend to be slightly higher risk than normal, everyday finance. Because of this, they wouldn’t want any shortcuts to be taken with regard to the valuation. If anything, our clients would want to make sure that valuation is watertight after a thorough, detailed review.”

Paragon Bank, for example, takes a manual, individualised approach to valuing and underwriting each application. “To ensure the security we lend against is of an appropriate standard for the target rental market and that we are managing risk appropriately, our team of experienced regional surveyors undertake comprehensive valuation appraisals that we feel are only possible by carrying out a full internal assessment,” explains David Hitches, head of property risk at Paragon Bank. “What we call a ‘boots on the ground’ approach also enables our surveyors to develop a comprehensive local market knowledge that can be just as valuable as the physical inspection itself.”

MS Lending Group hasn’t yet had a valuation based on these technologies, however it does carry out desktop valuations which allow it to move in as little as 72 hours. When asked whether the firm would consider these new methods, the lender’s CEO and founder Michael Stratton says it is open to implementing this technology to valuations if the team feels it adds sufficient value to the customer. “We are a highly adaptable business and will ensure we always stay on the front foot and move with the times in order to suit our customers’ needs.”

MS Lending Group is able to entertain this idea thanks to its unrestrictive funding model. “Often times, this is the reason lenders can’t push forward with advancements in technology,” Michael highlights, adding that some finance providers might have their hands tied by their institutional funding line parameters—which, understandably, need to get comfortable with the risks associated with the use of new technology. “A lot of lenders have specific funding lines in place which only permit very strict criteria, one of these will be a full valuation and will not have taken into account how technology is changing and adapting.”

“WE RECOGNISE THAT TECHNOLOGY SUCH AS AR, VR AND DRONES HAS THE POTENTIAL TO POSITIVELY IMPACT THE VALUATION PROCESS AND IT’S NOT SOMETHING WE’D EVER RULE OUT, BUT WE CURRENTLY FEEL ITS APPLICATION IS BETTER SUITED TO MAINSTREAM MARKETS”

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DRIVE BY, FLY BY, OR WALK THE SITE Could in-person valuations ever be abandoned?

While some experts have acknowledged the potential value of such innovations, the consensus is that traditional physical valuations are here to stay.

“We recognise that technology such as AR, VR and drones has the potential to positively impact the valuation process and it’s not something we’d ever rule out, but we currently feel its application is better suited to mainstream markets,” comments David.

Meanwhile, Colin Sanders, CEO at Tuscan Capital, is not convinced that bridging and development finance providers will ever accept VR, AR and/or drone-based valuations without any physical assessment. “While the residential market has long accepted ‘drive-by’ valuations in some circumstances, I don’t believe the same would apply with ‘fly-by’ valuations. Drones can only provide an aerial view of the site; they don’t offer the benefit of walking the site and comparing it to a site plan, which we find extremely important when assessing an application.”

Tuscan uses AVMs to improve the valuation process when appropriate, but Colin is “not persuaded” that VR, AR and drones could do the same.

Helen says tech will continue to have major positive effects across the valuation and mortgage markets, but there will always be demand for in-person physical valuations given that the stakes are high for lenders when it comes to ensuring their investments are secured and risks are mitigated.

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Michael agrees, adding that lenders whose work is dictated by “thick red tape” will continue to use traditional in-person valuations. “It’s what they know, and it is how they have always done things. There will be occurrences when there needs to be a traditional, in-person valuation to get the whole look and feel of a property, and some lenders’ funding lines will only allow this definitive criteria. All things often need a timeframe during which an idea, a change or a new behaviour embeds before it spreads and is implemented as a whole across the industry.

I can imagine it will be a long time before a valuation done by AR, VR and drones is seen as thorough as a full in-person valuation, but I think businesses and the industry should never be afraid to adapt and move with the climate and circumstances. Lenders who are a bit more agile could really start to thrive in this space, which is exciting.”

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In Conversation

One voice driving proptech

innovation With the British Property Federation (BPF) and the UK Proptech Association (UKPA) set to merge this summer, what does this mean for the property sector?

Words by

ANDREEA DULGHERU

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F

or decades, the BPF has been one of the main voices of the UK real estate industry, bringing together property owners, developers, funders (equity and debt), agents and advisers under one roof to collaborate and provide government and regulators with the necessary knowledge to help the real estate industry grow and thrive. The UKPA—founded in 2018—also has the same goal of improving the property sector, albeit using a different approach. The not-for-profit organisation aims to pair proptech providers and property business to create an environment conducive for technology innovation.

With the two sharing a similar aspiration—the desire to improve the property market—the two have decided to join forces, and are set to merge this summer. This plans to bring together the BPF’s membership of close to 400 companies with the UKPA’s community of over 1,000 entrepreneurs, solution providers, venture capital investors and tech innovators—all with one goal: to drive deeper collaboration between property and proptech businesses.

On a Friday afternoon, I sit down with Melanie Leech, CEO at the BPF, and Sammy Pahal, managing director at the UKPA, to find out why they decided to unite, how tech benefits the property sector, and what it’s like being a female leader in a male-dominated space.

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In Conversation

Andreea Dulgheru: Considering both organisations have been serving your respective industries for many years, why did you decide that now was the time to join forces?

Sammy Pahal: We’ve seen the industry shift its attitudes towards proptech, which has been brilliant. The conversations have evolved and the real estate industry is rarely asking why “Where I think the real we should change; opportunity lies is in innovation the talk is now more about how do we do it of construction methods while being effective.

However, there are and their efficiency” still barriers in the field when it comes to implementing technology. Often, organisations are looking at business-wide transformation, and that is challenging in any industry—particularly the real estate one, which is so fragmented, with many different stakeholders involved in the various parts of the property lifecycle. We’ve been able to shed light on issues through the discussions and the events that we’ve had with our members and by pulling real estate professionals into our community. What we found is that the experts who join us tend to be the heads and directors of innovation who are very much on board and are forward thinking, but they then face the challenge of having to educate their colleagues and senior management and bring them along on that journey. There’s still very much a gap in terms of who we can engage with through the community we have. Our focus has been on building that wider access and encouraging more people from the real estate industry to get involved in conversations and making it easy for them to do so. The BPF has a very strong membership and high engagement in its activities and events, so [the merger] is about 83

bringing the two organisations together in a much more practical way and widening the dialogue—that was the main reason from our perspective. Over the years, we have worked closely with the BPF, and now feel we are at the stage where we see how our two organisations align and can complement each other. Also, the industry has matured and we think it’s now ready for that change, for being part of one community.

Melanie Leech: On behalf of the property sector I represent, we feel the time is right to create a shared platform to make the technology conversation mainstream and easier for property companies that do want to talk to solution providers, but which also don’t want to have a steady stream of people banging on their door trying to market a particular product to them. That’s the ambition of bringing the two organisations together: to create a safe platform where they feel confident to engage with solutions providers and talk about their issues. The other reason is having a single, common voice for government consultations, talking about the issues that affect the industry which are relevant to both tech and property, and something that will be really powerful. We know we need the right policy and legislative framework; we need the right steers from government about what they’re looking for in the sector, particularly around things like decarbonisation and the increasing way in which property owners and managers are de facto taking on functions for the public good

May/Jun 2023

In Conversation

which have historically been thought of as the role of local authorities—such as keeping public spaces well-maintained and safe. This very much plays into the use of tech as an enabler around customer experience, which is something the property sector is having to think about more in terms of not just being asset owner, but actually providing a service to people through the asset that they own, and how to do that better. The time feels right for both organisations.

AD: The full merger is expected to officially happen in June. Once completed, what will be the main areas that you’ll be focusing on in the next 12 months or so?

“There’s potential to make significant improvements in speeding up the planning process and mitigating risks, but it also comes with changes in business models and in mindset”

ML: What we’ve agreed is to continue the existing plan for the BPF, and the one for the UKPA that the board on behalf of the membership has signed up to and endorsed [separately]. But as we start planning for next year—which we will do in the second half of 2023—we’ll be looking at where it makes sense to bring things together into a shared activity. I suspect there will still be things that the UKPA, as a subsidiary company of the BPF, will run for UKPA members, and there will be a lot of stuff that the BPF does which doesn’t directly touch on tech. For example, we’ll still have a separate planning committee—I don’t immediately anticipate there will be tech companies joining this.

However, we’ll be continuously looking to [introduce] a tech voice and perspective into a lot of that. We’re already doing that, for example, in the conversations around the digitalisation of the planning system.

However, there’s a lot more we can do if we really harness the creativity of the tech sector to say how we could improve the process if we really put our minds to it.

SP: From our side, we’ve been going through a consultation period with our members and getting feedback and questions from them. We’ll be clarifying any that have come through and outlining the strategy for the work we intend to

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implement next year. From my side, as Melanie said, in the second half of the year, we will be looking at what we can do that will benefit BPF members and vice versa. It’s drilling a bit deeper into what areas could be aligned for the joint programme and those that we may want to continue with separately. That’s going to be the focus for this year.

AD: So, in terms of membership, will it be separate, or will there be a joint membership option?

ML: Both. We will continue to offer the option to be a member of the UKPA only as a subsidiary company of the BPF. Some of the members—particularly the property companies that belong to the UKPA—are already BPF members; we anticipate that, if you’re a property firm or an established proptech company, you’ll become a BPF member. That will give you access to the activities that we run through both the BPF and the UKPA. But we also want initially to have a standalone membership that is tailored for those who are UKPA members only. This is because there are some very distinctive things that proptech individuals and some companies might continue to want—such as investment showcases and pitch events—which we will continue to offer to them without them necessarily needing to pay what would inevitably be a larger fee if they joined the BPF—plus some of them may not be able to join the BPF because they are not incorporated; we offer corporate membership. We want to continue to provide that tailored offer to them, as well as access to a new programme with shared activities, which will enable them to have a stronger voice in the conversations with our stakeholders.

AD: Sammy, you mentioned that the attitudes towards tech have changed over the years.

When would you say was the moment when the property sector really started embracing it?

SP: Yes, they have changed overtime as property professionals have become more educated on the way in which technology can aid them and is changing how the industry works. This has been helped by the wealth of content and events that we at UKPA and others have produced for the industry. However, a real accelerator for that evolution in attitudes was Covid 19. During the pandemic, businesses had no choice but to work remotely and bring in technology just for general business operations, engaging with their teams and being productive. In the property industry, there were so many

In Conversation

more risks associated with Covid, because we weren’t going into the office anymore, so we couldn’t show properties for sale in a physical environment; that had to be virtual.

There was a real need for property companies to better understand their portfolios and where that risk was lying, and technology and data have been the ways in which they could do that, and then use tech to mitigate those risks as well.

ML: The other thing I’d point out is the decarbonisation challenge. There’s a real focus on how we decarbonise the built environment, because it’s just such a significant part of the overall carbon emissions piece.

There are different estimates, but anything between 25% and 35% of emissions come from buildings. We must be at the forefront of finding solutions for decarbonisation of the built environment, and that’s the other key driver [for proptech adoption].

AD: Risk is one of the reasons why developers and construction workers have been reluctant to adopt technology. Are there any other barriers preventing it?

SP: I’d say there are a few things. One is general preparedness to bring in tech—there’s a lot of work that needs to be done to have the systems in place and the data that businesses capture internally on their building portfolios.

That needs to be managed in the right way to make good use of the technology. Without doing that initial piece of work, they will not realise the return on investment on the technology solution. You can capture more data using tech and use tools to draw out the insights but, if you don’t have good-quality data going in, or you don’t have standards and consistency in place internally to manage that, then you can’t rely on it nor make effective decisions. The other reason is about understanding the different tech uses within the business and how that will change the way in which people conduct tasks and parts of their job role, and being able to bring these people along on that journey so that you can reduce the fear that their jobs may not be needed. Externally, a lot of different proptech solutions have entered the market, which creates over-choice in some cases and a lot

of noise for property companies to navigate.

They must then understand what all these different companies do, how they are each unique, and which is the best fit for their business—and that in itself can be a really difficult task. Proptech companies being able to communicate what it is that they’re offering very clearly, and how that can help their clients, is important to solving that.

ML: Thinking about construction in particular, the reason why we’ve been slow to build differently is because people can build the way they’ve always done and make money out of it. There’s been no incentive to do things differently. There are barriers in the insurance and lending markets—if you’ve got a home built in a non-traditional way that you’re trying to secure a mortgage for or get insured, people don’t know how to price that because they haven’t seen that kind of product before. You can bring these houses to market, but if you can’t insure or borrow against them, then that’s a worthless asset. There’s education to be done around this, and these conversations need to happen before people will feel comfortable enough that you can mainstream modern methods of construction (MMC) or other kinds of innovation.

“When we look at proptech, we don’t look at it as being the answer, but an enabler to help businesses— whether you’re a property developer, construction professional, or landlord—make better decisions”

AD: The construction sector has been struggling over the past few years due to labour and material costs and shortages, issues around planning, and trying to meet the UK’s net zero target. In your opinion, how can proptech help the market navigate these hurdles and meet housing demand?

ML: There are some challenges that the tech sector can help with, and some they can’t, such as the ageing workforce and the migration of skills following Brexit. I’m not sure there are tech solutions for that except in terms of driving efficiency, which brings me to MMC. As for materials, labour, and energy costs—other than driving the efficiency agenda—I don’t think there’s much the tech sector can do to directly help with that.

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processes. A big problem within planning and construction is how long different processes take and the ability to gather that data in an efficient way. Those sorts of things will be made easier with technology once we can overcome the barriers to bringing it in. There’s also an element of trust that is required. We Where I think the real opportunity lies is in had a roundtable event recently that discussed innovation of construction methods and their how proptech could help with the planning efficiency. You’ll have seen the announcement and design processes as we try and build more that L&G is mothballing its modular homes sustainably. There was a lot of talk around 3D division. A factory like that depends critically visualisation models, which have been around on a steady supply of demand for the product, for quite a long time now, but there is still that but they couldn’t get this. Unless and until trust that’s required from local authorities and that changes, then we’re going to struggle planners to be able to use them. The trust to bring real innovation and efficiency into element and the willingness to engage with the construction sector. the wider community must come from the industry as a cultural change in wanting to be more transparent.

“A big problem within planning The technology is and construction is how long there to enable that to happen. There’s different processes take and potential to make significant improvethe ability to gather that data in ments in speeding up the planning process an efficient way. Those sorts of and mitigating risks, things will be made easier with but it also comes it h c h a n ge s i n technology once we can overcome wbusiness models and in mindset. the barriers to bringing it in” SP: You’re absolutely right, technology is not going to solve all of these problems. There are lots of things in there that are completely down to the way in which the industry operates, the policy and legislation, and other factors such as the economy. When we look at proptech, we don’t look at it as being the answer, but an enabler to help businesses—whether you’re a property developer, construction professional, or landlord—make better decisions. An example of this is bringing in data and the tools to analyse that, and being able to automate the

AD: In terms of the proptech solutions that we’ve seen come into the market, which one would you say has had the biggest impact?

ML: Probably the innovations around things like digital twinning. Before you start a development, as you’re envisioning the building, you can create it virtually. With this, you can look at how to maximise energy efficiency and assess safety. That’s transformative in terms of being able to think about all the long-term issues you need to get right in order to deliver a building that’s as future-proofed and responsive to the challenges you need to address as it can be.

SP: I would agree with that. The modelling side of things allows you to get that context and try new things. Alongside that, I’d say building passports have been on the agenda.

There are several working groups who are developing solutions to allow data to be passed on and stay with the building so that, as you change owners, you have that

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information there. Particularly when it comes to property transactions, getting access to that data early on is critical to speeding up the process, whether it’s a residential or commercial property.

AD: What do you think the next big proptech innovation will be?

SP: There’s obviously a lot of talk around AI at the moment. We’re seeing some really good advancements. It’s becoming more mainstream and accessible to consumers, which goes full circle and drives innovation in the workplace, too. AI is something that had a lot of hype around it, took a bit of a dip in popularity, and is now coming up at the other end of it. Things like blockchain also seem to have picked up interest again.

There’s been some progress made there, and we’ll start to see real changes with this, and with some of the building passport solutions that I mentioned.

ML: There is so much efficiency you could drive by using a combination of AI and existing technologies. In terms of transactions, there’s a huge amount of legal time spent just reading through 100-page documents of leases that are broadly standard. They’re just looking for key things that are non-standard or need to be there—that could all be done so much more efficiently. However, there are some real challenges there culturally, but also in terms of the fact that lawyers learn their trade by doing that: you start off in a basement trawling through leases, legal documents and transactions in order to familiarise yourself with the sector and the language. If all of that could be done more effectively, efficiently and automatically with just a human being checking at the end, then how do you learn your trade? Where do you start as a trainee lawyer coming into the sector? And these issues are not unique to law or property; they’re in a number of different sectors. If you think about how you can automate and make these more efficient, quite often what you’re doing is taking away the starting point for people building careers. How do we address that in the future so we can still offer an entry point where workers can learn their trade without being thrown in at the deep end of a process? There is clearly a lot that will come there; it has to and will.

In Conversation

SP: That’s where the private sector—whether it’s the proptech or the property markets— needs to engage more with universities, because there are so many advances being made with tech and innovation in different industries. It’s about translating [that into] education, and changing the way in which courses are delivered and how people are leaning. Up until this point, it really hasn’t changed, but we are now seeing Reading University, Oxford University and others catch up and bring in tech and innovation into the curriculum. Law is a great example; there are plenty of intersections with law and finance in the real estate industry that need to be looked at in order for the industry to be able to move forward.

AD: Speaking of starting careers, what got you into property and tech?

ML: I came into the BPF with no background at all in property; I started my working life as a police officer, then I went to work in the civil service for a chunk of my career. I left the civil service in 2005 and went to run the Food and Drink Federation (FDF)—a bit like the BPF, but working with food and drink and manufacturing companies—and then I came here as I was headhunted. But underneath that, I feel like a public servant at heart. I like working on public policy and issues that are important to people’s lives. In terms of trade associations—food and drink and property—they’re the two basic human needs. So, working in those areas on the issues that are fundamental to people’s lives is why I made the move from FDF to BPF. I was delighted to do so because I can’t think of more important issues to be working on and trying to make a difference in.

“The reason why we’ve been slow to build differently is because people can build the way they’ve always done and make money out of it. There’s been no incentive to do things differently” SP: Funnily enough, although we’ve had a different start to our careers, Melanie, my path has not been too dissimilar. My background was not in property either, and not really in technology. I studied psychology at Portsmouth University and then went on to join Ordnance Survey, which was civil service that then became a government-owned company. It was very different to what I’m doing now in some ways, because it was a company of 1,000 people, and I was in a team of 13. It was a very different age demographic as well. I was there for five years, and then I was headhunted for this role at the UKPA. It was a very good contact of mine—who I think Melanie knows—who I worked for at Ordnance Survey. They put me into touch with the founder of the UKPA back in 2017. It was just by chance that this came up, as I was in a position where I was looking for a new role. Ordnance Survey was going through a number of changes at that time, so it was a good point for me to do something different.

It was a whole new world; I was engaging with technology companies that were using location data in their solutions, most of which happened to be considered proptech companies. Back then, I had not heard of the term proptech, but I joined the UKPA anyway. I then became managing director after a year as we changed to not-for-profit status. That was a very steep learning curve for me, going from a team of 13 and a company of 1,000 to just me and the founder of the UKPA, and no longer any strict processes or guidelines to follow. It was a real start-up environment—learn as you go along.

But that helped me to really empathise with our start-up members that are in the same boat and figuring things out. My psychology background, although I probably didn’t realise it when I started, is quite relevant to what I’m doing now. Psychology is a huge part of digital transformation. Whether it is complete shifts in business models, rethinking what your job will look like, or just generally bringing people into new ways of working and that change management piece, it all comes down to psychology. The 87

property industry, and perhaps the tech sector, are not known as the most diverse and inclusive of sectors. However, I’m really pleased to say the proptech membership that we have is becoming very diverse and inclusive. It is something at the forefront of their minds, and one that we, as an association, are passionate about driving forward. The proptech industry has a really important role, as they develop their businesses, to consider it from the beginning. We’ve got female founders within the membership who are very much thinking about this. Plus, we’ve got a very diverse board—we’re pretty much 50-50 male and female, [and have] people from different backgrounds. It is slowly changing and, hopefully, being in the position I’m in and the team that I have can help to change that, too.

AD: Do you think these sectors have improved in terms of gender equality and diversity?

ML: It is important to note that we are making progress, undoubtedly. There’s a huge commitment from many of the leaders of the property sector for change, and we can see that things are happening. They’re never going to change fast enough for some—including me—but there’s real recognition. I’ve been outspoken about this at the BPF; when I came here, we didn’t have any public statement or positioning around the importance of a diverse and inclusive sector. So, we put out a statement to say this is a really important issue that is critical to the health and the future of the industry. It’s not just about it being the right thing to do; it hits your ability to grow and be a

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In Conversation

sustainable business. If you don’t access diverse points of view and look like an organisation that represents the communities you’re trying to build in or serve, how are you going to have a sustainable business? How are you going to be successful going forward? You’re not going to attract talent and you won’t be credible.

I’ve talked a lot about this and I’m not alone.

There are lots of organisations trying to make a difference—Real Estate Balance probably being the largest one—and lots of networking groups trying to support women and grow careers, because we know it’s not enough just to attract people in from diverse backgrounds.

They have to feel welcome and that they can progress and are supported. We’ve seen a lot of growth around diversification of boards, but that’s quite often using non-exec appointments to help with that. We need to focus on bringing executive-level diversity through much more consistently across the sector. I don’t want to unfairly characterise anyone who has been in a particular role or business for a long time as unable to change or be part of the journey, but you do get pockets of people who’ve always done things a particular way. They don’t feel the need to change and don’t understand how to change—they may be scared of it. You get that in any sector that’s going through these challenges because, most of them, historically, have not been diverse. However, we’re really committed as a sector. More people understand the importance of diversity and the benefits that will bring if you are serious about it. But it will take time.

AD: Overall, do you think it’s now easier for women and younger people to join these sectors?

ML: A lot of the big employers in the property sector are going out their way to try and reach young people who are thinking about their career options, but who know nothing about property and never thought this sector could be for them. They don’t understand the range of roles that are available. For example, you can be a lawyer, or be in HR or PR just as much as you can in any other sector. But they probably think it’s just for graduates of half a dozen courses to go into very niche roles in particular parts of the market. There’s a lot of work going on to change that. I’m part of the advisory board of

Bridging & Commercial

“Psychology is a huge part of digital transformation. Whether it is complete shifts in business models, rethinking what your job will look like, or just generally bringing people into new ways of working and that change management piece, it all comes down to psychology” something called the Academy of Real Assets, which is working with schools in deprived areas and communities to try to open their eyes to what the property sector is, what it does, and what it’s all about.

SP: Society has changed, which has hopefully made it more comfortable to raise and call things out if they’re not quite right. We are seeing this with all the different movements that have been in the media; people are much more informed about what is and isn’t acceptable. Hopefully, that is then translating into the workplace in the property industry. Certainly, on the proptech side, we try to shed light on female founders and people from diverse backgrounds to position them as role models for people that may not have considered a career in tech or property before. We’re also seeing in universities much more interest in proptech from students who are studying real estate, as it’s a new career opportunity for them. They don’t have to stick to a graduate scheme and work their way up within a property company—they can take the knowledge they’ve acquired during their course and come into a proptech company if they want to. Through education, both at an academic level and in society, change is happening.

AD: Finally, what advice would you give to other women who are looking to join the proptech and property sectors?

ML: Do it! Take advantage of everything that is on offer to you in terms of support, the ability to network and meet fantastic other women and colleagues from all backgrounds.

Be confident you can and will have a great

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career, and don’t be frightened to speak your mind and call things out. You have to be sensitive about how you do that, but look for your allies—there’s nothing like finding people in the organisation who will really support and help you.

SP: From my point of view—and I can only really talk from my experience—everybody who I’ve come across, generally speaking, in proptech and real estate has been very friendly and supportive. There’s a real sense of community; everybody is willing to support each other. As a woman in the industry, I feel very supported by other females such as Melanie, our chair of UKPA, by the female founders in our membership, but also by the men as well. They’re very encouraging and supportive. I’ve never, fortunately, felt that gender has been an issue for me in this role. Age, sometimes, especially early on in my career, but I felt very empowered by the people around me. Building confidence early on is so important—as women, we do tend to lack confidence more than men, just because of the way society has raised us. I was fortunate enough to have men and women around me who helped build my confidence.

I’ve had a range of different managers in my time, but those that have really pushed me and given me opportunities very early on have led me to where I am today. Finding that support is key.

Bridging & Commercial

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ONE DAY At NivoCon On 4th May, secure digital communication platform Nivo hosted its first convention which brought the second-charge lending market together to discuss the latest in fintech. With demonstrations of how AI can be used to provide accurate information and panel discussions examining fraud prevention, I booked my ticket, eager to delve into some fascinating findings Words by

ANDREEA DULGHERU

Attendees in the main reception room at NivoCon (Copyright: Nivo)

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I think the specialist market is ripe for this technology to really make a big difference in terms of how easy it is to get access to information

Playing with my new AI friend

I

Screenshot of the Nevis AI chatbox

Bridging & Commercial

t’s around 10:30am when I arrive at 1 Wimpole Street in Marylebone, London, the location of the inaugural NivoCon. As I make my way through the main reception room, filled with second-charge market experts, one thing draws my eye: a photo of a massive ketchup bottle plastered on a banner ad.

“It’s an inside joke,” explains Matt Squire, CTO and co-founder of machine learning operations firm Fuzzy Labs. “We believe that artificial intelligence is the secret sauce to second-charge mortgages.”

Matt is one of the masterminds behind the innovation on which Nivo and Fuzzy Labs are collaborating: a digital co-pilot for specialist finance brokers and lenders.

The practical research is only at its starting point; what Matt and his colleagues are showcasing at their stand at NivoCon is only a steppingstone to creating the final solution—to cut a long story short, they’re presenting a ChatGPT-like system designed for specialist finance.

As luck would have it, I am the first person to test this outside of Nivo and Fuzzy Labs (although saying I’m a trailblazer would be quite a stretch). Once I download the Nivo app and scanned the QR code on the big screen placed on the stand table, I am greeted by a cheery text message from a magical AI chatbot called Nevis. With Matt’s encouragement, I type in a random question about the cheapest rate available for a second charge mortgage—but this stumps my new digital friend a bit. I try again, this time asking it an easier question: how much

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can I borrow for a second-charge mortgage?

The second attempt proves successful, as the AI swiftly presents me with a chunky response. As the system only has Pepper Money’s broker packaging guide from April 2022 as its source of knowledge—the lender was the first to volunteer for this beta testing stage—the response is clearly tailored to fit its criteria. Nevertheless, it shows how easy and quick it is to use the system and get information, and I quickly realise the potential that Nivo and Fuzzy Labs see in harnessing generative AI for this sector.

Ultimately, what the two tech firms aim to create is a co-pilot by adding the generative AI service—built around a messaging interface— onto the existing Nivo platform. The intention is it will help brokers and lenders by handling repetitive and mundane tasks, facilitate communication between finance providers and intermediaries and, ultimately, streamline and speed up the lending process.

Michael Common, CEO at Nivo, adds that it also aims to reduce human error.

“What's really interesting for us about these technologies—and what we think can be delivered into this market—is if you can put the [industry] knowledge into one of these models for everyone to access when they need it and have confidence that the information they're accessing is accurate, then a lot of these conversations and a lot of this wasted effort can be eliminated. I think the specialist market is ripe for this technology to really make a big difference in terms of how easy it is to get access to information,” he says.

One Day

The QR code used to access the Nevis AI at NivoCon

Matthew Elliott, CCO at Nivo, confirms that the Nevis co-pilot will go beyond ChatGPT by using verified instant messaging to ensure security and compliance are in place. “When you're having a conversation about financial services products, that needs to be secure, authenticated and encrypted, and you need to know that the brand on the other end is a legitimate lender or broker, and that the customer is a specific individual.

Unless you've got those things in place, you can't really get any meaningful value out of this stuff. When you put generative AI behind a bank standard mobile app, [with] verified ID on a text interface, the whole opportunity for AI suddenly becomes available. But, unless you've got that security on the front door, there's not much you can do.”

This is why Nivo chose to use the opensource model—the secret sauce mentioned above—rather than relying on third-party systems such as ChatGPT, to ensure the firm offers a secure service that the team understands, trusts and controls. “When you're talking about things like credit reports, people's transactional data and other personal information, that's not something that you want to stick through ChatGPT. But this is something that comes through our platform every day, so this is our opportunity. Obviously, we're not inventing this technology, but we can apply it in a secure way,” details Michael.

Following this, Nivo and Fuzzy Labs are looking to onboard more lenders and their criteria, as well as create a testing group to trial out the bespoke AI system, with the aim of evolving it and reaching the desired final product. “This is an exploratory phase; what we’ve achieved [so far] has been a valuable first step, and we’ll take it from here and build it up,” concludes Michael.

When you’re talking about things like credit reports, people’s transactional data and other personal information, that’s not something that you want to stick through ChatGPT

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The panel event starts with a presentation from Carlyne Gibb, management consultant and ID and verification (ID&V) lead at PA Consulting. But it isn’t Carlyne beginning the presentation—or rather, not the real Carlyne—but an AI version of her.

Her digital twin is not here to make things fun and add technology into the mix at a fintech event, but to illustrate how AI has evolved to such a stage that it now poses a massive identity fraud threat. “The use of stolen or fake identification documents to open accounts has significantly increased in the last few years, and the mortgage industry is no exception.

We used to live in a world where a customer's relationship with their bank manager or broker was absolutely vital to accessing finances, but now we onboard customers globally, and people no longer transact with just one financial services institution. This means that companies need to adapt not just their customer experience, but also their compliance to ensure that they are meeting global regulations.”

While technology can enable more people to commit fraud, it is also the preventative solution: it’s a case of fighting fire with fire.

“Put simply, your employees alone cannot detect sophisticated fraud attacks, but technology can.

Firms must confirm that the ID verification solutions they are putting in place work with their wider control frameworks. If you don't do this, it can result in significant regulatory challenges, increased fraud, reputational risks, and operational headaches.”

While the use of digital ID and verification can help lenders avoid losing large sums of money or getting into regulatory trouble, Carlyne reminds the audience of an even more important reason why fraud prevention is essential: “Financial crime doesn’t open up orphanages—it funds terrorism, child and arms trafficking, and drug dealing.

The audience at NivoCon’s ID and verification panel (Copyright: Nivo)

L-R: Carlyne Gibb, management consultant and ID&V lead at PA Consulting; Matthew Common, CEO and co-founder of Nivo; Tim Wheeldon, COO at Fluent Money; and Buster Tolfree, director of mortgages at United Trust Bank (Copyright: Nivo)

No single control is going to do everything and capture every single level of fraud. It’s about having those different layers in place so that you’ve got as much risk management as possible in it Bridging & Commercial

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One Day

Fraud via a digital twin Preventing identity theft is that exact first step in building a safer world. We have a duty not only to our stakeholders and our customers, but also to the world to do something more to detect fraud.”

After a hard-hitting introduction, the discussion continues, with Carlyne moderating a panel of three experts: Buster Tolfree, director of mortgages at United Trust Bank, Tim Wheeldon, COO at Fluent Money, and Nivo’s CEO and co-founder, Michael Common.

The conversation focuses on the same topic as Carlyne’s presentation: the importance of digital ID&V in preventing fraud.

When talking about the fraud trends seen in the finance market, Tim notes that the brokerage had experienced an increase in early identity fraud attempts at the initial application stage. “We train the staff to look out for this, and it’s fairly obvious—like someone who’s declared their age on the application form to be 50, but seems like a 25-year-old. We always make sure we speak to applicants initially [to prevent this].” Buster adds that UTB has introduced a notice in the firm’s lending process map to inform customers that biometric verification will be carried out, partly to drive off potential fraudsters. “If you can scare them off early, then we and the broker are not going to waste our time,” he explains.

While Tim says adopting digital ID&V has been a straightforward process for Fluent Money, things were a bit more difficult for UTB, due to the bank’s stricter existing processes. This is why, Buster clarifies, the firm initially chose to run traditional and digital ID&V processes simultaneously, as this made the transition easier, and to have a fallback option for customers who couldn’t use the tech route. “We removed that a couple of years ago and, actually, if someone says they can’t go through the digital journey, we consider that as the biggest red flag,” says Buster.

One tech innovation for digital ID&V highlighted during the discussion is the use of video—something Fluent Money has

Put simply, your employees alone cannot detect sophisticated fraud attacks, but technology can already implemented. “We started doing video selfies with 3D rotation; it’s very difficult to get [fraud] past that. It needed quite a bit of a technical expense, but we felt it was worthwhile because it gets the extra layers of protection in place,” says Tim. Michael also highlights the value of video technology within digital ID&V in discovering coercion fraud—something the business has caught quite a bit. “When you’re recording someone and you can see a person behind them coercing someone vulnerable to take a loan, it’s immediately apparent in a way that wouldn’t have been before this technology was introduced.”

Overall, the panellists agreed that the key to preventing fraud is having multiple layers of security to ensure nothing gets missed.

Michael sums it up: “No single control is going to do everything and capture every single level of fraud. It's about having those different layers in place so that you've got as much risk management as possible in it.

However, when you're layering controls, that human element of it is going to continue to be a real key part.”

Carlyne Gibb, management consultant and ID&V lead at PA Consulting (Copyright: Nivo)

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