Horde has been in Helsinki this week attending an event matching startups with VC funds from the Nordics and across Europe. Naturally there was lots of talk around alternative finance, with DeFi, Crypto and SoFi the hot tickets. It was great to feel the buzz around the FinTech industry and witness the innovation with deep tech and smart data technologies. Of course Horde was well represented here with our AI and DeFI products.
Sometimes simple is best
Whilst it is easy to understand why there is such excitement in the space, it did make me think that sometimes the simple ideas can be just as effective.
One of the leading sources of alternative, non bank finance is actually the friend and family loan. According to the Financial Conduct Authority (FCA) up to 15 million people in the UK borrowed money from friends and family during the COVID pandemic. What was surprising, to me at least, was the size of those loans with 50% borrowing more than £1000 and up to £50000.
With interest rates on the rise and the cost of living crisis starting to bite, it is likely that many will be looking for lower interest bearing financing solutions to help them make it through this period.
Vital to work out the terms and repayment plan
According to the personal finance site Lending Tree, over a third of those that borrowed money from friends and family had a negative experience. The most common reason was hurt feelings and social friction. From the loanee it was asking for the loan in the first place and communicating if they fell behind on a payment. For the loaner it was the failure to get their money back and difficulty in chasing up payments.
The loan management solution for friends and family has been available in the Horde app for the last 18 months and has seen great success.. Somewhat surprisingly the Friend and Family loan segment is underserved across Europe. With the exception of “split the bill” or shared economy apps there are very few apps that focus on friend and family loan management for larger, longer term loans.
Horde app helps you set up the terms and conditions of the loan, with interest, cost, length of loan etc combined with functionality to make payments, send automated reminders, change schedule and add / pay down loan directly through the app. By using the app to facilitate the communication it removes the friction, anxiety and potential fall out associated with this form of personal financing.