Chapter Two is about to launch its smartphone app and become the ‘Uber’ in debt management
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Chapter Two is set to play a crucial part in Credit Intelligence’s strategy, as it looks to launch a debt management tool app and expand the business in Australia.
Since coming on-board as COO of Credit Intelligence (ASX:CI1), Will Banks has always said he wants to diversify the business from its main revenue profit centre of Hong Kong, and build market share here in Australia.
Part of the strategy is to expand on what’s already working well in Hong Kong, its debt restructuring businesses, and build on that momentum here in the country.
In light of that, CI1’s 60% acquisition of Chapter Two last year is now set to play a critical role in executing the strategy and capturing that market share Down Under.
Founded in 2015, Chapter Two is a fast growing, Sydney-based debt restructuring firm that provides informal debt negotiation and mortgage broking services to individuals experiencing financial hardship in Australia.
Its debt solution services are especially relevant during the pandemic, as they provide an alternative way for people to avoid bankruptcy.
Stockhead caught up with Chapter Two’s founder and managing director, Chris Mushan, who told us the name of the business alluded to a new beginning and the ‘next chapter’ for people who have gone through financial hardships.
Mushan said most of his clients approach the company when they feel a bit of pressure on their financial situation, and are trying to avoid defaulting on debt.
These clients mostly hold between three and in the worst case, 20 credit cards, and have subsequently fallen behind on payments.
“Our typical customer has around $50,000 worth of unsecured debt, but could be as high as hundreds of thousands depending on their financial situation,” Mushan explained.
Most other debt restructuring companies typically focus on consumer insolvency, which comes under the bankruptcy act.
In this arrangement, the bankrupt party would normally have to repay creditors through the bank or a bankruptcy trustee, which impacts their credit file.
What Chapter Two does differently is that it focuses on what’s called ‘informal debt arrangements’.
Depending on what the customer situation is, Chapter Two has a number of options it could offer to restructure a customer’s debt.
“There are two key services we offer, one is where we put the debtor into a hardship arrangement with the bank for six months, so we can work with them on a solution.”
“If the debtor could get his hands on some funds by the end of six months, we could help negotiate with the banks to accept the payment and partially write off the debt,” Mushan said.
When this is completed, the debt is written off and there will be no impact on the client’s credit score, he explained.
The other service that Chapter Two offers to clients is what’s referred to as an ’informal agreement’.
“This is where we help negotiate a payment plan with the banks generally for five years, and pay the debt down over time, with the interest frozen.”
Through helping thousands of Australians over the last years, Mushan realised that Chapter Two needs a debt management tool that allows clients to have all their debts in one place on a smartphone’s app.
This will soon become a reality, as CI1 and Chapter Two are about to launch a new smartphone-based platform which Mushan says is the only technology of its kind used in the debt management space.
Amongst other features, the app will have a unique way of taking a borrower’s loan repayment, and distributing it to pay down creditors.
“This app tool would be similar to what CI1 uses in Hong Kong, with the data pushed through from our Salesforce portal.”
Essentially, clients will be able to view all their debts on this one app, with their credit rating updated automatically by the portal on a monthly basis.
This enables people to see their credit rating improve over time, as well as their repayment history for every debt in one place.
“There are no other providers (other than Chapter Two) offering the fintech platform that manages client’s money while negotiating with the banks at the same time,” Mushan said.
Mushan explains that as the app gathers data over the next few years, the company will be able to see how their clients’ credit score has been improving, which will then allow it to cross-sell into other financial products in the future.
“It will start as a debt management tool, but will expand into a full financial services platform in the future”, he said.
Potentially, one financial product that Chapter Two could offer in the future is mortgage broking.
According to Mushan, the data picked up by the app could provide triggers such as when customers are ready to buy their first home, or are ready to refinance.
‘If they can show a good repayment history, then internally we could re-analyse their situation and work with them towards buying their first home.”
Chapter Two is currently applying for a wholesale mortgage licence, which will be the key to building out the company’s mortgage broking loan book in the future.
According to COO Will Banks, CI1’s longer term vision in Australia is to work with Chapter Two and bolster out the Australian business.
He believes that it’s important for an ASX-listed business to have a wide presence in the domestic market.
He also reckons the app and the business model that Mushan has built from scratch could be easily replicated and expanded into other territories.
‘Ultimately, once we’ve built the Chapter Two business in more states across Australia, we’ll be looking to take it into other territories such as NZ and the UK, for example,” Banks said.
Banks likened Chapter Two in debt management to what Uber is to taxis.
“We’re enabling the individual to keep a close eye, real time, on what their debt position is.”
“And how by working with Chapter Two, they’ve been able to improve their credit rating and reduce their debt over time,” Banks added.
This article was developed in collaboration with Credit Intelligence, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.