Fronted Financing Tenants’ Rental Deposits

FACTS

• The British start-up Fronted was founded earlier this year and should soon launch a product for tenants: providing them with the amount of their rental deposit. A limited beta version is expected to see the day in March ahead of its official launch later in 2020.

• Fronted relies on Open Banking-entailed opportunities to feed their platform. Tenants would then link their bank account so their day-to-day transactions can be analysed. They also describe the type of property they intend to rent.
• Once this analysis conducted and the tenant approved, Fronted directly sends the amount to the real estate agent in charge of the transaction. Fronted then sets a repayment schedule, applying a rate of around 12.5%.
• Some months, the tenant may ask for their payment to be temporarily reassessed downward, helping them avoid falling into financial difficulty. They can also pay off the entire amount as soon as they can afford it.

In Great Britain there are roughly 4.5 million tenants, including 35% aged 25 to 34. Most of these customers haven’t secured savings and must rely on their relatives or apply for short-term loans to afford their rental deposit.

Source: English Housing Survey 2017 to 2018

CHALLENGES

• Enhancing overall rental processes. According tho their founders, Fronted has much room for manoeuvre. They deem that most tenants have trouble dealing with this step considering the induced costs and stress. They also believe that the option of purchasing a house has become much less accessible. Tenants’ status and the procedures they go through must then urgently be reconsidered.
• An alternative to short-term financing and reliance on Open Banking to address borrowing rates. Fronted are well aware of their customers’ profiles and repayment capacities.

MARKET PERSPECTIVE

• For now, Fronted will only feature a financing option for rental deposits, but they would eventually aim for the entire rental chain: from the moment customers think of leaving the place they rent, until the point when they get the keys to the new place. Among considered services: other financing products focusing on the rental industry, and a turn up and turn off service for utilities and Internet.
• Their list of rivals includes FlatFair, which just raised $11 million, but whose offers don’t rely on a credit line but rather on a one-off fee based on the transaction amount.
• Fronted emerged from the FCA sandbox and was founded by three former Monzo (challenger bank), Bud (aggregation service) and Apple employees.