Fronted, the London-based fintech aiming to make life easier for renters, including lending the cash needed for a deposit, has finally launched.
In March, its founders took the decision to “hibernate” the nascent business after the first lockdown and with the pandemic taking hold. But, now with regulatory approval from the FCA and rents falling in London, the startup is officially opening.
“We had a lot of great momentum and then when lockdown came it was like getting headshot from across the map,” Fronted co-founder and CEO Jamie Campbell tells me. “It was when we heard that people weren’t able to move [that] we knew it would be impossible to find early testers for the product and that is when we decided to look at different options. We knew lockdown would delay launching and the furlough scheme gave us options and time. In the end, it was an easy decision and, looking back, it was the right one”.
Founded by Campbell, Simon Vans-Colina and Anthony Mann — former employees at Bud, Monzo and Apple, respectively — and backed by Passion Capital, Fronted is using open banking and other financial technology to offer a credit product designed to finance deposits directly. The pitch is that Fronted can lend more cheaply than existing options, such as credit cards, pay-day lenders and overdrafts, or insurance-backed membership schemes. And, crucially, at lower risk.
“Renting sucks — anyone who rents knows it,” Campbell told me last year. “There are so many problems to solve and we intend to tackle them all bit by bit. But first, we are going to pay people’s rent deposits for them so they can pay us back in bite-size manageable amounts”.
To be able to apply for a Fronted rental deposit loan, you’ll need to be U.K. citizen, have a bank account with more than six months of transaction data and minimum income of £12,000. You are then asked to securely link your bank account data to Fronted via open banking, in order to assess your affordability beyond a simple credit score.
“We believe [this] is a fairer way to determine whether or not someone qualifies for a deposit from us,” explains Campbell. “We are confident we are launching with a fair approach. We don’t, for instance, turn people away who are on benefits or furloughed”.
Fronted loans last 12 months and carry a 12.5% interest rate. However, there are no early repayment fees. Once a loan is agreed, the startup sends the money directly to the estate agent to be placed in the U.K.’s Deposit Protection Scheme, meaning that the loan never touches the renter’s hands (or wallet).
Meanwhile, the timing looks good. Fronted says that 60% of all renters have no savings and are therefore not in a great position to move. Meanwhile, rents are falling as much as 12% in London, meaning that renters could save huge amounts of money simply by moving.
“Deposits are a huge impediment to social mobility; the amount of people who don’t move because they don’t have the money on hand is staggering,” adds the Fronted CEO, noting customers don’t just include those that have already found a place, but also those who are still looking.
“People who haven’t found a place, they are coming to us to see what deposit they could get and then going to find a property… For those people, we give them a maximum which is valid for 30 days so they can shop around knowing they have Fronted in their back pocket”.