There has been some really interesting talk recently of the relationship between FinTech (Finance Technology) and PropTech (Property Technology). A few articles from both sides of the Atlantic have made comments about the growing link between the two.
And so for this week’s column I thought I’d throw my hat into the ring and give my two cents on this blossoming friendship.
Let’s start back in the year 2000. Remember? Maybe not, as we were all hungover from partying like it was 1999 and lost in celebrations having realised our survival of the near fatal ‘Millennium Bug’.
But back in 2000, around 70% of households owned their own property.
Jump forward to 2015 and that figure has fallen to around 64%. At the same time, the number of private rentals has risen dramatically by 11%.
The result of this is what has come to be known as Generation Rent. An entire generation of young people priced out of owning their own home and being forced into the rental market.
For the first time in living memory, there is a real possibility that many people will never be able to own their own home, short of receiving some sort of bitter-sweet inheritance.
Because the rental market is so in demand, we have seen an awful lot of PropTech companies pop up, attempting to offer solutions to common problems between landlords and their tenants. From fee-free online letting agents and brokers such as Upad and NoAgent, to multi-faceted property management companies like FixFlo and rentr.
Everyone is hopeful that their business solution is the solution - the game changer remembered forever. However, there is one area of PropTech that I think is going to be remembered as the driving force behind the industry’s sprawling success; FinTech.
If we’re going to be honest about it, there are elements of PropTech, that are a little more than a subsidiary of FinTech, without which it could never exist. Equally there is a natural symbiosis between the two. One needs the other to progress.
FinTech will always succeed because the banks and traditional lenders have, more or less, gone into shutdown. If you’re under 30, earning less than £30K/year and single, have you ever tried to get a bank to give lend you money?
Chances are you’re getting laughed out of the revolving doors, and even if they do offer you something, it is likely to be an astronomically bad deal in terms of repayments and interest.
This is great news for the property industry, because if finance flourishes, property flourishes.
If we look at it in more granular detail, there are four areas where FinTech can help underpin PropTech and continue its considerable growth:
This subsector of PropTech is made up of mostly B2B companies focused on facilitating the mortgage application process. They do not lend or service the loan themselves.
They use expert knowledge and streamlining in order to simplify and declutter the process of securing a mortgage. UK based companies to look out for include:
Digital mortgage lending
These guys, on the other hand, help with all of the processes but then also provide the loan to the customer themselves.
Real estate investment
A massive part of PropTech at the moment, these companies focus on the investment opportunities of commercial and residential property. Some are facilitating existing processes while others are introducing new, disruptive methods for reliable investments.
Indeed, Frazer Fearnhead, Co-Founder of The House Crowd states:
"Interest in property crowdfunding has grown dramatically in the last few years. A particular section of society who want to get onto the housing ladder but can't afford deposits immediately, are using it as a vehicle to save.”
“Equally, buy to let landlords and other property investors, disillusioned with stamp duty changes, have found an alternative mechanism for their investment decisions."
Property focused influencers
These companies give most of their focus to the pure property side of things, but nonetheless, they are, in their own ways, heavily influenced by the activity of FinTech companies.
These are just four areas in which FinTech can work in harmony with PropTech. As we move forward I’m certain we’ll see more and more examples of this relationship between the two.
However, we must never take anything for granted and need to ensure that we’re smart to the fact that this symbiosis and mutual success always has the potential to become a parasitic relationship, where any failings in one have a negative impact on the other.