Refin.Online: Simple and Affordable Mortgage, Just Like Managing Your Mobile Tariff Plans

The Russian mortgage market is booming. The industry is now more than ever in need of new solutions to help make mortgages flexible. In this article, we will talk with Mikhail Chernov, CEO and co-founder of the online mortgage management service Refin.Online, about how FinTech startups make the life of bank customers easier, which technologies have the greatest impact on the development of the industry, and the attitude of banks to such innovative projects.

—  How are fintech startups developing on the Russian market now? What are the benefits of cooperation between such projects and banks?

— FinTech is developing rapidly both abroad and in Russia. Founders create projects independently or in association with major market players. For example, such large banks as Barclays Bank, Bank of America, JP Morgan and others are already working in the West in alliance with IT startups.

In Russian FinTech is the 2nd most popular field for launching technology startups. For banks, cooperation with IT startups and the integration of their developments with banking products helps save money on developing their own IT solutions. And for the client, the main value is that thеy get new, more convenient functionality.

In the Russian market, for example, Tinkoff and Tochka Bank, are actively integrating new solutions.Tinkoff often organises contests for the selection of startups in the ecosystem, and Tochka, together with United Investors launched a pitching for technology startups in October with the opportunity to raise investments of up to RUB 500 million. All this serves as an additional driver for the growth of FinTech projects in the Russian market.

—  Does the growing number of FinTech startups affect the demand for financial transactions in the online format? 

— Definitely. Not only demand is increasing, but also customer loyalty to financial transactions on the network.

Even 8-10 years ago, most people were wary of financial transactions on the Internet. And with the development of online banking, many of us only visit physical bank offices to do what cannot yet be done remotely. Now, including thanks to fintech startups, especially in the credit sector, a second wave of transition to online is taking place, which increases customers' confidence in digital transactions, for example, for large sums and real estate transactions. In 2020, 37% of users registered mortgage documents remotely - that is, they did not visit the MFC and did not wait several weeks for confirmation. Compared to 2019, the volume of such transactions has quadrupled. 

—  What technologies are driving changes in the industry today?

— First of all, it is an open API (often called a public API - this is a public application programming interface —  Startup Jedi), which extends the connectivity of third-party products. This is especially true in the field of banking, as it values flexible services that integrate offers from different sites. 

Another important technology is the distributed ledger system. In fact, it is a unified base of digital transactions. Its implementation helps to conduct fast and cheap transactions, and also increases the level of security. Such a system is extremely difficult to hack or tamper with. 

Big Data is also making its own changes in the industry. The technology makes it possible to more accurately create a portrait of a consumer, identify their characteristics and wishes, and reduce risks for banks. For example, Big Data helps determine the level of solvency and financial literacy of a client, which in the future will help the bank to choose the most relevant solutions for the consumer. Machine learning and robotic process automation (RPA) are also having a big impact on the industry, significantly reducing document processing times.

— Why did you decide to launch a FinTech startup in the mortgage sector? What is Refin.Online doing now? 

— We saw that now is a difficult time for borrowers in the mortgage sector. On the one hand, real estate prices are growing almost monthly. For example, in Moscow the cost of new buildings increased by an average of 21% per year. At the same time, people's salaries most often remain at the same level, which means that the most affordable way to acquire your own housing is a mortgage. However, many potential borrowers receive a “gray” salary, and their income is often not enough for bank approval. Besides, it is often difficult for clients to understand all the conditions: for example, the high cost of insurance can offset all the advantages of a low rate.

Along with the mortgage boom, the credit burden is also increasing, therefore, mortgage refinancing is becoming an increasingly popular service. Here, the barriers for borrowers are often the same. Therefore, we thought it would be cool to create an online service that would help such users get a mortgage or refinancing at the most favorable conditions for them. Real estate agencies or private brokers have been involved in this work on the market for quite some time, so we immediately decided that we would tune out of them due to technology and business model. We make money on a commission from banks, not from users. 

— What challenges did you encounter while creating the project? How did you manage to solve them?

— At launch, we faced two major challenges. First, it was not easy to get started with banks, as it is difficult for a little-known startup to get past their security service. However, as we partnered up with more and more banks, it became easier to execute new agreements.

The second difficulty is the audience's distrust of the new project. It is not easy for a client to entrust their documents and personal data to a little-known service. We conduct regular research and polls, and one of them has shown that the main sources of trust in a FinTech mortgage startup are recommendations from a bank (63%) or reviews from friends or acquaintances (47.7%). Of course, when we first launched Refin.Online, it was not easy, but with each partnership with a new bank, with each new feedback from customers, it was easier to gain users' trust.

Sometimes customers are alarmed by the information that Refin.Online services are free for them. We think that the audience has just got used to the fact that assistance in obtaining a mortgage always costs money, and you can save money only if you contact the bank directly. But we always emphasize that our goal is to create a new, more convenient service and help borrowers optimize costs. That is why we have chosen this business model. 

—  What funds did you use to launch a startup? Did you raise investments? 

— We launched a startup with our own funds in the summer of 2020. Of course, in the early stages, our team was a little limited in finances. In these conditions, it is important from the very beginning to correctly build all business processes and allocate resources. We decided not to waste them on an online platform, website, or interface layouts. Instead, we focused on studying the audience and the optimal channels of communication with users. This approach allowed a small team to test hypotheses quickly and efficiently. 

We started looking for investments at a later stage. In May 2021, we raised ₽35 million from Moscow Seed Fund, Kama Flow and two business angels. In October, we raised another $ 360,000 from several business angels, including Ivan Milekhin, managing director of the Gruppa advertising association. 

— How does the Refin.Online service work and how does it benefit borrowers?

— The client applies for a mortgage or refinancing on the site. In the application, in addition to contact information, they can indicate the numbers for the current loan or wishes for rates and other conditions. Further, our employees contact the customer and clarify additional data. Then the system selects banks with the most favorable conditions for a specific client. After receiving approval from the bank, we help to collect all the necessary documents, check their relevance, submit them to the bank, negotiate with the insurance company and prepare the client to enter the transaction.

We send one application to several banks at once, which are most suitable for the client's profile. This helps speed up the processes and increase the chances of your mortgage being approved. Besides, we have built partnerships with banks so that applications made through Refin.Online have a higher priority for them.

Sometimes it happens that it is difficult for us to offer the borrower refinancing conditions that are much better than the current loan figures. In this case, we try to offer additional options or alternatives. Thus, for borrowers who have more than one loan, we have launched the TOP-UP service. It helps you combine several loans at one mortgage rate or receive cash from a bank.

— You talked about the tech effectiveness of Refin.Online. What technologies are used in the service? What, in your opinion, will borrowers get in the future from the integration of FinTech into mortgages?

— We try to automate routine tasks as much as possible. Thus, we implement RPA. Now robots help to form customer profiles templates for banks. We also use API protocols for integration with banks and insurance companies. This helps optimize communication with partners and accelerate the processing time of applications. Now we want to give the user the opportunity to independently manage the terms of the mortgage online. We are developing our own online calculator for calculating mortgages and refinancing, as well as a mobile application.

— What stage are you at now, how many employees are there in the team? What are your plans, do you want to enter foreign markets?

— Now we are already at the stage where a startup generates revenue. We have more than 30 employees and process more than 150 applications from clients per day. We are expecting to expand the team in the near future. We strive to create a multi-bank application for working with mortgages from the moment of issuing a loan to full payment of the debt. We see Refin.Online as a technological platform that allows us to fulfill the client's requests for updating the mortgage load for his life situation. Now we are already working all over Russia and we believe that a model similar to ours can be launched on the European market. Although, of course, it is too early to talk about scaling abroad.

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