Thought Leaders in Financial Technology: Karthik Manimozhi, CEO of RentMoola (Part 4)

Sramana Mitra: The COVID incidence is not a fault of their own. It’s a market failure. The question is, what happens after January, for instance when the eviction moratorium expires. COVID is not done. The economic impact is pretty dire.

Karthik Manimozhi: It is. This is where different people take different routes. The renters are not a single monolithic group of people. We are talking of people living in large cities, small cities, and small towns. We have people in different age groups.

Increasingly, you have more seniors and it’s a multi-generational population. You have people who live in class A and class B buildings as well as class C and class D buildings. There are different variants of this. My fear is something’s got to give here. I foresee local government activity to step up. It’s just shifting the problem right now.

What happens if 40% of the American population is in a fear of eviction? That increases the strain on the local counties, states, and cities trying to handle issues like homelessness. What we’re finding is that the landlords are starting to have conversations around how to ease the pain.

Remember in the past, as a landlord, you were in command of the situation. You had records. You had almost zero vacancies. Even today when the evictions happen, they will be able to refill, but that’s a very inhumane solution.

We should also be sympathetic to them. They are not just one class of people. The bane of small businesses and families is income inequality, access to proper credit sources. Most of the time, all they need is a lifeline. That is liquidity to overcome diversity. The landlords are interested to figure out payment plans.

I predict that the local counties will work with us and others to figure it out. For that reason, we have a Q4 program where it’s data-based lending. It’s not just prime and subprime. You already have companies in developing countries where they use data other than the credit score.

You will see an explosion of how we determine people’s intent and capability to borrow and repay debt. That’s one of the solutions that we are packing into our platform today. We hope to go live in Q4. The idea there is checkout flexibility.

At the time of checkout, you can borrow a revolving line of credit that is based on your data and financial history. You are able to get a revolving line of credit for low to no interest. I think it’s going to take just one company. It’s got to be a movement. That creates big opportunities.

Sramana Mitra: I have several questions as I’m listening to you. The questions are different for different segments. There is one category that has jobs. Even in the blue-collar sector, some segments are still doing well. The delivery workers and the essential workers have jobs.

There are companies like Walmart. They use these new FinTech solutions for payday advances on worker’s pay. These employees get to borrow against their paycheck. Before the paycheck is due, they can get advanced payments. That’s a bit of a guarantee that these guys have jobs.

That’s one segment. They are most likely in relatively stable sectors. Delivery workers are doing well because delivery workers have become essential workers.

There are other categories like that. Then there is a category that is really completely zapped. They don’t have jobs and it will take a while for the economy to recover and get back on its feet. They probably need some solution for the next 12 to 18 months while the economy gets back on its feet. What happens to them? Do you have any solutions for them?

Karthik Manimozhi: What we’re seeing here is multiple layers of reality. It’s also a factor of going back to what is the type of pay they are making and what is the burden of rent. The golden rule is, you don’t spend more than 30% of your pre-tax income on rent.

In larger cities, that is easily 50%. We are seeing a financial crisis intermingled with a health crisis. It is very muddled. You’re going to find the whole topic of income inequality come into play as well. Does that free cash support your rent and other utilities?

Rent is just one of the primary needs. Whichever way you slice and dice it, you are going to find a tale of different fates depending on people’s demographics, the cities they live in, and so on. We provide some level of flexibility.

There is no silver bullet. It’s going to require the whole village to work towards the betterment of the community. Maybe it’s also time to look at some of the systemic things. 

This segment is part 4 in the series : Thought Leaders in Financial Technology: Karthik Manimozhi, CEO of RentMoola
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