I guess we can start by you telling me a bit about Shieldpay.
Shieldpay was started just three years ago by our CEO and Founder, Peter Janes. Our initial mission was to create a safe way for two strangers to transact when buying or selling items on classified sites or marketplaces, like Gumtree, Auto Trader or Facebook
Pete had the idea for Shieldpay after one of his friends had their car stolen by a fraudster posing as a buyer. The fraudster stole the car from his driveway during a test drive and unfortunately, there was no way of tracing
that individual after the fact, as they had not been identified or verified by the platform they had met on.
That was back in 2016, and Pete wondered, how could that still be the case in this day and age? How can you not know who it is that you're transacting with online? How can over 8% of such transactions started online end up in fraud?
To solve this problem, Shieldpay took the principle of escrow used by lawyers, corporates and others for high-value transactions such as property transfers or company sales around the world. We democratised it by making it digital and free to create,
and applied the use case to buying and selling with strangers online.
How does it work?
Shieldpay verifies all parties in a transaction with our bank-grade KYC/KYB and AML checks. Whether you’re buying festival tickets from a stranger, a second-hand car or a house, every party involved in the transaction has to go through these advanced
bank-grade security checks to give both sides total peace of mind. The payer then funds the vault, we hold those funds securely in escrow – we use the term in the Shieldpay vault - and only release those funds when both sides agree, and digitally authorise
You've already talked about the inspiration, which was your founder’s friend...
That is indeed the core of our business, peer to peer transactions. We have recently announced a global partnership with Visa in this space, and we’re growing our presence in the classified and marketplaces sector. Rated People is a great
example of a platform that we have partnered with recently – to bring Protected Payments to their marketplace, connecting tradesmen and homeowners for home renovations.
We also identified a new opportunity, due to changes in the approach by the legal regulators in the UK in respect of law firms holding client funds in transactions. From this came our Professional Services offering, targeting lawyers, accountants, lenders,
insurers, estate agents and other professional services. I look after our Professional Services offering, which includes both corporate escrow services and payment services. In the legal sector, we offer an alternative to law firms holding client money in property transactions, mergers and acquisitions, claims management and just day-to-day matters. We have 35+ firms now using us for those purposes.
What is your background?
I'm a lawyer and I guess now I'm selling to lawyers, rather than being a lawyer myself.
It's good because you probably know how they think.
That's the idea. One of the main challenges when you are building a new solution, as a newcomer to an industry, is credibility. In a former life, I was a transactional lawyer in the City. I then advised start-ups as an independent lawyer and finally joined
the TechStars Barclays accelerator, which is where I met Pete and the Shieldpay team. I'd like to think of myself as a lawyer turned techie. This gives me a specific understanding of our clients’ needs and ensures that we are building something
that works in practice for them.
Which market do you think is going to be most disrupted by Shieldpay?
I think on both sides of the business, Shieldpay is creating a new market where one hasn’t existed before. We're not displacing anyone. We're just making people's worlds better. For law firms, we're taking away the compliance risks and the unnecessary
stress, liability and costs associated with holding client funds. For lenders in property transactions or insurers when handling pay-outs, instead of sending funds to one of 4,000 different client money accounts with various firms or clients, they're
sending funds to one place, Shieldpay.
What can you tell us about your experimentation with blockchain in the mortgage process?
We were part of two really interesting projects one with the Land Registry Digital Street initiative and the other with the Instant Property Network, both utilising the Corda blockchain. Both these projects, as well as Dock9’s own work in
this space, shows that there is an increasing appetite in the market for this. This marks the beginning of proptech and fintech moving away from a focus on property or product discovery to transactional efficiencies; workflows, due diligence and completion
mechanics. Essentially, a focus on the customer experience from end to end. The possible applications of blockchain technology are great, but transaction management is a clear use case where much efficiency can be gained.
HM Land Registry’s involvement has given the market great validation and a strong statement that they are open for business and innovation. Their involvement was very much a "does it make sense to do this way?" rather than "this is the way
the Land Registry is going to go". But looking at the firms and the members involved in that project, along with 40+ organisations that are involved in the Instant Property Network on a global level, it really shows that there is a growing interest
in the industry to properly examine this.
From our perspective, we can see that there are tangible benefits to such a system or systems existing. If only the sharing of information between stakeholders was more efficient and secure, this would be a huge win. Reducing the costs of ID verification, of due
diligence and speeding up the whole process is clearly going to come out of these types of projects. When are they going to come and when will they be mass adopted? The first few real-world transactions will happen in the not too distant future. But
for the actual widespread adoption of this as a new way of transacting, I think we're still five to ten years away from that. In the interim, I believe you'll find niches where within the next three to five years there will be recurring transactions in particular
market segments. If I were to make a prediction, I think it will be with new build properties. Net-new makes things a lot easier. It's the same for us: adoption within organisations operating with legacy systems and processes is difficult, but working
with new entrants and forward thinking incumbents, there's lots of opportunities.
What has been Shieldpay's biggest challenge so far?
It was gaining credibility. From a standing start to processing the most important transactions in people's lives, what we do requires people to trust you. It requires a lot of stakeholders also to agree on a new process. On the consumer side of our business,
there is more comfort around that. There are existing electronic payment providers. But we were the first people to do a fully digital property transaction in the UK. To get that across the line we needed the buy-in and agreement of the legal regulators,
two law firms, insurers of the law firms and a bank! Credibility was the biggest challenge. Conceptually everyone agrees that what we're doing is good. But for someone to send and authorise £250,000, that is very different to buying something
on eBay for £1,000. It requires a lot of effort and getting the good will of important stakeholders is key.
How did you reach that point? How did you manage to get their credibility to do just that? I'm sure there will be other people reading that will have the same problems, if you could give them a tip.
Absolutely. Find a hook that gives you credibility by association. Prior to doing our first property transaction, we got our proposal and concept agreed in principle by the relevant stakeholders. We did this by galvanizing everyone around an Innovate
UK grant application we were putting together. We had to get all of those different stakeholders that I just mentioned to agree that, in principle, this was a good idea.
It helped that there's a tide of change in the regulatory framework for law firms. The Solicitors Regulation Authority and the Council of Licensed Conveyancers are promoting the use or the exploration of the use of what is termed “Third Party Managed
Accounts” overall for the industry. They believe that law firms ought to consider using alternatives to handling client funds. So, we rode off the back of that momentum, along with the government's manifesto stating they want to improve the
home buying process. We combined multiple stakeholder interests to gather support around what we wanted to achieve. So, we got the Solicitors Regulation Authority, the Council for Licensed Conveyancers, Barclays Bank, The Land Registry, My Home Move,
Pirie Palmann and Howdens Insurance to give us their support for the grant application. This gave us credibility by association and the parties we needed to get our first transaction away.
Having those people supporting, putting us forward at conferences to talk about conceptually what we were trying to do and trying to achieve and then doing it, helped massively. Openly speaking about what we are building has also helped. Much like what
you are doing at Dock9 with this interview series, you are showing a great understanding of the market you are operating in. That is key. We are very much trying to lead by education. When you're creating a market, you have to educate people on what
it means and how that works. That does mean in part that all the work we are doing in educating the market will pave the way for others to come in to, but we must continue to be the thought leaders.
Now, a large part of our credibility comes from our stats and wins that we put to the forefront of discussion; from the number of firms that are using us and by having some of the larger law firms in the City using us for corporate escrow transactions.
In one case we are contracted for holding funds for 22 years. These factors combined have meant that we're starting to see that barrier to entry lower.
We continue to educate through content, most recently we published a White Paper dealing with the issues around Third Party Manage
Accounts in property transactions. Not as a selling point. Well, it is a selling point for Shieldpay, but we were more focused on discussing the considerations, and pros and cons, of why you might want to do this as a law firm and here are all the questions that we need to be answered as an industry to see widespread adoption.
What are the plans for the future? You've got this grant...
Our plans on the consumer side of the business are to grow our offering globally with the support of our global partners, Visa. On the Professional Services side of things, we're a third of our way through the grant development which is helping us to
scale the solution now. So it's no longer "does it work?", now it's about demonstrating that we can do thousands of property transactions a day. The short-term aim is to build scalability in the Professional Services platform and to be able to this year to integrate with a number of case management systems. The long term aim is for us to be the premier payment provider to the professional services industry, globally!
Is there anything that you'd like to say that I haven't asked?
Combining loads of people's ideas and technologies will make it a far quicker journey to create solutions that are actually helping our common client, the consumer. My ask is for industry participants to remain consumer-centric and continue to meet and to look to collaborate and find ways of working together to deliver on this.
If you're interested in enhancing your online offering then speak to the mortgage website experts at firstname.lastname@example.org or call us on 020 7977 9230.Pictures from Judit Toth