Building a Canadian loan marketplace, with Vlad Sherbatov
This whole show is built on the premise that lending money is a tricky endeavour, but, let's face it, borrowing money can sometimes be easier said than done, too: instalment or revolving, secured or unsecured, long-term or short-term, monthly cost versus APR, affordability versus need, etc.
There's a lack of transparency and a lack of knowledge. "And when there is a lack of knowledge, there is a lack of trust, and as long as there is a lack of trust, there's always going to be a hindrance to the advancement of the industry." says Vlad Sherbatov, President & Co-Founder of Smarter.Loans - helping Canadians discover top loan providers for any credit purpose.
Head on over to https://smarter.loans/ to see what's there, or https://smarter.loans/videos/ for a wealth of lending content
Or get them ont he socials, they're big on TikTok (at https://www.tiktok.com/@smarter.loans?lang=en), YouTube (at https://www.youtube.com/c/SmarterLoans) and Instagram (at https://www.instagram.com/smarterloans/?hl=en)
You can learn more about myself, Brendan le Grange, on my LinkedIn page (feel free to connect), my action-adventure novels are on Amazon, some versions even for free, and my work with ConfirmU and our gamified psychometric scores is at https://confirmu.com/ and on episode 24 of this very show https://www.howtolendmoneytostrangers.show/episodes/episode-24
If you have any feedback, questions, or if you would like to participate in the show, please feel free to reach out to me via the contact page on this site.
Regards,
Brendan
The full written transcript, with timestamps, is below:
Vlad Sherbatov 0:00
People don't know what an instalment loan is, or they don't know what the actual cost of a loan is sometimes, whether it's a payday loan or an instalment loan or a home equity loan, and so on and so forth. And when there is a lack of knowledge, there is a lack of trust, you know, and as long as there is a lack of trust, there's always going to be a hindrance to the advancement of the industry.
Brendan Le Grange 0:23
15 years ago, my best mate and I were in San Francisco, having just pitched at the social entrepreneurshipaAwards where I met Praveen Sinha from episode 15. We had some time to kill and were looking to do some sightseeing, so we jumped onto the internet and searched for rental car options.
In those days though, all the internet really did for us was give us the phone numbers of each major company in the area and maybe show us a heavily asteriked "prices from" type of offer. So we had to call up Avis, hear how their prices increased in a series of complicated fees, write down the actual price, then we had to call Badgett hear how their prices increased with a series of complicated fees, write down their actual price, then we had to dial Enterprise, though, I think after listening to a minute or two of hold music, we lost the will and just chose between the cheapest of the first two offers.
It wasn't a great system.
But also, if there was a small challenger company trying to disrupt the industry, they had no way of getting their offers to us. So it really wasn't working for anyone.
Until surprisingly, recently, the market for Canadian loans wasn't too dissimilar to this. Welcome to How to Lend Money to Strangers with Brendan Le Grange.
Vlad Sherbatov, welcome to the show. You are the president and co-founder of Smarter Loans, Canada's loan directory. So you have a rare bird's eye view of the marketplace, which I guess is particularly sought after now in these volatile times. But you appear to have got to where you are now via a slightly winding path from investments to digital marketing to fintech.
So maybe you could start by talking about your career before Smarter Loans and how you were shaped into the entrepreneur that you are today.
Vlad Sherbatov 2:21
Well, I did a few different things. But I've always had a passion for entrepreneurship. I took it on a little bit later on in life, I was already 30 years old when I started on a full time basis. I happened to be in the financial industry, working at a company called, well, it's GoEasy is what it's called right now. It's a publicly traded firm, a large FinTech lender, one of the largest ones in Canada, and they were just getting started at the time. So it was gave me a good exposure into what at the time was known as the alternative lending space. So non-bank lending. But today, people don't really refer to it as much in that way anymore. It's more or less just FinTech lending.
And my partner, Rafael Rositsan, who is the CEO, he's the other co-founder of Smarter Loans and my best friend. I've known him for 23 years now, we met in high school. And he was also in marketing, but working on a slightly different type of projects, he was more on the agency side. So he had a much more diverse experience in terms of work in different verticals, as opposed to being purely focused in FinTech lending.
And it's so happened in the industry was growing and expanding at the time, many new entrants came into the field post the 2009 events in the financial market. And as a result, there was a lot of activity happening, there was a lot of new companies coming up new products and services of the FinTech lending area.
But there was very little information about it. And if you went online, there wasn't really a clear way to understand all the options, learn about who these companies are, gain confidence in it, you know, Canadians are more conservative consumers than US and UK, there was a clear gap in the industry in terms of being able to bring all that information together for people, enable people that empower them to make more informed decisions, when it comes to credit. Understand that there are actually credit options outside of maybe what you have been used to, at your financial institution, the bank that you should be dealing with your whole life.
But there is a reason for that, because a lot of people did did not fit into the same type of box, right? And you had to have these new entrants, that's the gap they were filling. So what we did is said, we're going to create like an Expedia style website, but for loans industry - so that people can come in and easily understand what's out there, learn about these companies and then, if they want to proceed, make that experience easy for them as well.
Brendan Le Grange 4:35
I think the creation of that marketplace, of that transparency, is fundamental to actually seeing the boom in FinTech, the big banks need to be scared of something before they would start moving as well - so now now they can do that, because consumers can easily see what's happening.
Vlad Sherbatov 4:51
Banks welcome this. Banks are starting to make partnerships and collaborations. They're making investments into FinTech companies, because they see it as a opportunity for growth. Like they're not stupid, right? They're not going to sit around and just just wait. I think they all understand the need for innovation.
For example, we just recently had the Canadian Lender Association event, which started around the same time, Smarter Loans started in 2016. And they initially had maybe 10-15 people at an event, you know. When they first started, I was there, and I was just there a couple of months ago, when they ran it in Toronto, there were over 500 people - and these people, they're not just from FinTech lenders, they're from insurance companies that are integrating with, you know, lending companies due to API's and tech, you have lots of banks, and there there is VC firms, right? There is payment processors and like different vendors that support the lending industry, because as the lending industry grew, the vendors around, it grew as well.
And I think that's because it's not just pulled by, you know, a few big FinTech companies, because the entire industry collectively is moving in that direction.
Brendan Le Grange 5:56
It's only six years ago that you started Smarter Loans, but we are seeing, of course, a rapid change and evolution in what's available and how people can react. Can take us back to that time, just six years ago?
Vlad Sherbatov 6:08
What was happening a lot of the times is people definitely rely on the word of mouth. That's always been one way that obviously that has spread and that in some ways can be an obstacle to overcome if you're an online all the lender, right? Like how do you gain reputation. So there was still the lenders at the time that were FinTech lenders that were coming in that executed brick and mortar strategies, in addition to online so you would see on different classes, you would have stores similar to Money Mart's of the world, right like Money Mart style, little shops, and but they would position themselves not as payday loans, but they would be more like instalment loans, right. So supposed to be a little bit better a little bit larger loans, a little bit lower interest rates, it was sort of that middle point between a payday loans and perhaps like a prime credit type of law.
And a lot of them were set up in rural communities, and you would have people that would walk by and that builds a lot of credibility, when you have a store that you can walk into and talk to somebody, at least, you know, you're kind of dealing with something real. And the rest of them had a lot of challenges acquiring people online because, well not so much acquire people I should say, but people had a challenge, sometimes filtering out who can really be dealt with, because there's a lot of stigma in the industry, one because the interest rates may appear high. A lot of the websites didn't have strict regulations, like they didn't have examples of what alone costs, they didn't have much information about the company, about the different fees that might may be associated. So people had to kind of just trust their judgement and hope for the best that what they're getting is a good deal.
And we felt that was a big problem.
Because these are important decisions, it puts you in a certain situation. And I'm not saying that you're just getting scammed left and right - that's not what I'm saying, necessarily. The lending industry is one of the most scrutinised industries from a Google point of view, if you're trying to advertise or try to do any kind of business in that space, you're gonna have a lot more eyes on you than if you're selling shoes, for example, in an e commerce store. So there is already a lot of pressure. And even though scams and fraud that can happen - and we certainly wanted to reduce that by only showcasing the type of companies - but even aside from that, let's say you have multiple lenders that are legitimate lenders, they have different terms. So if you're a customer, it's not enough to just say, I'm just looking for anybody who's willing to give it to me, because this is a sure way to put yourself in a bad situation, there's going to be some some something about those terms that aren't really right for you.
You know what I mean, if you are taking out a loan, in order to take care of a certain expense, like an emergency expense that has come up, and you need it for a short amount of time, that's a very different type of loan than if you're trying to invest into a new business opportunity. And you need to deploy a little bit of capital to get a few things up and running. And, you know, you want to pay it back with the next two years, in all sorts of totally different situation.
So we felt like it was necessary to explain to people, not just these companies, but also what are these different loan products that maybe you haven't used before, like if people don't know what an instalment loan is, you know, what does that even mean? An instalment or they don't know what the actual cost of a loan is sometimes the whether it's a payday loan or instalment loan, or a home equity loan, and so on and so forth. They don't necessarily know about any additional fees that may be associated, that could be reasonable fees, but they just don't know what they are.
And when there is a lack of knowledge, there is a lack of trust, you know, and as long as there is a lack of trust, there's always going to be a hindrance to the advancement of the industry. So we felt like transparency was always a core thing for our mission. And I would say you compare going back to your question of how was experience different five years ago than now even though technically it was also different, right, like tech advice and players change and all that stuff.
But the number one thing, in my opinion is that there was a lot less transparency and less trust in the industry. And that undermined the entire growth of it and now there is much more trust there. and see much more trust in the industry. And we certainly aren't like the only obvious the reason for it. But we absolutely played a role, because that's what we created from the very beginning.
And that was a key reason why we're able to attract people to our website is because there was no other place that they could learn about loans on this matter.
Brendan Le Grange 10:17
I feel like I can see the information I need, I can ask the questions I need without, you know, the extra nerves that come from doing it in front of someone, particularly where there's that sort of power imbalance, you know, somebody's got the money you want.
Vlad Sherbatov 10:29
Yeah, especially if they've been rejected a couple of times, right?
Like, imagine that you're not only you're stressed about something, but you also were declined to have maybe a water to play with maybe you tried to bank first, right? So it is important sometimes to just take a step back, even if you have a loan offer no matter what it is. You know, I was buying a house a few years ago, and we had mortgage deal on the table from my regular bank, right. And even in that situation, I feel like it's important, take a step back, make sure you have everything that you thought about before you have responsible plan of how you're going to use the money that you're taking out. How are you going to pay it back? Because from a lender's point of view, that's the customers that you want.
We do this we study every year, what are the main things that people don't like about the industry, okay, is year after year, and this year more even so than before is that people feel like they've been rushed, or pushed into offers, all that means is that they can have more customers that aren't as informed, perhaps taken on a little too much debt or taken up a cup of debt that they could not properly fit into their lifestyle, it just creates a bad customer for the lender. So they also lose, you know, this customer is probably not going to refer anybody else to this lender ever anyway, because now they have a broken relationship, the lenders book doesn't look as good, you know, everybody tries to keep their default rates down. So it's a win win.
And that's why we work with over 60 lenders right now. And this is the same reason that transparency is good for everyone. Lenders that work with us, they understand the same thing I just explained, they also want to increase trust, they also want to increase transparency. And not only that, they want to be the ones to do it.
Brendan Le Grange 12:05
I want to pick up on that 60 customer number you just mentioned, because when I went to smarter dot loans, your your webpage, if the thing that struck me is just how many types of loans you cover, it really is a wide swath of Canadian lending products.
Let's talk a bit about that, in practical terms at Smarter Loans, when somebody comes to your webpage, and they want to get financing, they want to compare financing options, what they do what this look like today?
Vlad Sherbatov 12:32
As we grow Smarter Loans, both Raf and I we're also learning about the lending industry and understanding that there's a lot more to it than just personal unsecured loans, than just unsecured business loans. So we started developing relationships, and then that got turned into motorsports and farming and equipment financing and buses and coaches. And today we have people financing aeroplanes and aviation. So it all grew over time.
And now if you look at it, yes, that's how we're able to say 60 lenders because they represent different verticals, you know, they're not all in like personal, unsecured loans, they represent a spectrum of different types of products and services.
And so collectively, if you are looking for a loan that we say, you know, you can find any loan in Canada, through Smarter Loans, because we're fairly confident that there isn't like a type of loan, or the type of purpose that you can fulfil between the different providers that we work with.
It's all about tech right now, so that's a big focus for us what we've done - people can come to our website, and basically, they can either just find a lender they want go straight to them, or they can tell us about themselves, and we do the matchmaking so we'll connect them. And that used to be a little bit more of like a self declared / fill out an application, you tell us about who you are, and then we may make the matches. Now it's much more tech driven.
So we have a completely integrated credit score. As part of the application. We have full banking verifications where we can confirm people's income and their financial situation was so much more data about people that are coming through the website, we are able to know more about them and actually be much better at connecting them to the right type of provider. And that process also is much more seamless now. So people can first of all narrow down their options and know exactly what they're eligible for very quickly. And to if they want to proceed, it usually takes one two days, and they can receive the funding depending on the type of loan that they're looking for.
Brendan Le Grange 14:19
Every year you you're putting out a report on the Canadian market and I saw that the Canadian FinTech lending study by smarter loans. You've done for nearly five years of this report, which has this sort of bird's eye view of the Canadian FinTech landscape, reaching 2000 executives 100,000 views of the video version last year, so obviously a sought after and valuable piece of content.
Vlad Sherbatov 14:42
It's the number one research when it comes to Canadian FinTech lending here, and it's picked up by some major publications is very anticipated by the industry. And the reason that that's the case because it's towards the industry as well - it's not a consumer report, it's an industry research.
And it explains to lenders, number one, how are people actually interacting with loan products? How are they discovering them? How are they finding them? How would they go about their decision making? Are they reading reviews? Are they going on different social profiles? Are they consuming different content, which type of platforms are really effective from a social media point of view from a customer acquisition point of view, and also what drives their satisfaction and dissatisfaction.
Everybody kind of wants to know about this. And that's one of the reasons that industry that research has been so hot.
And what we've learned primarily is people definitely, first of all, they're what they really crave and need sort of changes throughout times. So most of the recent study, we're about to launch our fifth annual edition, one of the most most important things for people was the they're very interest rate conscious. So they become a lot more price conscious now, because interest rates are on the rise. But in the past, it wasn't as as primary of a factor always. And what we're also really seeing is that people love speed. So when they're looking for a loan, here's what they're looking for, they want somebody who is fast, super clear, and transparent, in terms of a lender has fair costs, okay?
It doesn't necessarily have to be the cheapest, like everybody understands, are going to get a loan for free, everybody knows that there is fees, everybody knows that, depending on your financial profile, your credit score, your ability, your cash flow situation, you may have a higher or lower price, you know, people generally have that under understanding already that not all loans are made equal.
What they are expecting, though, is that they can have a very clear picture of the law that nobody's going to push stuff down their throat, nobody's going to take advantage of their vulnerability at the time, you know, or intimidation. Like it's intimidating to, to talk about that sometimes, because somebody can go into an explanation, like if you ever buying a car, and somebody starts with throwing out numbers, okay, well, this is your residual value, and this is your percentage here, and this is your number here, then there is a fee for delivery of the car. Like it's intimidating to start challenging people and all that stuff, right.
But it's very refreshing when you are actually clearly explained. So as long as lenders are able to offer that they usually get high scores but if people feel like that's not happening, then scores surely go down.
Other than that, like people are I think the Canadian market has come a long way, most of the loans that have been received, and this happens year after year, if you get approved, and you actually get in for personal loans, the majority are done within 24 hours. So it's extremely fast. That's already an expectation that people expect that you get to get funded in the same day, or at least within 24 hours.
Now, going into 2023, we just finished our study, even going from last year to this year, a lot of recession talk is a buzzword, right gets thrown out there. So there's been some downward pressure on home prices. So the real estate market has been dropping slightly here as well. Some big companies laid off a bunch of people, rather major companies have laid off 1,000s of people. And that has impacted the job market too.
So with that situation, when we ask people kind of what is your view going into 2023. What we found with the study is that 83% of people are essentially bracing for tough times ahead and are expecting that they will need access to additional capital next year. Right. So they're really trying to or at least, you know, sometimes in practice, it doesn't work out as much, but at the very least in tourism intent.
People are budgeting and saving, placing that as a top priority for themselves, they're going to be looking for additional sources of income.
And I think the the gig economy is on our side in this situation, just allowing people to have an extra outlet or to generate additional income, then I think for lenders, because with higher interest rates with this type of outlook overall, some lenders are also becoming more tight and constricted with their lending, right. So they're not learning as much they're understanding that people might hit some rough waters, people may lose jobs or because of high interest rates. When people start to renew their mortgages, it might catch up to some people that you know, will stretch themselves too thin.
But I believe what's going to happen is that lenders will actually be able to pull people through this, because people's lifestyles will adjust and the lenders should be bracing to satisfy that demand right in a good way. Like there's still going to be demand for financing. People will need extra capital businesses will need extra capital. And some commerce will go on as it did before. And lenders will play a key part of it in terms of the recovery and the regaining of the momentum and economic activity. I think the same ways as it happened after 2009/ 2010.
Brendan Le Grange 19:36
I'm definitely looking forward to reading that report myself. I've seen you also describe it as the only report of its kind. You'll want to watch on social media not just read with your background in digital marketing. I guess that's not so surprising but Vlad, when people go to smarter.loans/videos they're presented with a wealth of content from your partners from education staff from from industry staff - what is Is your content creation philosophy? And where can people go to sort of get some of their content to see your videos to read the stuff that you're putting out and stay on top of the industry themselves?
Vlad Sherbatov 20:11
I feel like the financial industry sometimes gives itself an out by saying that 'we're a boring industry and our products are dry and not video friendly'.
But to me, it's just an excuse.
It's not enough.
And our philosophy overall is experimentation. So we do a lot of stuff that doesn't do well. And that's how we're able to do stuff that does well, you know, so we will try almost anything, sometimes, because we are at the leading end of the spectrum when it comes to innovation in our field, certainly in Canada, but I would argue, at least in the lending space, in other markets as well, because we're certainly aware of the major players in the United States and the UK and other markets as well so and see what they're doing.
And we try to not just be the leaders here with the marketing tactics that we do, but also outside, we were one of the first brands in the financial industry in Canada on TikTok, we have over 30,000 followers there. Now, you know, you can check the banks or any other huge companies in Canada, and nobody else is even close to us. There was a reason for that. That's because we know we were we were part of their beta advertisers, we had our own creators, which we still do work with that make videos for us, and we post them tick tock every single day.
So for now, video is the most effective way to communicate that message, even a study a research study that we did, which is long form content, lots of tables and graphs, why not make that into a video. So we have a separate speaker, we dissect the study into much smaller pieces and make them standalone pieces of content. So it's not even a single video, it's a series of many videos that deliver the essence of the study in much more easy to digest kind of way in a little bit of information. So that same executive, that same person that's in the industry that's interested in this content, they don't have to go and always download a PDF and sit at their desk and analyse it, they might be scrolling through it in the middle of their kitchen, you know, they might be watching their Tik Tok clips or YouTube videos or be on Instagram.
And all of a sudden, they're gonna have somebody from Smarter Loans, a pleasant person describing to them the latest, greatest insights from a study and what to expect in 2023.
Brendan Le Grange 22:12
And I think more of their trust and transparency rating, the more we can talk to the ball about what we're doing or showing them what people are doing, the more it builds their trust and transparency is I think, nice, sort of echoing of that theme going through.
Vlad, you're clearly a founder with lots of energy, Smarter Loans is clearly a business with lots of energy, you're operating in a market that is volatile at the moment, ceretainly it's changing quickly - where's your focus for 2023? What are we as outsiders? What should we be looking for in the smarter loan story going forward?
Vlad Sherbatov 22:43
Sure. I know it's a volatile time. And that's not the first time this happened in the lending industry. We've had similar things during COVID. And even prior to that, so the market can expand and contract. Some of those things are macroeconomic, right? So there's only so much you can really do, we see the different players adjusting their strategy, like we see the lenders adjusting themselves.
The benefit that we have as a company is we're very agile as well.
So we're very conscious of our bottom line. We're also profitable business. Like I said before, we're we are bootstrapped. So we're profitable business that has a very healthy balance sheet. In other words, we're not a company that has a runway problem, we know that during one of the effects of what's been happening is there's less investor money out there that's fueling a lot of lenders, you know, a lot of lenders are new companies, they're startups, and there's a startup, typically, if you've been in business for just a couple of years, a lot of times you're not even profitable yet, you know, you will have a bunch of expenses. So companies like that rely on the continued access to that type of investment in order to stay afloat. And that becomes more challenging during times like this, you know, when things are more volatile.
So all these things play internally in our advantage. When everybody else slows down, it's a good time to capture additional market share at a discount. That's what happened after COVID. Or during COVID. I should say like, during COVID, when everybody kind of froze and didn't know what was going on. A lot of advertising dollars got pulled out of the Google, they got pulled out of Facebook, like advertisers just they just kind of chilled for a bit. And nobody was waiting to see what happens for a few months. So during that time, if you want it to advertise, you can actually get significant discounts on major keywords like major inventory in the digital space.
So our approach is we're continuing to develop to facilitate our mission, which is to create the best borrower experience in the industry continue to building trust with our target market. And for somebody for whom, you know, marketing is kind of our bread and butter. From our competency point of view, we're certainly going to be using this time to find unique ways to reach more audience to cover and capture more market share and to continue establishing smarter loans as the household name for anybody who's looking for loans in Canada. So we're continuing an aggressive outlook and we're fairly confident in our positioning in the market.
Brendan Le Grange 24:55
Yeah, well, it's a great story so fine, lad if people want to learn more about Smarter Loans, maybe they want to look for loans in the Canadian market, or they just want to learn more about you as a business, maybe they want to access that report when it comes out, where are the bases for them to go to sort of follow the story?
Vlad Sherbatov 25:11
Absolutely, the best way to do would be to go to smarter that loans are a website.
We work with a lot of companies actually that are outside of Canada. So we have one of the biggest trends in the Canadian market that I think fueled a lot of the growth is the entrance from outside. So we have a lot of companies that are US based for who have expanded into Canada over the past two years.
Same with the UK, there are multiple companies that we that we work with that have presence in both of those markets. So it's not uncommon for us to take an existing company from an outside market and actually position them in a very good way, within Canada.
And the best way to just learn more about our company is to go to our website www.smarter.loans And usually if you just do a Google search for Canadian FinTech research, or Canadian lending study + smarter loans, you'll certainly find us all over their in all kinds of formats.
Brendan Le Grange 25:56
Vlad, thank you very much for your time. It's been a pleasure hearing about what's happening there and, yeah, really interesting to hear how trust and transparency are, I think, great keywords for for making lending better in all markets. So yeah, thank you again for your time.
Vlad Sherbatov 26:08
Thank you for having me on. Have a great day. And I'm really looking forward to this being released.
Brendan Le Grange 26:14
And thank you all for listening. Please do look for and follow the show on your favourite podcast platform, and share the updates widely on LinkedIn where lending nerds are found in our largest concentration. Plus, send me a connection request while you're there.
This show is written and recorded by myself Brendan Le Grange in Brighton, England, and edited by Fina Charleson of FC Productions. Show music is by Iam_Wake and you can find show notes and written transcripts at www.HowtoLendMoneytoStrangers.show
And I'll see you again next Thursday.