Dexter Cousins of Tier One People caught up with HashChing CEO, Mandeep Sodhi. He shares a compelling story and the secret sauce to making a Fintech startup a success.
Mandeep: In August 2014, I decided to buy my first home. As a loyal bank employee, I reached out for the staff discount. At the time, I would boast to my friends about the special discounts I was entitled to as an employee of the bank.
A few days later I found out from a friend that they had secured a better rate from the bank I worked for. How come when they were not entitled to a staff discount and had never even worked for the bank?
I was infuriated, so I reached out to my bank asking how my friend managed to secure a better rate.
The bank simply replied, ‘Because your friend used a mortgage broker.’
Their answer made me even more frustrated, so I started to look at the mortgage broker model in greater detail.
From my research, I could see how much value mortgage advisers were providing their customers. Not only were they saving customers more time by taking away the hassle of completing documentation etc. brokers were securing better rates.
Initially the idea for HashChing, when we joined H2 Ventures in January 2015, was to work with the banks. We approached four of the banks who basically said;
We are happy to work with you guys, but our advisers are only available from Monday to Friday during operating hours only. We do not call clients on Saturday and Sunday or nights.
Consumers need the convenience of a broker coming to their house on the weekend. So, we quickly pivoted the model to service mortgage brokers. More than 50 percent of loans are written by mortgage brokers so we had a huge market to target.
HashChing went live August 2015 with nine brokers. The platform has 586 mortgage brokers across Australia. Each borrower rates a broker based on the service they receive. Any broker who receives less than a 4-star rating is expelled from the platform. Brokers understand.
The brokers have strict KPI's and must call customers within 12 hours of an enquiry even on a Saturday or Sunday. Today an Uber driver can turn up to your house for a ten-dollar ride within five minutes. Borrowers can be making a million-dollar decision, they expect a first-class experience.
Mandeep: Year one, just two confounders, Atul Narang and myself. I was responsible for the broker/customer support and CEO, Atul CTO. The reason for keeping the business so lean was to understand firsthand the customer’s needs.
The approach helped in building the right product first. After year one we expanded our team from two to five people and now we are ten full time staff and one part time. It is a lean business even though we're growing fast. As a tech business, you don’t need an army of people. We are not a call center selling home loans.
HashChing is a technology business with bank level security in place. Brokers use the HashChing dashboard to collect bank statements, loan documents etc. to be lodged to the lender. The information consumers provide to us is completely secured and protected, even our staff cannot access the information. All information is encrypted, we have to make sure we hire the right technology people.
Mandeep: I was lucky to have a Tech co-founder. As Hashching has grown we've hired a CTO from a big four bank. It is their job to make sure we continue to keep taking security to the next level. And hiring a Senior Architect from a Telco has really helped in making the business scalable. We have grown 10x this last year but the team has not grown. It was always the vision to build a technology platform that can scale quickly.
Equally as important as the tech, is the relationship with mortgage brokers. We hired a Chief Operating Officer, Siobhan Hayden, who came from MFAA. We have not spent a single dollar on broker marketing and the reason for that is the trust Siobhan has within the mortgage broker community.
The final piece of the puzzle is marketing. How do we make the consumer aware of HashChing? If you google hashching you will see, we are in the media quite a lot. The PR has been great for brand awareness. That's because we have the right marketing team in place. When I call it a marketing team, it's a team of two people.
What we need in the future are specialist skills in certain areas of the business. People who can help us continue that growth trajectory. When you start scaling you need to grow your team accordingly, otherwise people will burn out. New skill sets need to come into the company as it continues to grow.
Mandeep: I realise that top talent do not leave a cushy job at a corporate to have the same experience. We can attract better talent than a bank because we give employees the flexibility to do their job. There are very clear expectations and KPI's from day one. We remove all bureaucracy.
HashChing empowers employees to make decisions and offers an accelerated career path. People who joined Hashching six months ago have already moved up because they are performing well and show passion for the company. This doesn't happen at a corporate.
We have a unique environment with diverse backgrounds. Everyone is treated in the same manner. The intention has never been to hire for diversity, only to hire the best people. They just happen to come from different backgrounds. However, diversity is critical for innovation. When I consider the backgrounds of our people, they reflect our customer base. The team isn’t measured on innovation, it happens naturally. We think like our customers because we are just like them.
The environment at HashChing is like coming to work with your cousins. Going to see your cousins is fun. We have a bond with one another, where we can have fun and feel like we are a family. But at the end of the day, we can go home, so you don’t get the arguments like you might with your siblings. Our people love being here.
They're not getting paid top dollar. I know they can get paid a lot more in corporate world. But it is the satisfaction they get from working with a startup, building something special that keeps them motivated and hungry.
Most of the team approached HashChing directly, explaining how passionate they were about the company. Importantly, they understood the nature of a startup. They did not approach us looking for a fantastic salary and work life balance.
I was on the stage at a conference recently and someone asked me the secret sauce of the company. I thought about it for a while and I realised the secret sauce is your team. It's not the technology or the algorithm. Technology is an enabler. The team makes the vision come to life. And if you have the right team, even if it is a small team you can out play a bank.
HashChing is fortunate to have super smart people who get on with the job and don't need to be managed at all. The team owns the culture. In fact, it was the team who came up with the HashChing values after two years in business. Culture is critical in a startup and if you hire the wrong person it has a huge impact. You need to act swiftly and decisively. We have made a hiring mistake in the past and I regret not acting sooner. But it was a good learning lesson.
Mandeep: It is a very exciting time for HashChing. We have grown 10x in the last financial year. That level of growth is across revenue, number of mortgage brokers on the platform and number of mortgage applications processed. It's enormous growth.
Our first home loan product has been launched and is being distributed via our mortgage brokers. We designed the product based on the needs of the broker and the consumer. It is a product that provides same day approval. Brokers and consumers are loving it because now they don't have to wait five days for approval.
The team is continually looking for the parts of the home loan journey that are broken. If you compare home loans from the 1990s nothing has changed. We have 1500+ home loan products in the market but they're all the same. The question we ask ourselves everyday ‘How can we give the consumer more choice and help the brokers more easily fulfill a customer’s needs?’
Mandeep: HashChing is not exclusively for the Australian market. Today, Australia is the biggest market for us and we need to stay focused. But we are looking at other geographies who have a similar home loans model and regulatory framework. Before going into the other markets, we want to make sure that the model is scalable.
The UK, Canadian and New Zealand markets are the countries we will be exploring first. In the geographies where mortgage brokers do not have a significant presence, we will look to operate a direct model launching our own products.
Mandeep: I'm not thinking about exit at this point. I know a lot of investors do not like that answer but I do not want to sell to the banks. There's a reason why we're going with equity crowdfunding and that is to make sure we stay independent of the banks.
A lot of our competitors are backed by financial institutions. Some have openly disclosed their investors, some have not. Two of the big four banks have approached us in the past. We've politely declined their offers. It's just not the right model for us.
Why would a bank want to invest shareholders money in a startup? It stands to reason that they want to influence their own products on our customers. So how can we claim to be independent if there is a conflict of interest?
What we're seeing with the Royal Commission clearly shows you that banks and financial institutions have very different KPI's to HashChing. Our KPI’s are all based around customer satisfaction and we have a very clear review system to measure that. Where as banks and financial institutions base their KPI’s on sales.
Mandeep: The regulators clearly want to work with startups. But they are not clear on how they want to engage. My view is regulators are setting too many boundaries around innovation which makes progress very difficult. Startups are not trying to disrupt the industry they are striving to give more choice and transparency to consumers. To do that, we need to disrupt existing models.
The regulators seem to think startups present a systemic risk. Regulatory bodies need to acknowledge that startups do better job than the major financial institutions in certain areas. We need the support of the regulators.
Yes, regulators must ensure startups do not cross certain limits or mislead the customer. But regulating a startup in the same way as a bank or financial institution is not going to work. We just don't have the resources or funding to compete.
The royal commission has been a real eye opener for ASIC and APRA. They have openly identified that the banks have done some terrible things. Maybe the regulators can now work with the startups and find ways to solve some of the issues the banks are facing? We are happy to show our tools and share our knowledge with the regulators.