Aneesh Varma: Changing Credit Perception in the US
In this episode we are joined by Aneesh Varma, founder and CEO of the forward thinking credit assessment service Aire.
He shares Aire’s mission of moving data collection away from the limiting aspect of only looking at the past, to also taking into account a person's present and probable future. By doing this, lenders can make smarter decisions, and borrowers get fairer access to credit.
He tells us why he set up Aire, how it works, and what the experience has been like expanding to America.
Different countries have different cultures and attitudes towards credit, and Aneesh talks about how he came to terms with these differences in the US.
“Trying to chase the international market can kill your domestic business.”
Time Stamps:
02:06 - Who Aire are.
02:48 - Why Aneesh started Aire.
03:58 - How Aire helps banks make better decisions.
04:50 - The problem with the data that banks normally use.
06:16 - Who Aire’s consumers are.
07:01 - What happens when a bank refers a consumer to Aneesh.
08:45 - The generic profile of Aneesh’s ‘future prime’ consumers.
11:30 - What it’s like starting a financial business in the UK.
15:13 - The different approaches in consumer finance and credit across nations.
16:53 - The reasons for expansion and what that process was like.
19:01 - Having headquarters in New York, and the importance of taking things slow.
21:16 - How regulations change across the US.
24:23 - How lenders in the US react to Aire, and the access to credit in America.
31:18 - The kind of consumer that approaches Aneesh for a credit score.
35:30 - The importance of doing the right kind of market research.
37:53 - The difficulties in operating in an area as large as the US.
40:49 - Advice for businesses that are moving to the United States.
Resources:
https://aire.io/
www.mtbonnell.com
Connect with Aneesh Varma: LinkedIn
Connect with Sebastian Sauerborn: Linkedin
Connect with Nastaran Tavakoli-Far: LinkedIn
Email us at – Info@mtbonnell.com
Twitter – @mtbonnell
Episode Transcript
Aneesh: So Aire really started with this mission that we felt consumers were not getting the best outcome when it came to consumer credit and there was so much uncertainty and so much chaos and so much confusion that we could help consumers get a better outcome with access to credit, managing the credit and eventually never having the problem of having too much debt as a burden.
Nas: Aneesh Varma is the founder and CEO of credit assessment service Aire. This is Move Your Business to the United States from Mount Bonnell Advisors, the consultants who help you expand your business to America. I’m Nastaran Tavakoli-Nar or Nas, and this season we’re speaking to companies who’ve made the move so we can find out more about what’s worked, what hasn’t worked and what they suggest to anyone on that journey. We’re also putting your questions to Mount Bonnell CEO Sebastian Sauerborn. So send those over to info@mtbonnell.com you can also find that in the show notes.
Hello, I’m Mister Money, people can’t seem to get along without me, as cash or credit. What does credit mean to you? Gosh, I don’t know. Buy now and pay later, I guess. Don’t bet. But there’s a lot more to it than that. Credit is being defined as man’s confidence in man. Webster dictionary says credit is trust, given and received. Almost everybody in the United States chooses credit in one form or another, millions of people use credit to buy the things that add up to a better living. Well, there is, sure a lot of things I’d like to buy for better living, how about giving me a little credit? Nobody gives you credit John, it’s something you have to earn. I don’t understand Mister Money, how can you earn credit? Well, we’ll select another channel on the learning machine by remote control and see.
Nas: I am excited about this week’s guest, Aire is a new credit assessment service, where they aim to look at the bigger picture. Now if you’re a freelancer, or even if you’re someone younger, you probably know the dilemma. You speak to your bank or another lender about getting a loan, and they want to see monthly income statements and a healthy credit history, which can be hard to show if you’re young or you’re freelancer, or even if you move around a lot.
And these are all conditions which are becoming increasingly common in the modern economy. It’s a problem Aneesh was having himself, so he told Sebastian and I more about why he set up Aire and how it works, as well as talking about the expansion to the US and the different attitude to credit in America.
Aneesh: I think there’s always this joke, right, behind many companies you have a frustrated founder just trying to solve his or her own problem [smiling] so yeah, very true, guilty as charged, I am- I used to joke back in the day when we started this company that I was reject and nobody would ever give me credit, nobody would ever give me loans, and the joke probably continues as I’m building this company just so that I can get a couple of mortgages [smiling] so yes I’m a user number one, but in learning about my own experiences and learning about the challenges I talked a lot of people and it seem that I’m not the only one, and the more people I talk to, the more of them come out and they tell me about their problems so- it act as a nice motivator cause you can see what you’re solving and you can relate to these people but it also puts a lot of responsibility on your shoulder because they are waiting for something.
Sebastian: And so, what you’re really doing if I understand you correctly is kind of the technology based solution which would then be used by banks or other financial institutions, that when they check somebody’s loan or credit application, they would run that through your systems and it would give a different, potentially better result than the traditional credit bureaus.
Aneesh: Yeah, to somewhat extent right, so we are a data and tech company, we’re not a lender, we’re not a financial institution in that core sense, so we partner with financial institutions, banks, lenders, credit card providers, and as you said, the aim is to help consumers get the right outcome.
In some cases it doesn’t mean getting a loan and credit, but you do have to think about newer and better techniques to make better decisions, cause ultimately giving credit from a bank’s perspective is about making a decision, and if you’re using slightly outdated or antiquated tools or inefficient technologies or data sets, you’re never going to make the best decision. So we wanted to make sure that the decision that is being made is as close to ground reality as possible, and that’s the work we’ve been doing over the last five years.
Sebastian: So I assume that traditional credit referencing agencies and bureaus have outdated data?
Aneesh: So, I wouldn’t call it outdated data, I would just call it, instead of data that has been captured because it was easy to capture but it points in direction which is not the entire picture. And I’ll explain that a bit, right, so, if you think about a consumer’s life and if you think about their financial life, there’s so many dimensions to it, there is what happened in the past, what’s happening right now and what’s going to happen in the future, right, sadly, if you look at those three tenses if you may, like past tense, present tense, future tense, a lot of the work that have gone in from the fifties and sixties, the models that were built, the data sets that were used, were serve only historical, they would kind of look only backwards.
And that was powerful, it’s not bad, but it’s missing two big dimensions if you think about it, and that’s really the cracks on what we focus on, and in fact a lot of customers we work with, I use to use this word, we call them future prime, like they’re great consumers, the history that they have hasn’t tell you the story, but their future is exciting you know, they’re going to be great people, they’re going to do some amazing things, and you want to take a bet on them. It’s just, you don’t know how to read that future.
So what Aire does is in many ways helps you understand the present and the future, and if combined with the past, that gives you the entire picture. And that’s really how we even talk about our work, right, that’s- it’s opening the landscape, it’s removing sort of the curtain and allowing you to really understand the consumer in a full holistic sense.
Nas: So, your consumers, they are people looking for credit on their lenders?
Aneesh: Correct, so we are a company that has two dimensions, two sides to it, so we work with lenders, financial institutions, banks, and also consumers. But the way the work is today, is consumer that goes to a bank, is maybe not able to get the right decision or there’s some uncertainty in making that decision, gets sent to Aire, and in some cases we’re also working with consumers that already have an existent loans or credit and see if we can create even better outcomes for them or avoid financial distress or avoid the traps they may fall into. So, as a consumer, you don’t directly come to Aire, today, yet, but in the future you might, but today you come to a bank and the bank sends you to us.
Nas: So let’s assume I get sent to you guys, what happens?
Aneesh: So we, if I just strip away all the technology and just kind of bring it down to the very, very basics, we’ve really got excited about studying the idea that, if you as a consumer, and I as a bank loan manager, and officer at the bank, we’re able to have a conversation, and in not in an interrogation, just a conversation.
If I were to understand the context of your situation, where you are, what you’ve studied, how you get here, what do you try to do, what’s your financial stability, how you think about savings, how you think about insurance, a resilience, you would tell me a lot of interesting things that would help me make a strong view whether or not to give you a credit card to start you off, or car loan to get you to work.
And that’s sort of what we ended up building through technology, so the process we have built and it’s powered by obviously a complete automation, allows you as a consumer to come to us directly, we engage with you, you tell us relevant facts about your current circumstances, your future circumstances, your plans and that helps us build a financial profile of you that is ultimately driving how we think your credit worthiness might look like in the coming eighteen, twenty-four months, thirty-six months.
So we call this the interactive virtual interviews, so it’s hundred percent automated, but obviously what’s happening behind the scenes is you and I are exchanging information about your circumstances. So we’re also trying to make it a lot more relevant to your circumstances, your situation. It’s getting personal at scale.
Nas: So, a moment ago, you used the phrase “future prime” so I’m wondering what’s the profile of this kind of person, and you know, can you tell more about these people who you think have a lot of potential but right now are not being observed?
Aneesh: So I used to fill in that category, and also a lot of employees personally fill into that category, so it’s very personal to all of us. So I’ll walk you to the situation which usually leads to this kind of individual to it. So, in many cases they might never have had exposure to financial credit before, maybe they’re young professionals or just starting off on their journey, or maybe they’re self-employed, and especially with the rise of the gig economy, freelancers, contractors, people like me who are founding companies and are always consider themselves as self-employed people, the circumstances have always been such that we haven’t been able to build a traditional credit history.
And so when we do go interface with the market and we go for the right reasons, and we say, hey we want credit card because we want the miles or we want zero percent financing on this computer, or this piece furniture, or perhaps we want a mortgage, the market doesn’t know how to read us. And, that’s because historical data didn’t exist. But these individuals are usually employed, they, you know, early in their journey, early in their career, so they’re trying to get to some place.
They might not have a lot of savings today, but they’re starting to put together the right plans for what their future is going to look like, and those are some of the things that Aire is trying to understand and trying to assess that, is this customer going to take the right steps that make them a lot more stronger in the future? And ultimately, for a lender as well, that’s kind of a customer you want to get yourself exposed to, because they’re going to be great long term customers.
They, you know, possibly going to go on and take a mortgage and possibly going to stay with you for the next twenty, thirty, forty years, and that’s pretty long actually if you’re thinking about banking and getting a customer really.
So that’s the sort of relationship that we think about, we do also see customers who have very different circumstances, sometimes it’s really sad but you see individuals who, let’s suppose a divorce has happened in the family, everything has been on the name of this spouse and the other spouse has to pick it up, and all of the sudden you’re like, oh this is the person who’s in their late thirties or forties and they’re sort of returning to market because of circumstances as such but they are considered sort of invisible to the market cause they have no credit in their name, and also they’re struggling and everything used to be so good a few months ago. We’ve heard of even sadder stories, like people returning from the army, this is the worst, right, you’re out serving your country and you come back and you should be treated like a hero, but often the system looks at you and looks at you like hey who are you?
So again, these stories are really real and we’ll talk about them and in some cases we can relate to them. Most consumers I talk to have somebody in their family who’s gone through it, some cases are themselves, but these are really the case studies that we think about.
Nas: So, a lot of what you mention is really interesting things I guess about the economy in general, so we’ll go into that, but first, can you tell us a little bit about founding the company here in the UK and what that was like?
Aneesh: Yes, so I’ve been living in the UK for, like I’ve started the company seven eight years and I’d previously done a few companies, and sort of being getting my feet wet in building companies, getting hard knocks and, you know, learning the hard way, if you may.
Sebastian: Sorry for interrupting you, are you American, because you sound very American?
Aneesh: I’m, I like to call myself a phrase which is a third culture citizen and so, I was born in a different place, I grew up in bunch of different places and I live now in a different place. I agree I’ve picked up something like an American middle Atlantic accent [smiling] over the years I lived in New York for many years and I did my University close by, but yes, I am, I say I’m a proud migrant to the UK, a legal migrant, I know the word these days has a, some firm negative and strong connotations, but I’m very proud to be a migrant, I hope I’m meaningfully contributing to the economy, but my story is not unique and I think there’s a lot of us who are mobile for a variety of reasons, whether it’s personal reasons, professional reasons, can’t make reasons, there’s a reasons to move around and there’s nothing wrong with that, we should celebrate that. But this group of individuals like myself often will be looking at building companies, in my case, I ran a company prior to this for six, seven years which was mostly focused on the UK but also in Asia and the Middle East. So yeah, that’s how I got exposed to the idea of building companies and taking on bigger and bigger problems to solve.
Nas: And so tell us a little bit about when you’ve founded Aire? And a little bit about your UK journey and then we’ll talk about the expansion across the pond.
Aneesh: Yeah, so, before Aire was a company it was just my personal fight with the system [smiling] and I’ve talked about this a lot in the past. I, as you can tell, I had a number of runners with a consumer credit, not getting access, not getting card when you wanted it, not getting a phone, and I just used to get frustrated and I used to write really, really angry letters to the government, and regulators and politicians, anybody who would listen to me.
And people, you know, gave me meetings, oh this is interesting, this guy is talking about this random stuff, bring him in, let’s talk to him, and everybody used to give me a pat on the back, you know, this is cool, yeah, it’s a good thing, yeah, you’re right, you’re raising a good point, but nobody would do anything about that, and maybe I was too naïve to expect people to immediately start changing their behavior for this and making a change.
So eventually just got to a state where I was, this is ridiculous, I need to build a company to solve this problem. Nobody is solving this problem, everybody acknowledges there is a problem, and the only way to solve this problem is to go on the inside, build a company and change the system from the inside.
And that was a crazy idea that I had, and I, you know, even some of the stuff underneath what we’ve tried to do was pretty out there. I’m not a person from the world of consumer credit, maybe your listeners would love to hear this, like it doesn’t- you don’t always have to come from the sector, I had to learn everything about consumer credit, and at offices we have Wikipedia and we meet people and you Google and you meet more people and sort of expand your knowledge set and you get more exposed to the ins and outs of the sector, you learn the words, lexicon, the phrases and that’s sort of being the last six years of my life, learning, getting up to speed, building companies, surrounding myself with people who teach me as well some of the stuff. All I’ve had is the vision of what the world could look like. And I think that’s what we’re really trying to build at Aire.
Nas: But I assume these questions are very country specific.
Aneesh: You mean the way we do things at Aire?
Nas: Yeah, in terms of how this consumer credit work in different-
Aneesh: So there are going to be nuances for each country, so, for example, right now, we’ll talk about this a little bit later but we’re moving from the UK to the US, and part of that for us was that we saw the UK and the US surprisingly similar in their approach to consumer finance, consumer credit, there’s subtle differences but the differences are not as pronounced as maybe moving from, let’s say UK to Spain, which surprisingly geographically you think should be closer, but historically there’s been reasons, regulatory there’s been reasons why UK and Spain are very much further apart in this particular sector.
Sebastian: And we found a lot by the way, so we have a lot of clients of Mount Bonnell Advisors who are essentially they are British and Irish, or based here, but even based in countries like Germany, to find actually for more industries, you know they find while it’s a lot easier to actually go to the US rather than sort of doing the same thing in Italy, France, Spain, not only idea with five different languages but those are five legal systems so I think that’s a very common experience.
Aneesh: Yeah, and you know, there is benefit in a single language market in some extent, through meeting people, I would never try to call the US one single market, maybe we should talk about it, it’s multiple small markets, but collectively it comes across to a lot more manageable to attack, if you may in a business sense.
Nas: And what’s this expansion been like? When did you decide to expand, and I’m sure we all are thinking for the obvious reasons, but, what was it for you, you know, you’re like, we got to go to the US?
Aneesh: So Aire was started as a view that we will be a global company, the problem we’re solving isn’t just a UK problem, it exists in any and every country, in some countries problems are a lot more magnified, we knew however, the next pit stop we make outside the UK has to be one that really shows that this company has come of size and we can win in a sophisticated market, we can win in a market that’s very mature, it’s complex.
And in many ways US represented the right pieces point, right, it’s big, it’s large, similar regulations to some extent like the UK, you know, you care about the consumers, English speaking [smiling] there’s a lot of easy things to win on.
So I would say about three years ago we were starting to hear a lot about the US. We’ve always kept a close relationship, we have a large investor base in the US which is a bit ironic even though we’re British company, I think in the early days most of our capital came out of the US which is very, very unusual for a British company.
Nas: Why do you think that is though, do you think that’s something about the industry you’re in trying to do, does it say something about the American attitude to credit?
Aneesh: So Aire was, and I always say this, a very out there idea. In fact 2014 when I was starting and I used to talk about this a lot of people used to laugh and mock us you guys are crazy like what the hell you’re trying to do, this is not even a thing, and I maybe benefit from the fact that people in the US immediately grabbed onto it, and they saw the potential of what we could do if we do this right and they were very open minded about that. And so, without sort of getting into the politics of it, that was beneficial and we were always raised a capital from there and also we get support from here which is great, but we’ve always had a great relationship with the US we would spend time and I’ve always been the relationships that we needed, but about a year and a half ago we sort of got really serious about it and said okay, now we’re going to really set up roots, open a company, start looking getting the first people in, the legal process, the regulating process and all of the stuff that unfolds from, it becoming an aspiration to actually the grunt work that goes into building a US presence.
Sebastian: And now you are based in New York, right, in the States?
Aneesh: Yes, so we have a US presence which is in New York, we have a very small employee base, we often joke, we have one and a half employees in the US right now [smiling] but that’s the big push, I’m spending a lot of time there alongside to really help grab what the US is going to look like. I think one of the things which a lot of founders don’t acknowledge or a lot of CEOs don’t acknowledge is, sometimes in trying to chase the international market you can kill your domestic business.
Sebastian: Yeah, that’s true.
Aneesh: And that distraction can be very scary, very risky, and there’s a graveyard of companies that have done this wrong, so we have been very mindful to kind of preserve what we’re doing in the UK, you don’t let the UK get sacrificed, you know, in trying to pursue the US and you take a tempered approach to make sure the US is getting what it needs but the UK is not being starved.
And that’s what’s going to happen for us for the next year and obviously the size of market so big, I do expect the US market will overtake our UK operations in the near future, that’s a commonsense, but we do want to remain a UK based company, we kind of like our roots in London. We use to have this phrase “Made in London for the World” [smiling]
Sebastian: And New York was basically, because you’ve said you started there?
Aneesh: East Coast is easier for us, you know, time zone wise, coordination, we also know from a financial services perspective there is a bigger base, we’re a fin tech company, naturally, being close to regulators is also going to be a big factor, in the kind of business we’re in, most of our regulators are based in Washington DC and believe me as a tech founder I’ve never thought I’d spend that much time in Washington DC but [smiling] it’s a really good city, I really do like it, it’s a fun place to be, so that’s why East Coast has become the choice for us, the nature of our work is, even though when I go to the US or even our people on the ground there, they have to travel a lot and we have to go to all kinds of places, in Texas and California, Chicago, Illinois, and Ohio, and we travel a lot, there’s a fridge in the office which has magnets from everywhere, every state, we’re probably get all 52 States soon, that’s a reality as well, you have to put in the effort, you have to put in the mileage, you have to go see these big customers, wherever they are, they’re never going to come to you.
Nas: And are the regulations the same across the States?
Aneesh: It varies for each fin tech, we sit in a very interesting space where, our regulatory position in the UK is actually something that you get a license for, so we actually get permission by the regulators for doing what we do, which is kind of cool, and also I understand when we went through, the regulators used to joke with us, this is the first time they’re going to issue this in many, many years, and the joke used to extend that we’re going to become the fourth credit bureau or something in the UK which is kind of crazy, you know, small company becoming the largest company in the space [smiling] so US has, obviously a similar mindset, you want to do the right thing for the consumer, you want to make sure they’re not being, you know, getting negative outcomes.
But the regulation is imparted in different way but in heart, yes, that same sentiment, you want to make sure that what you’re doing doesn’t bias against race, religion, ethnicity, it’s positive for the consumer, it’s helping the consumer get on their journey, you’re not over debting the consumer with credit.
Nas: This season we’re taking your questions. Send them to info@mtbonnell.com we’ve put that in the show notes. I caught up with Sebastian Sauerborn to find out what exactly Mount Bonnell does.
Sebastian: Mount Bonnell Advisors help European entrepreneurs to expand their business in the United States, and what this really means is taking care of all the administrative, logistical and other steps involved in setting up a business in the United States.
That involves tax, legal, banking elements, finance elements, payroll, hiring people, creating contracts and, so we cover that whole process and we’ve been doing so since 2008. We know many if not all of the potential pitfalls, and that are there issues that have to be avoided, kind of traps that an international entrepreneur was looking to set up a business in the United States has to navigate and that’s really what we help with. So through that process we were managed to set the business up in the US and that’s our promise to clients, normally within four weeks.
Millions of people use installment cash credit when they borrow cash, from consumer finance companies or small loan companies, commercial banks and other financial institutions. Consumers use installment cash loans to pay off accumulated bills, to keep their credit rating good, they use installment cash loans to pay for vacations, to pay for special education for their children. And people use installment cash loans to meet unexpected emergencies, so you can see that use of installment credit is important to the consumers of this country.
Nas: And I’m wondering, so, you’ve gone to the US and you’re talking to lenders about your service. What’s their reaction compared in the UK and what does that say about, yeah, just trying to get credit in the two different markets, how have you adjusted to that?
Aneesh: So the problem has always been known, and that’s kind of the cool part, so you go and explain what you’re doing and they know the problem and that’s one of the benefits we have cause UK and US are very similar at heart, underlined the metrics, the percentages, the stats, so lenders are like, aha, yes, we know the problem you’re solving, we’ve been trying to solve this problem ourselves.
And what’s been kind of need, you know, without sort of tooting our own horn here, we did notice that we started out in the UK and we had this nice image in the US where a lot of companies kind of knew about us, yeah, you are that British company out there that has done something really cool, “oh you’re coming into the US now?” so it’s kind of cool, we’re like a little bit of luxury import, somebody actually once said that [smiling] you’re kind of like the Aston Martin car like James Bond drives it it’s in the UK and now it’s available in the US, great analogy, I loved it, but, so there is some of those benefits, sometimes the grunt work you put in one market helps build a reputation in the other market.
We’ve always had good media coverage in the US we’ve, you know, let’s say the problem we’re solving is really so acute and people relate to it, that a lot of US blogs and sectors and people are writing about our sector and kind of highlighted us, showcased us, so that’s helped. However you still need to put in the hard work, there’s no easy path entering the US, it’s not a finger snap.
Sebastian: I hear what you say, that the UK and US are very similar in terms of how they approach credit. But I think in the US credit is still more, people have a lot more credits than I used to have here and I often think, I lived in the US for many years, that, because most of the US citizens don’t have much holiday time, you know.
Instead, and so they spend their money on buying stuff, you know, they have a boat, they have a four by four, they have this, they have that, you know, I mean everything is finance, you know, and it’s very easy and accessible.
I mean when I bought a truck, in Texas when I lived there, I mean you go to the shop you go to the car dealership and like two hours later that’s it, you’re done, you drive off and so easy and it’s so accessible, I mean I see what you mean it, it’s similar in the UK but it’s still, wouldn’t you agree it’s still, I mean I don’t want call extreme but there’s a lot more credit used than in Europe.
Aneesh: Yeah and so I would almost put it, if you rank it that way, like the US would definitely have the highest per capita debt ratio which is true, the UK is significantly behind, which is in a way a good thing, in Europe is even further behind if you think of Continental Europe.
So yeah, absolutely you’re right, the access of credit, the awareness of credit itself, you know, I was very intrigued to see high school students when they graduate, their awareness of what a credit score is, what it even means and the FICO score and all these buzz words, you know, very aloof to a lot of kids of a similar age group in the UK, which is good in a way, which means they are a little bit more engaged with it, it’s also slightly a concern because that means they can overload on credit.
Nas: Or that they need to, perhaps -?
Aneesh: Correct, and I think that’s, when you think about our mission statement one of the things we talk about is, we want to enable credit for those that need it, but you don’t want those who shouldn’t have it or overburden by it to struggle in that burden right so enable credit to stop debt, it’s really interesting when you sort of put both sides together.
But, I do agree that the mindset around credit in the US is much bigger, is, you know, market as well that has a lot more players in our space. I think the average American has two times as many credit cards in their wallet than the average Brit, so there’s that stat for you I think and I’m sure someone can fact that exactly [smiling]
Sebastian: And also I think there are different types of credit, right, so I remember, for example, some people I know, they have car title loans, I don’t think they have that in the UK, right? So basically you have a clean title for your car, so you own it outright and basically you bring it to this lender and you get credit, this horrendously high interest right, I’d say it’s only for the desperate like payday loans, you know, but there is a lot of- I guess the credit portfolio that’s available is a lot bigger in the US than it’s here.
Aneesh: Yeah, I think that just comes out of how you see the market and it’s done and it makes sense, people would all, you know, the laser sphere approach allows you to pop out more business that going to be looking at, at times abusing the customer as well, I think that does happen. We’ve been very clear we do not work with payday lenders, that’s one of my principles that I was very adamant from day one we’ve been very public about it and we’ve absolutely stuck to our guns over the last five years, but, you’re right, there’s going to be a number of players, and if you think about credit, that idea, that business has been around for 2000 years, that’s not something new, right, I mean, people are lending money, borrowing money for years and years, some get abused, some play that take of rules, you know you’re going to find your moral compass in this as well.
Sebastian: So it’s also like stuff, I used to own a ranch and in fact owned two ranches in the US, one in Texas, one in New Mexico.
Nas: Sebastian your example seems so classically Texan buying a truck, owning a ranch [smiling]
Aneesh: Did you have a cowboy hat as well or?
Sebastian: Yeah, I still have believe me more than one, you know [smiling] and you know, I bought both of these, using own finances, which is like a non, I mean, they don’t have that here either, so your lender is essentially the seller, you know. And they have mortgage, probably to the eyeballs you know, and then they kind of mortgage it on to you, you know. But it’s all properly done with the title company, you know, so, I mean, there’s a deed and everything, so I think for some Europeans, as I want to say, the credit landscape in the US is a bit bewildering, you know, so this is why this is a really interesting conversation, because you kind of ride in the middle of that, and I find it quite interesting that you, you know, approached the US market with that in mind.
Aneesh: There’s more of it we also have to uncover, there’s use cases we service in the UK that we also we don’t even see them in the UK which exist in the US, right, with the reverse that we have to do there’s still more research, so that would happen, right, each market would open and expose new things, and even if you think about emerging markets, how they think about credit, it’s very different mindset, in some cases, probably credit cards might never take off in certain emergent markets, but other installment loans will take off, and you have to adapt yourself to that, but, you’re right, the US is always- I always call it the most sophisticated and the most chaotic market when it comes to consumer credit [smiling]
Nas: So given this really different landscape, I’m wondering what’s the profile of the type of person who comes to you to try to get a better credit score and how does that compare to the UK, has that changed the way you approach expanding?
Aneesh: So that’s being interesting part, at a consumer level, the stories and the personas if you may that we’re servicing and helping are very similar, right, the inherent dynamics in the market and the way credit is handed out, you still create the same pockets of people who are getting, either un-served or marginalized. So we think at a consumer level it’s very homogenous, naturally the players are much, much larger, sometimes, I remember I used to talk to some of the big players, and they would tell us their volume numbers and it was honestly a whole order of magnitude, an extra zero compared to the UK numbers, and it’s the size that you have to deal with.
Now there’s also something really interesting about the US which is, the nature of regulation therefore from lender’s perspective has been very state by state. So there are sometimes lenders who would operate in certain states and not in certain states and also certain states would have very specific laws around credit, granting, so that’s some of the stuff that has to be unpacked, unlike the UK that kind of operate as a- sort of national level, again this is sort of the nuances that you start leaning into, and then, as I was saying earlier, the US still not one big market, I don’t know if you- so I’ve studied in the US and I’ve learned this quite fascinating anecdote, so you know like, Coca-Cola and all these things, so, different parts from the US call these different types of things, so there is soda, there is pop, and there is soda pop. And based on what in the mid west or the east coast or north or south, you know, people would call it different things and it interchanges and they call it different things.
Just kind of, it’s always an example that stuck in my head over the years and I remember learning about that first went to college, kids coming from different parts of the country and they would, at the canteen, can I have some soda, can I have some pop, and I would what the hell is this different thing is there two drinks here [smiling]
Nas: One language right?
Aneesh: It’s one language, but that’s quite interesting because if you do have to sort of break the US land mass in sort of four or five or six chunks if you may, and say look, this is how we’re going to go to each of these markets cause you cannot try to bite the entire US market in one gulp, I cannot stress this enough, this is such an important part for people to think about. The east coast, even the north east, how they behave and act, the way they set up is quite different from many products than how maybe the south works or California works. In some cases you might get lucky in making like a music app and it’s sort of much more universal, maybe try maybe not, I don’t know, but that’s quite important to think about.
So and then underneath that, and this is really I think, I was fortunate to be able to do this in my younger years, just getting on the ground and driving and being in these places, you know, not just flying in, having a meeting, going out, like, take greyhound buses, I cannot emphasize how amazing to go on a greyhound bus, it’s tiring, but, you go to the country, you get to see people, you get to meet people and you appreciate how they think about, different things, what kind of phones they’re using, what kind of apps are using, what’s their interaction with different services, language, lexicon.
Nas: Are you still doing that, you know, getting on a bus and-
Aneesh: I don’t do greyhound so much but I do like renting a car and driving and I know my team gives me hard time, why don’t you just take the flight in two states, and I drive, and I do sometimes you take the train but you get a lot more exposure to local names, I mean we’ve talked about payday, we’ve talked about cash loans, I mean some of the things we’re seeing in smaller towns is scary, it’s purely scary, there’s no other way of describing how consumers are being treated. Part of it motivates me to work harder to make sure consumers are getting a better deal, but it also shows you the behavior that sort of being done at some level that we can stop.
Nas: So this is interesting cause you’re talking about doing your research out and about. So what’s it like try to gather that, trying to chat to people?
Aneesh: Yeah, so, you have be able to get people open and talk, not everybody wants to talk to random strangers-
Nas: About money, as well-
Aneesh: About money, about behavior, I mean, sometimes it’s just obvious stuff, you want understand how are they thinking about shopping and what kind of apps they’re using. Observing is as well interesting, what kind of phones you’re using, why are they using that phone, are they even using the phone in the right way, they think they might be using.
This is common I think for any company trying to bring in to new market, you kind of want to really get on the ground and learn it. I’m going to tell you about this Japanese word that I’ve always love it’s called “Genchi Genbutsu” Genchi Genbutsu sorts of stems from, it’s a philosophy from Toyota, we really take it to heart at Aire, it means that, if you really want to learn about a problem or something, you have to get out of the meeting room, and you have to get on the factory floor, and in fact it stems from this philosophy that, Toyota used to say, managers that are trying to solve a problem, they need to get down on the factory floor, look under the car, see where the oil is leaking from or get where the screw is loose, cause sitting in the meeting room you’re too far removed the problem, you will never solve the problem.
So that philosophy is very true, and if you think about our core product as well, that’s exactly what it does, it’s a “Genchi Genbutsu” we’re going to the customer and say, you tell me about your situation, cause that’s how we’re going to solve the problem. I’m not going to sit out there in my ivory tower and going to figure out who you are, but same applies here, we call it doing a “Genchi” you have to go down to where we’re going to be serving- you’re talking about taxes, I had a fun time driving through taxes, and attending meetings and going to barbecues, and really, really spicy chicken wings which I love and it was great but as you’re getting a sense of how people are interacting and engaging and the consumer’s mindset, and ultimately these are the consumers we’re going to serve and we have to know how they’re going to be engaging with our services.
And even subtle things about their behaviors about whether they want to go to ATM or cash machine, you know, how easy it is to get to, whereas in the UK it might be different. And so, all these things kind of feed in to your overall analysis and how you adjust the product just enough so that it feels that it’s correctly localized.
Nas: But I assume you’ve been on the ground in US, so huge, so what do you do in breaking your expansion open to areas, how do you approach this?
Aneesh: Yeah, it’s really hard to cover all, so you have to break it up in chunks, we’ve been a bit, like I’ve said a bit more biased towards the east coast, that said occasionally we end up going down south and other places but east coast in general.
One of the fortunate things of our sector has been that in consumer credit there seem to be a concentration around few cities I don’t why [smiling] it happens, right, so there’s a place in Delaware, where there is a bunch of credit card companies, there is a place in Ohio, in Texas as he talked about, so in a way it’s kind of nice cause if you hit these big hub spots you kind of get a lot of the exposure of how the people you were there think and thinking about improvements, their mindset.
So, but you’re right it’s still hard to hit in one go, you still have to start somewhere, in my case I have the benefit of doing this naturally for the last fifteen twenty years, all my trips and University days and learning all the stuff that I’ve learned, behavior patterns, I mean, I never had to buy a ranch yet [smiling] but maybe that would give me an exposure to another market I’m sure.
Nas: Who might need credit, as well [smiling]
Aneesh: Exactly, and then the other part as well, you know, we’re very fortunate, we’ve been able to hire great people along the journey but people who’ve been in the game, on the ground, they help us understand their perspective of the problem. Our US team, one of the things I want to hire is people who can strategically think rather than just, oh this is how we’re doing in Europe we’re going to copy paste and get it done, that’s not- you have to adapt, and adjust, you know, we’ve been, the other day we were sort of arguing over couple of words that we’ve been using in the UK that don’t perfectly translate over to the US.
Nas: What are they?
Aneesh: You know, it’s subtle things, like, we used to use the word partners for lenders, alright, so companies we’ve worked with we used to call them partners, and the US has much more looser words, you know, partners, like kind of affiliate with you, they’re not really a customer, they are not a closely coupled relationship as a company. So, the way we’ve had to go sort of how the work gets done and five years of history in UK using that word teaching everybody that’s the word, even certain words like under served, under bank, you know, there are subtle differences that how people think and behave about it, invisibles, and these are important choices to make, cause either you keep two molds of words, or in UK you’re using one word and in US you use another word and then if you go to Brazil or India, you are using different words which is too chaotic.
Nas: But at least it’s a different language, so that makes it easier.
Aneesh: Or that way or in some cases you have to keep adapting and building a lexicon or you’re trying to find a word that does it all, there’s no perfect model but you just have to be aware what worked at home is not on the work overseas.
Nas: To wrap up I want to know what’s your advice to companies who want to move to the US and maybe things that you haven’t thought about, were a surprise to you, what would be your nuggets?
Aneesh: Yeah, so I break it into two categories, one is, do your research, do it diligently, it is not just a matter of, like, oh you went on the app store and it’s easy and quick we’re going to be there, it’s only with speaking, we’ve seen him on Facebook. It’s very complex market, it’s nuance of behavior, people are having different expectations, you know, you might have seen it in movies, that’s not what happens in the real word. So that’s one, one big category of things And the other one is, stems from the same idea, make sure your business at home is stable, don’t just run in the US cause it’s exciting, cause you’ve heard about it in the movies and your friend told you about it. You can easily lose your business at home if you don’t focus and completely distracted by focusing on US.
Nas: Sebastian is nodding.
Sebastian: I agree and you’re totally right, and it’s because it’s hard and I think there are a lot of companies, as you mentioned previously who don’t make it and end up with nothing.
Aneesh: Yeah they kill both markets and are sitting with nothing, right, and it is, all and I’m founder and I’m guilty at the same, and we’re very ambitious and very optimistic and we’re like, of course we can conquer the US and do the UK and do Sweden and do this. You have to know your limits and the US will push your limits, so be mindful of that, but it’s a great place to do business if you can- you can never be a successful global company if you’ve not conquered the US so, that’s the answer.
