Giles Cross explains why FOLK2FOLK is his kind of financial services company
After 25 years in Britain’s financial services industry, new FOLK2FOLK CEO Giles Cross says he has found his ideal role in a business which is sustainable, fair, and beneficial to the customers and communities it serves.
“I think financial services has the opportunity to be a real force for good in society, driving positive social outcomes – and to make money in the process”, Cross explains, “But on a large scale, I think the sector has, over a number of years, been consciously or unconsciously complicit in ‘underserving’ the consumer, focusing on the generation of profit above all else, and the creation of shareholder, rather than stakeholder, delight. Our financial institutions hold the nation’s wealth in their hands. People are tired of opening a newspaper or turning on the radio and hearing stories of poor service or malpractice and scandal driven by greed. They want more. They deserve better.”
Cross says his approach to business is based on a philosophy he picked up years ago from his grandmother. “She used to say: ‘Fair exchange is no robbery.’ I never really understood it until recently, but the concept of fair exchange means conducting business in a way that all parties are happy, and feel they have been treated fairly and decently.”
FOLK2FOLK uses a technology platform to match individuals who are looking for a decent interest rate return on their capital with local and rural businesses that require finance for growth, development and diversification.
“I’m not a fan of those businesses that use technology as a means to dilute or replace human relationships. The warmth of human to human interaction is, I believe, an essential element of great customer experience”
“I’m not a fan of those businesses that use technology as a means to dilute or replace human relationships. The warmth of human to human interaction is, I believe, an essential element of great customer experience”, Cross says. “But what excites me most about the fintech [financial technology] element of our business is that it enhances and embeds human relationships. If anything, we are a dating site: we bring Lenders and Borrowers together to interact for their mutual benefit.”
Cross joined the company as Chief Marketing Officer in June this year, having previously spent time in senior leadership roles at wealth managers The English Mutual and Sanlam UK. He feels “honoured” to have been promoted to CEO in December of last year: “When the role came up, I had got to the stage where I had become wedded to the concept of what we want to achieve – and, quite frankly, I didn’t want anyone else to do the job.”
FOLK2FOLK’s success in the years ahead, Cross believes, will depend on the company’s ability to expand in a controlled and sustainable manner. “We’re not here to grab market share to make a quick buck. We want to do this properly and build a business that will last for generations; we want to become a recognised and valued part of the rural and business landscape.”
So what does Cross see as the key to FOLK2FOLK’s appeal to both individual Lenders and business Borrowers?
"The market is yet to develop a real alternative to the annuities in the ‘at retirement’ space and many of our customers see us as offering just that.”
“For Lenders, we offer a very attractive annual rate of interest, payable monthly at 6.5%, which is secured against property,” he explains. “While there is risk, because the loan is linked to bricks and mortar people tend to understand it more. And that return, especially for those looking to bolster income in retirement, can be life changing for some. The market is yet to develop a real alternative to the annuities in the ‘at retirement’ space and many of our customers see us as offering just that.” **
“On the Borrower side, our customers are typically people who have non-residential property assets to use as security, and who are looking for debt finance, predominantly for growth, development or diversification.” Cross says these companies come to FOLK2FOLK, not because it is an adverse-credit on “last chance” solution, but because the firm “isn’t limited by the same templates and shackles that the traditional debt finance space tends to have”.
“We try to do things faster and make things easier: We try to get an answer out within 24-72 hours and, depending on the complexity of the case, we aim to complete deals within a good timeframe.”
“There’s a line in Hamlet: ‘Neither a Borrower nor a Lender be.’ We’re trying to make a nonsense of that; and by holding the value of fair exchange as a key driver to the way that we do things, we will succeed.”
But perhaps the key element that sets FOLK2FOLK apart from other peer to peer (P2P) lenders is its focus on building and revitalising local communities around the UK.
“If you look at recent government statistics, 96% of UK businesses employ less than nine people*. We’re still a nation of shop keepers,” he points out, “Support of those businesses is vital to our post-Brexit economic success.”
“We’re making it much easier for individuals to support those micro-businesses in local and rural areas: it is vital that, as a society, we create economically vibrant local communities. And we can play our part because the acquisition of finance is fundamentally important for the development of those businesses that sit within them.”
"In four years of trading, we still record zero customer losses on the Lender side.”
While individuals who lend through the FOLK2FOLK platform tend to be initially attracted by the interest rate on offer, Cross says that they quickly buy into the company’s ethos. “Most of our Lenders soon become embedded in the idea that they are investing for the benefit of their local communities as well as the wider UK economy,” he explains. “We have case study after case study of jobs being created, of businesses being thrown a lifeline, of new ventures being enabled: and the fact that our Lenders keep coming back at the end of their loan terms suggests we are doing a lot right.”
He adds: “Of course, they are also attracted by the fact that in four years of trading, we still record zero customer losses on the Lender side.”
In the months ahead, Cross intends to reduce the minimum investment amount for Lenders from the current £20,000 to £10,000. “This would further democratise our point of entry and allow more people to get involved,” he says.
But ultimately, the thing that will drive FOLK2FOLK forward is the business’s ability to spread the word about what it stands for, Cross says. “We have to go out and talk about it. The market is big enough for us to succeed and do very well, not only for ourselves and our shareholders but all our constituents. Our customers seem to love what we’re doing. We just need to focus on reaching more people.”
“There’s something really pleasing about the outcomes that we’re helping create”, he concludes. “We have Lending customers with more money to spend in their retirement. We have Borrowing customers achieving their goals and growing their businesses. We’re creating hope and opportunity. “This is a type of financial services that, until recently, I wasn’t really sure existed. I love it. It’s personal. It’s human. It has real purpose beyond itself. We want it to succeed. For all of us: Our customers, our shareholders, our staff and the wider community. Success built on the value of fair exchange. That’s the aim.”
* Source: House of Commons Briefing Paper Number 06152, 28 December 2017
** Annuities are an income while a peer to peer loan is an investment and carries a degree of risk. It may bolster income, but cannot be relied upon as a source of income.
Capital is at risk and not protected under the Financial Services Compensation Scheme.