June Ou, COO and Co-Founder of Figure, will be joining us in London this November at LendIt Fintech Europe, where she will be discussing, ‘How Figure is building a real application to bring assets to the blockchain.’
We connected with June to ask her some questions on the home equity market, why Figure identified this market as one that could be transformed, and the importance of blockchain technology to their solution. We hope this whets your appetite for her presentation this November.
Why did Figure.com choose the home equity market?
We like greenfield markets with macro tailwinds and high customer lifetime value. With rates moving higher, mortgage volume has dropped, and cash out refinancing isn’t happening. Cash out refi has been the primary way people release equity from their homes for the past 10 years. In a rising rate environment, people have HELOCs and reverse mortgages. We feel both products have significant challenges – and we can deliver better alternatives.
Further, our focus is on creating innovative products and delivering them in simple, transparent ways that benefit consumers. We want to help people make better financial choices. To that end, we are building financial literacy into our products and services to educate, empower, and enable customers to act on it.
What was it about this market that you and the team thought could be disrupted and transformed?
It takes at least nine weeks to get a HELOC, and the product itself is cumbersome and expensive. We figured (pun intended) that if we can bring that process down to minutes, there is a huge addressable market, including use cases outside of the scope for HELOCs today. On reverse mortgages, it’s a 38% LTV product that erodes your equity at 7-8%. We like the buy-lease-back solution – something done in commercial real estate, but not in retail. We buy your home and rent it back to you for as long as you want to live there.
Can you talk about the importance of blockchain technology to your solution.
Figure’s mission is to build and promote innovative financial products and solutions on blockchain that eliminate rent seeking, illiquidity and other inefficiencies present in current financial markets. Each financial asset class requires some combination of custody, trustee and/or administrative functions that are not accretive to the asset originator or investor. Further, each class is often burdened with aspects of illiquidity, opaqueness, additional cost and risk. Non-securitized loans have no formal trading platform, and trades can take up to 100 days or more to settle. Securitization is burdened with audit, underwriting and trustee fees. Stocks require expensive custody and transfer infrastructure. Corporate bonds have limited pricing transparency. Pooled vehicles require trust, custodial and administrative fees. And exchanges—when available—charge for liquidity.
Despite the obvious value, it was apparent early on that if we simply built a blockchain, it would go the way of many other blockchains: interesting technology relegated to proof of concepts and parallel transactions. We wanted a real application, so we launched Figure to bring assets to the blockchain.
Stepping back a bit, there seems to be a lot of hype surrounding cryptocurrencies and we constantly hear banks are testing blockchain solutions but we have yet to really see them take off. Do you see the broader financial services community implementing blockchain based solutions on a wider scale?
We think we are on the precipice of major blockchain adoption. We had a seminal meeting two months back with six of the largest global banks and Dentons (the law firm), to go through legal issues surrounding blockchain, such as enforceability of contract and perfection of security interest. That paved the way for broad adoption. We currently have dialogue with over 30 financial institutions about using blockchain, and are in the process of adding a second asset originator to Provenance.
If you do see the broader financial services community implementing blockchain based solutions on a wider scale, are we looking at a few years or more along the lines of 10 years down the line?
There are some institutions that will be more cautious than others. The cautious ones will watch to see if the technology works as promised, others will be technology forward and will not hesitate to make the leap. It also depends on the promised solution and how it impacts their business.
We put the first loan ever on blockchain in late July, and will do the first warehousing in August and first securitization by Q1 2019. Concurrently, we are issuing our REIT on blockchain, and working with other originators to circumvent trust/trust certs, do debt issuance and more – all this year.
You also talk about using AI and advanced analytics to unlock new access points for consumer credit, can you talk more about this and are we moving towards full automation in our financial lives?
We are a data driven company, using data to inform on all aspects of the consumer business. We are using AI to target the most likely prospects to take our products, as well as to provide rich contextual content to help the consumer understand their choices.
What do you think it takes to be a successful woman in fintech? How can companies create work environments that are supportive to women?
There is no easy answer to this question, no magic bullet, no “one solution fits all.” To paraphrase one of my all time favorite colleagues, Sara Priola: every person is unique, every organization is unique, what works for a person in one firm may not work in a different firm; there is no one path to success that you can map for everyone to follow. What makes me successful is probably that I love what I do, and I love the people I work with; they inspire me with what they achieve every day.
I am happiest when I am able to provide an environment where my teams can thrive. The best thing we can all do, is to provide guidance and opportunities, while removing barriers so everyone can realize the satisfaction that what they bring to the table is valued. Ultimately, what people want can be boiled down to three things: they want to be valued, they want to learn, and they want to know that they are growing. We should be mindful to find talent of all kinds, and to equally invest in each individual. In the end, we can each personally make a difference with each interaction we have every day.
Want to hear more from June and 150+ other thought leaders? Register today for LendIt Fintech Europe, Europe’s leading event for innovation in financial services, or for more information download the attendee brochure here.