Upgrading the ‘bank of mum and dad’

Tim Dean, founder and CEO of Australian fintech Credi, talks to MPA about why he created a relationship lending platform for ‘The Bank of Mum and Dad’ and how it works.

Dean has spent his whole career in financial technology but it was two years ago that the idea for Credi hit him following his own experiences lending money to family and friends. “We’re seeing the emergence of the ‘Bank of Mum and Dad’ and I thought look there’s got to be a platform for this,” says Dean, so he did some research to find out more. “I was just blown away by the sheer scale and frequency of related party transactions. The amount of money that Australians lend to each other every day is millions of dollars – that’s $50 here, $200 there.”

Credit isn’t a lender but a platform that allows family and friends to draw up, negotiate and accept loan agreements between each other. It also sends alerts and keeps track of repayments. Loans under $2000 are free of charge and those over $2000 attract a one-off $90 fee.

The platform covers personal loans, property deposits but also loans for start-ups, as Dean explains, “In America, 2.4 million start-ups each year get 42% of their start-up cash to a dollar value of about $22,000 from friends and family”.

Setting up a loan agreement on Credi takes about five minutes and can be done at any time, he explains. “The problems that exist in this market place are very simple and very human – people don’t like talking to each other about money – they hate the money chat.

“The rule of life is don’t lend to friends of family – but in reality everyone does a lot, all of the time,” says Dean. “Therefore if you can provide a system that kicks it into a business-relationship as opposed to the face-to-face relationship, then you can than organise it and remove the awkward conversations.”

Since its launch in April this year, Credi.com now has almost 2,000 accounts and 28% of the $32 million of loans currently on the platform are property related - either to help fund a purchase or for deposit help. The average value of loan on their platform is $20,000 (excluding property related transactions) and with property related transactions, the average sits at just under $100,000. Their largest loan to date is $1.4 million.

Following the success since its launch and as the complications and stress of lending money between families and friend are certainly not exclusive to Australia, Credi has begun its international rollout. The lending tool is set to hit New Zealand on the 23rd of this month, the UK in November and the US in early 2018.  

Dean says Credi is keen to work with brokers and aggregators and giving family and friends the option to formalise their lending to each other.

“I think what we’re doing is we’re exposing a real desire of family members to want to properly document their loans that are on soft-terms but protect the family finances in the event of a split up down the track and Credi has a single objective in the property market place to deliver that.”

He says their platform already has millions of dollars in property related loans on their system. “I think that their (the parents) concern that they’re not going to get their money back is beginning to outweigh their concern that their family member won’t be able to get the property they’re seeking.

“We’re looking to work with aggregators, in Australia and overseas, to get the Credi platform accepted and known and visible within the lenders’ panels.”