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Challenging Industry Norms - We Chat to Fintech Startup Reposit
by Startacus Admin
The startup landscape of recent times has been dominated by stories success achieved by companies that have reimagined something and challenged industry norms where they see that things could be done more simply and efficiently.
Hoping to add their name to a long list of UK startups working to disrupt their market is Reposit- a fintech / proptech startup that has found a far better way giving landlords protection against financial loss, which also removes the burden of large security deposits for renters.
We caught up with co-founder and CEO Curran McKay to find out more about creating a startup within the fintech space, and the challenges which come from introducing innovation within an industry whose ‘standard practices’ are so utterly entrenched.
Here’s our chat with Curran..
Hi Curran. Many will be all too familiar with the issues surrounding deposits for rental properties, but for those who aren’t, can you describe why the current systems in place are unacceptable?
Simply put, it is a large and often unnecessary financial hit for tenants and an administrative headache for landlords and letting agents. Tenants in London now have to find almost £2,000 on average for their security deposits which coupled with a month’s rent in advance is an enormous amount of cash. The government approved deposit protection schemes were brought in to protect that money from unscrupulous landlords but over 98% of cases end without a dispute and buy-to-let landlords can be fined up to three months rent if they fail to register in time. Even if a deposit is returned in full, it can be ten working days before a tenant receives their money back by which time they often need to have placed another deposit on their next move! This results in this unique situation in the UK of even well-behaved tenants refusing to pay their last months rent in order to have the funds to move house. The system is archaic, unnecessary and is a real barrier to making renting easier for everyone.
How does Reposit propose to solve some of these issues and who is the team behind the business?
Reposit is an alternative to the deposit system; tenants pay a fee (equal to one week's rent).
They then don’t need to pay a deposit as we’ll guarantee their landlord the cover for damages, unpaid rent or cleaning costs that happen during their stay. However, they remain responsible for the property and for paying all the damages they cause, they just don’t have to put it all in an account up front! This frees up the other five weeks they would have had to pay out to secure the property to spend on anything they want; whether that’s clearing their student overdraft, a holiday or even starting their own business. Landlords enjoy the same peace of mind and we actually pay out faster to them than the current schemes, meaning they can turnaround tenancies faster.
The Reposit team are three renters ourselves; we’ve experienced this problem first hand and thought there has to be a better way. Brendan, Jude and myself were frustrated at having to pay such large sums of money and I personally have moved so many times in London, that I actually have to ‘topup’ my deposit as rents have risen. I’ve never broken so much as a mug and I should be able to access my own money!
Can you give us a sense of where Reposit is, as a business, at the moment? What are the main challenges you are facing and what’s the next big step forward you hope to take?
We’ve just closed our seed round from a broad range of property angels, industry figures, international proptech entrepreneurs and even the Mayor of London’s Fund. We are scaling up fast; The full online platform, legal documents with esignature and payment and our insurance, underwritten through Lloyds of London to provide peace of mind is all live.
Our challenge now is to raise awareness and trust of Reposit to tenants, agents and landlords alike. Reposit is sold through partner agents, who we offer training and a referral fee to and we’ve got some fantastic trial agents on board now. We need to continue to grow the number of agents who offer Reposit to their prospective tenants and for it to become a household name in this industry.
What factors do you feel are the biggest threat to the continued growth and development of Reposit?
Trust! We’re a new option but tenants and agents have to be able to trust that we’re a simpler, more affordable, faster and equally secure one. We’ve addressed this by having some great professional advisors supporting us including the chair of one of the UK’s largest landlord associations and a top inventory and arbitration professional who has overseen hundreds of disputes.
There are also brimming scenes of competition both from larger agents and proptech startups as people realise how the deposits system is so unfit for the modern world. We’re adapting to this by making the process even simpler for agents by becoming a plugin for their CRM systems and partnering with credit agency partners so that a tenant who either doesn’t damage their property or does and repays Reposit in full will improve their credit rating first in the UK lettings market.
Of course, there is a risk that tenants cause more damage as they don’t have ‘skin the game’ but we’re buoyed by the likes of AirBNB and the sharing economy- in general most people simply want somewhere to live at a price they can afford.
What would you say have been the specific challenges of launching and building a startup which is working within financial services?
Trust! Again! We needed a comprehensive, bespoke insurance policy that paid out to landlords even if Reposit were to cease trading otherwise they rightly wouldn’t take the risk and would prefer to have the tenant’s money deposited in the schemes. Being a startup, with no data or track record and insurance companies being surprisingly riskadverse (who knew?) it was difficult for brokers to draft us a policy. We worked hard though and did our research and found a broker who believed in the service and team.
I think it’s a wider issue in fintech; the ‘we’ve always done it this way’ attitude but we’ve seen companies like Transferwise absolutely blow these mindsets out of the water. Millennials in particular are always game for a change or improvement but whole industries are starting to be more open to conversation with companies like us.
With industry norms so well entrenched within the rental property sector, how difficult (or indeed easy) has it been to convince customers of the value of your service, and to actually get them on board?
Tenants have been relatively easy; no one enjoys paying this money and you wouldn’t accept starting a new job and have them charge you £1000 that you’ll get back if you don’t break the coffee machine so they see the benefits. Letting agents are more difficult but one that spends £5,000 a year registering deposits can turn that into a £25,000 commission from us.
That's a huge swing for something that also takes twice as long. You can’t exist in lettings without adapting (try finding one who doesn’t list their properties on Zoopla or Rightmove) and we’re picking up lots of early adopters. The challenge will be to maintain the momentum.
Are the problems with deposits that you have described a phenomenon unique to the rental market, or are there other areas in which a similar system could make a positive impact?
We’re already in early stage research into the commercial sector the sums of money in question are often far, far larger and as any company knows, holding cash in your account is better than anywhere else so we think there is an opportunity there.
The tech and financial backup we’re using is, in essence, applicable to anything that requires a refundable security deposit and this is the case in everything from international cargo shipping through to high-end hotels. For now, we’re simply focusing on making moving into and living in a new home easier for everyone.
Thanks for the chat Curran, and hopefully we will hear from you again soon.