Helping students to achieve their financial goals, with Ethan Fraenkel
I'm almost old enough to start voicing opinions about youngsters needing to cut their hair and get themselves some jobs. Which is convenient, because that's sort of what we're talking about today with Ethan Fraenkel from ProGrad - a UK-based fintech that's taking an objective-first approach to improving student financing.
"You're not looking for car financing, you're looking to buy a car, you're not necessarily looking for credit, you're you're looking to make a purchase, you're not looking for mortgage, you're looking to buy a house. And so that's really the approach that we've taken with our algorithm as well, that allows us to predict how much money a customer will earn over the next five years."
You can learn more about ProGrad at https://www.prograd.uk/
I mention Guy Kawasaki in our chat, here's his 'must see' TED Talk: https://www.youtube.com/watch?v=Mtjatz9r-Vc
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:
Ethan Fraenkle 0:00
As a customer, you want to get the object, in a way. So you're not looking for car financing, you're looking to buy a car, you're not necessarily looking for credit, you're you're looking to make a purchase, you're not looking for mortgage, you're looking to buy a house.
And so that's really the approach that we've taken with our algorithm as well, that allows us to predict how much money a customer will earn over the next five years.
We've developed, in essence, a platform on ProGrad that allows users to set up financial goals and find personalised paths to either earn, save or borrow the way to those goals.
Brendan Le Grange 0:36
It's a new year. So let's talk about new career beginnings and about people on the cusp of new career beginnings: students.
Like many of you, I'm sure, when I was a student I used to do odd jobs for beer and travel money. Some of those jobs were your standard bar keeping or waiting at events, while others were... well, well, once I accidentally spent a morning promoting an escort agency.
Three friends and I had been promised four hours of pay for just 15 minutes of work. "Just jumping around inside a van", they'd said, "something about a promotion". And to be honest, it was all I needed to hear. There would have been R60 at a time when on a Monday night at Springfield, you could get a drink for R2.
And I don't regret it. But what it really was was the four of us hidden inside a windowless van painted in the Body Heat Escort Agency livery, now parked in the centre of Green Market Square on a busy Saturday morning, making it shake suggestively to promote a Valentine's Day special they were running.
When we talk about student financing, we are usually talking about funding their degrees with student loans. But tuition and books are not the only things students might want help financing and loans aren't always the best way to raise funds. That's one of the things I love about ProGrad - it talks to students about their financing options from an objective-first point of view. You don't tell Prograd 'I want a £2,000 loan, what are my options?' You tell ProGrad, 'I want to backpack around Europe, what are my options?'. Those options will include loans, but they'll also include other things, like a good old fashioned side hustle.
Welcome to How to Lend Money to Strangers with Brendan le Grange.
Ethan Fraenkle, co-founder and CEO of Prograd, welcome to the show. This is going to be the first episode of 2023. And we're going to echo that thematicallh by talking about new beginnings and financial inclusion for Gen Z. But before we get there, you have quite a remarkable background full of innovation across a real range of sectors. So let's first spend some time talking about that: what were you doing before you start Prograd?
Ethan Fraenkle 3:01
So first of all, thank you very much, Brendan, for having me with you on the podcast. I'm thrilled to be here today.
And yeah, to dive into it and answer your question, before starting Prograd with my co-founder, Marco, I spent a few years working for a company that sits between London and New York called Cutover. So in the FinTech space.
I joined them relatively early on as employee number 20-25, in the seed stage, and left post Series B, when the company had grown to about 200 people. It was fascinating to witness that growth from inside. And before this I had also spent a bit of time during a coding bootcamp, I learned how to code and that's really where I got immersed into the world of entrepreneurship. And that's really in a way how I kick started my tech and entrepreneurial life and career.
You obviously had a bit of a history then in entrepreneurship or around entrepreneurship, but what was the spark that led you to back out of paid employment field to go and start ProGrad?
To be honest, I've always had this entrepreneurial spirit. And what I mean by this is growing up in a family where my dad is an entrepreneur, my mom has been an entrepreneur, has been working and created her own business with my uncle, many years ago, and many people around me, my surrounding family, friends, have all created their own businesses. And so really grew up in this world where creating your own business seems to be relatively normal and accepted.
Rather than this, I need to get a job and if I don't get a job means I have less security, and if I have less security, this means it's a bad thing. And obviously not saying anything against this security that comes with a job, but I'm saying that it really gave me a big boost to have a lot of people around me that are part of this entrepreneurial world to feel that I could rescue it in my relatively early career could rescue it and could give it a chance.
And what really did it for me as for my co-founder and I were both at university, and we both want to rely on our or self rather than just on family. And we were both struggling to find ways to fund our postgraduate degrees, we just thought that something needs to be done about this. And so the big pain going to university having to deal with everything when you're out of your house, out of your comfort zone. And if we can either find a way to ease the burden on young people, we wanted to do something about this. And that's really what eventually led to me creating my own business,
Brendan Le Grange 5:24
As you said you're looking to help the financials of students, and you try and find them tailored ways to borrow the money, if that's what they need, but also maybe to earn the money or to find a route to get the object that they're actually looking for - and I think that's a great take on it, because sometimes a loan isn't the answer. If we think practically about what ProGrad is doing, how does the product work?
Ethan Fraenkle 5:48
So initially two approachs before I'll dive a bit more into what we do, but we've taken the idea that users nowadays don't look for a specific financial product. And what I mean by this is, as a customer, you don't really look for a car financing, you want to get the object, in a way. So you're not looking for car financing, you're looking to buy a car; you're not necessarily looking for credit, you're you're looking to make a purchase; you're not looking for mortgage, you're looking to buy a house.
And of course, very often a financial product, or some finances around this will be the consequences of what you're trying to buy or get in your life. And so that's really the approach that we've taken with our algorithm as well, that allows us to predict how much money a customer will earn over the next five years. And we've developed in essence, a platform on progress that allows users to set up financial goals and find personalised paths to either earn safe abode the way to the goals. And basically at ProGrad we use, as I mentioned, our proprietary models that matches users with solutions from different providers that could help them achieve their targets, including side hustles, flexible work saving accounts, credit card, car finance and many more products.
All of this with the idea that a customer never comes to progress looking for a specific product. Unlike other websites, where you come to your website, looking for specific credit card specific alone, we really think this approach will want to educate young people on different financial topics, and then really serve them with the right solution for their problems or for their goal. So customer can come to ProGrad, tell us 'ProGrad, I'm looking for £5,000 to buy a car'. Awesome, how can we help you get this? Yes, car financing is one option but can we maybe have a combination of you earning a bit of money through one of our partners, on top of you saving a bit of money and you borrowing a bit of money? All of this will allow you to find the most optimal way for you to have a solution to your needs.
Brendan Le Grange 7:40
I was recently watching a TED Talk that Guy Kawasaki gave eight years ago. So pretty old, but still very impactful. I'll link it in the notes. But he talks about companies needing to make meaning, to think about 'what are you enabling'.
Ethan Fraenkle 7:46
I think you are spot on right with this. And one of the things that we've heard from all the feedback from users is that and of course, like everything that I say like at the end of day, we really do need to have all of those buttons on board in order to find the best ways for our customers to find solutions to the needs. That it is true that a lot of our users have come back to us with feedback that they are looking increasingly to find more ways to earn money rather than just borrow money.
So they really want to have a combination, rather than just one specific solution. And at the end of the day, the lender only has the specific product to offer, which is very important in our economy, in our society and for young people as well. But we just take a bit more, as you said at the beginning, a bit more of an holistic approach where we want to give a lot of different options to customers based on what's sustainable for them. And based on what makes sense for them at their specific moment in life.
Brendan Le Grange 8:43
How do you bring your partners into this ecosystem to make this holistic approach work?
Ethan Fraenkle 8:49
Very often, the idea is that we come to them with an idea of we have a lot of customers, a lot of customers trust us come to site, we have like over 50,000 customers coming to us on a monthly basis looking for solutions, we can put you on site. And we can really create this Win Win approach, like when you make money, we make money as a free refer customer to you this customer is valuable, then we basically get a piece of the cake back. And that's usually an easy pitch for our partners because they really love the approach of you bring us customers, you bring us value.
And on top of this, you bring us this additional data that we can't really find anywhere else. And this additional data source that allows us to predict better that allows us to understand where customers going to be in the future. And frankly, also allows them to give more sustainable credit to our customers. So that's in essence, the pitch for us with our partners, which I believe when we create a win win, and which is what we're trying to create a win for the user win for the partner win for us. No one should feel excluded and everyone everyone wins just makes it easier to pitch it to both the user and the partner as well.
Brendan Le Grange 9:53
Have you got any tips and tools and tricks that you help these customers access to loans or is that how you select your partners. How are you helping this population that's generally an underserved one?
Ethan Fraenkle 10:05
Additional feature that we've introduced in our product very recently, it is the component of time. And what I mean by this is a customer can come to us not just looking for product today, but with a goal in the future. To give you a concrete example, customer can come to us tell us programme, I'm looking to get married in a year's time. And for this, I need £20,000 - just trying a random number. Awesome. Can you get me ready to this, we will assess whether the customer's credit worthy yes, no. And we'll understand what the optimal way for this customer is to get to their goal. And by doing this, by having added this component of time, we can now prepare the customer for these £20,000 in a way that's quite different than any other companies in the market. So we can have a customer who let's say is isn't credit worthy, we can give them a credit building product for six months where the customer can build up their credit for six months and ended up having a good credit score. But meanwhile, during this, we can help them save a bit more money, we can help them earn a bit more money for six months. And then after six months, come back to the customer and tell the customer, you've now put let's say £5,000 £10 1000 pounds on the side, we build you an amazing credit profile. Now for the remaining £10-15,000 that you're looking to get, we can borrow this and we have all of these good options for you that we've selected, handpicked for you.
And you can now decide which one makes the most sense, we'll give you the pros, the cons of all of these without advising you because we're not regulated for this. But really giving you all the different options and telling you these are the pros, the cons with every single lender that we have an on site, we will only have lenders on site that we believe are sustainable for customers, we still want to give the customer the right choice or the choice to make the right selection for them. It's not, oh, you're not creditworthy. Today, you're not going to get anything with us come back in two years time when you credit with it. No, actually, let's help you get to deposition, which you credit voted. And on top of this, we also have our algorithm as I mentioned, and as you alluded to, that allows us to predict what the customer is going to be of next few years. And this is data that we share with some financial partners that allows them to make different decisions than they would otherwise on people with a thin credit profile.
Brendan Le Grange 12:06
You talked about assessing whether the consumer is credit worthy is that also an algorithm you're running in house, or how you coming up with the determination of whether they are credit worthy or not.
Ethan Fraenkle 12:18
So we definitely initially run a soft credit check as well with the credit bureaus in order to understand and also because we're regulated by the FCA. So we run it in order to really understand what's the traditional approach on this customer is he slash she perceived as creditworthy or not by traditional means. And then on top of this, we want to add our own assessment on predicting where the customer will be from an earning point of view.
And by doing this, we really tackle on the affordability angle.
So really taking the approach of let's say, your student today, but tomorrow, you might be an engineer earning X or you might be someone in the art world earning y and you might be able to afford more money than you believe you could have more money than a lender believes you can. Similarly and equally as important when we have a customer that makes a certain amount of money, but we predict that the customer won't be earning a lot more money in the coming years. This also allows us to tell the customer, listen, you shouldn't be borrowing more than x because that might have an impact on you later on - where this might be unsustainable. You might you may believe that this is sustainable to you right now. But in the year, two year, three years time, because macroeconomic environment because of job vacancies, etc. This might become a bit unsustainable for you or because of cost of living crisis. So really allows us to do it in both directions, our algorithm,
Brendan Le Grange 13:35
Often in credit, we're looking backwards, we're saying, 'have you repaid your debts over the last year, or two years, and that tells me about how creditworthy you are today, but it's looking backwards, what patterns have you established. And for me as somebody in my 40s, you know, that's probably a fine way to do it. But so much is changing when you're 20. If I think back, well, one genuinely as a student, you know, going from there to the working field, and there are all these different trajectories, what field are you in? What type of company you're working for? What's your speciality? Have you gone out of university on a low base, but every few months, you'll hear salaries doubling, have you gone in a quite a good salary, but you just now in the world of 5% increases year over year. So much happens when you're at that stage, it's exponential.
And it just means it's so much more important to look at, where will you be in five years because 20 to 25 Bar more is going to happen. And then 40 to 45 or 50 to 55. So, so important for your target of Gen Z in particular. Although I'd argue in the sort of volatile world we're in now, very important for all lenders to be thinking a little bit more about where will the customer be in a few years time? I think there's one more area of it that you are building here that that is enviable among lenders and that's the community.
Ethan Fraenkle 14:52
It is very true that for us community is of key importance. It really sits for us under this umbrella of educating young people and What I mean by this is, we don't just want to attract customers on our website and just sell them any product. Because we can make more money out of this product, the real idea behind it is that let's bring a customer to site. Let's educate them.
And let's educate them in different ways to really unpack it a bit more. So the first way in which we educate customers is by giving them a community, a community where they can engage with people, people who've been through our platform, people who have maybe a bit more knowledge on different financial topics, we will give them access to a lot of content.
For example, are you thinking about buying a car? How could you go about this? What's a buy now pay later? What's a credit card? What are the differences? As credit as greatest people say? It's credit as bad as people say, what's the right thing between? What are alternatives to credit, really giving them a lot of answers to some of the financial questions that they have, also allows them to post questions, get answers and meet like minded people.
Again, we're not looking to replicate a Facebook or matters, it's called nowadays, and I create a massive social network. But we're really looking to give young people access to community based on financial needs, or based on educating them on financial topics, so on the community page of progress, but also really trailed the process, when a customer comes and selects one of our products or is looking at different products, we have a lot of pop up videos that will come soon, our platform is extremely clickable, and basically allows a customer to for example, if a customer says, Oh, this London is giving you an APR of X percent, actually, what does an APR mean? Can I click on this? And basically, we'll have a video that will pop up and explain what does that mean? What's an interest rate? What are the differences? What, what's considered an okay, interest rate, when you have this interest rate? What does it mean that you have to pay back this much and all of these three a lot of videos on our platform.
And that's the idea is that we want to enable the customer not just in our community, but even throughout the process of selecting the right product for them, and enabling them to have a real good education and then make an informed decision as such before they select a specific product with a specific partner. And in essence, leave our platform to start the journey with this Pokemon. Because we really understand that taking on credit can be quite scary for first time credit aged, a lot of people don't necessarily understand, Oh, I'm taking revolving credit, I'm taking credit card. Does that mean they have an additional £10,000 they can just repay whenever? No, actually you have you have to pay on a monthly basis? How much do you have to repay? What are the consequences if you don't repay? We really want to enable the customer to understand all of this, before they make the most informed decision for themselves.
Brendan Le Grange 17:35
While we're talking about their platform, where can people go if they want to join that community, or if they simply want to learn from some of their content, see what is happening, I programmed what's the first port of call,
Ethan Fraenkle 17:47
So they can literally join our website, www.prograd.uk and join the community side of our website. So literally click on the community, and they will then be redirected to all the community content, all the videos and be able to learn a lot before starting the journey on selecting the right products for them.
Brendan Le Grange 18:07
And if we talk again, now a bit about you as their entrepreneurs as a business leader, where are you focusing your efforts at the moment? Where are you in terms of building out this business and rolling out your product suite?
Ethan Fraenkle 18:19
So yeah, we've launched our programme formally launched in terms of beta launch, and then puppet launch a few months ago. So over the summer, which we've seen really positive intake in terms of users using it in terms of really solving a gap in the market.
It's quite exciting, as I had mentioned via email that I hoped coming out with a great news, which I'm happy to share. So we've also closed our seed funding round in participation with many VCs and our strong angel investors. And frankly, we're thrilled to have them on board because this just equals in a time where it's quite hard to raise another financial market or the economic market isn't prime, that we manage to raise money and just ecos the importance of being there for young people. And finally, having a company that really looks after and becomes the best friend in a way of young people in order to help them solve specific goals on a weekly basis.
At the moment, we're onboarding new partners to join our marketplace at the moment having over 4050 companies in the marketplace, looking to pretty much double it in coming months. And on top of this releasing more and more features that are really cool to our platform. And that will help young people navigate throughout the financial journey and financial experience. Being out there online is quite important. But we're also looking to be there offline for people being on campuses for students being in places of work for people who've just graduated and really help people join our community and learn more and then also get them to take the right financial products for them.
Brendan Le Grange 19:49
Congratulations on that raise. As you say, not the easiest time anymore to raise money so I think it is a good show of faith and I think a great resource to help ya And people think through but also solve those problems. So yeah, I wish you the best of luck with the ProGrad journey.
Ethan before we go, though, ProGrad is not your only FinTech project, you also are involved in that broader FinTech community. What other projects are you looking at? What else are you helping get off the ground at the moment?
Ethan Fraenkle 20:19
So a year ago, ProGrad joined TechStars - the accelerator - and this really allowed us to, or allowed me, in essence, to get a bit more acquainted with the financial world, with the ecosystem with a tech ecosystem in general with startups. And I found it fascinating because it's one thing building your own business. But it's also another thing trying to help other businesses basically get off the ground. As you said, in this respect, I invested in a few businesses.
So one fellow business that came through TechStars, at the same time, called Asset Reality, another one that's looking at credit in Africa, which is a massively underserved market, as well, with a lot of opportunities as a company called Good Loans. And also just mentoring a few startups on the side.
I'm not at the stage in life where I can preach I know it all, and I don't think anyone frankly does. But just believe that if I can share some of my knowledge with other people that are in a position where I was a year ago, two years ago, I love it. We all have to help each other. So many people have helped me along the way. And so I really enjoy sharing this knowledge with people who are maybe a bit behind in this entrepreneurial journey.
Brendan Le Grange 21:23
There's a lot of talented entrepreneurs coming up. So it's great to hear they've got some mentorship from all levels of entrepreneurs.
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 Charlson of FC productions. Show music is by Iam Wake and you can find show notes and written transcripts at www.HowtoLendMoneytoStrangers.show (or just www.HTMLTS.show) and I'll see you again next Thursday.