Farrukh Siddiqui, Defynance
Intro: [00:00:08] Broadcasting live from the Georgia World Congress Center for Fintech South 2022, it’s time for Atlanta Business Radio. Brought to you by Atlanta Blockchain Center. Now, here’s your host.
Lee Kantor: [00:00:27] Lee Kantor here broadcasting live from Fintech South 2022. So, excited to be talking to my guests right now. Farrukh Siddiqui with Defynance. Welcome.
Farrukh Siddiqui: [00:00:38] Thank you, Lee. Thank you for having me on.
Lee Kantor: [00:00:40] Well, I’m excited to learn what you’re up to. Tell us about Defynance. How are you serving folks?
Farrukh Siddiqui: [00:00:45] Well, we’re tackling a huge problem, which is the student debt crisis here in the United States. So, we’re able to actually refinance student loans with an income-sharing solution. So, we actually take students or ex-students, actually, people who have left school, who have existing student debt, out of debt into a more favorable income sharing solution, which means we’re able to pay off their student loans. Giving them an immediate credit boost. Tie their payments to their income.
Farrukh Siddiqui: [00:01:13] So, they’re always protected, especially in a downturn where if their income goes down or they become unemployed. We actually pause their payments. We don’t ding their credit or chase after them or charge late fees. We actually do the opposite. We help them find a job through our curated resources for career, such as career counselors, recruiters, upskilled resources, et cetera.
Farrukh Siddiqui: [00:01:33] And then we also have a fund for investors who deploy capital. We use that money to refinance these student loans. And give investors a fixed income type of return with low volatility, passive income quarterly. But investors also make a great impact by getting people out of debt.
Lee Kantor: [00:01:50] So, what was the genesis of the idea? How did this come about?
Farrukh Siddiqui: [00:01:54] Well, I kind of experienced the financial crisis in many different levels.
Lee Kantor: [00:01:58] So, you had a student loan?
Farrukh Siddiqui: [00:01:58] No, I had a business at that time, tied to Wall Street. So, it basically crashed and burned. And I quickly discovered, as an insider, how much of this was caused by our own, you know, self-inflicted wounds, essentially, right.
Lee Kantor: [00:02:13] Right.
Farrukh Siddiqui: [00:02:13] So, it really became a passion to work on, you know, like with Defynance, our goal is to beautify finances, to make it better, and to level the playing field. Aligns the goals of the consumer with the financial companies. And that’s what we’re trying to do now with Defynance and with the solution.
Lee Kantor: [00:02:30] So, how did you connect the dots between and say, OK. I’m going to go with student loans. I’m going to throw investors in the loop here. I got — there’s a few moving parts here that aren’t usually connected together.
Farrukh Siddiqui: [00:02:41] It took some time. Things, you know, they take the time to evolve. But after the financial crisis, I have to recover from that. I worked with Lexington Insurance Company for a few years. Working on like a different type of an insurance product.
Farrukh Siddiqui: [00:02:53] And then eventually about three years ago, I really wanted to kind of get back into — in the startup scene again and really focus on the next big problem. And I started researching various aspects of financial services. And this thing just — all of a sudden I’m like, student debt has been around forever.
Lee Kantor: [00:03:09] Right.
Farrukh Siddiqui: [00:03:09] But what has it become now? And then, you know, how it is, right? When you find something and all of a sudden it starts popping up all around you.
Lee Kantor: [00:03:16] Right, now you see it.
Farrukh Siddiqui: [00:03:16] You see it everywhere. So, I’m looking at my family, my friends, and so many people struggling with this issue, and it just became this huge passion to try to solve this. And I didn’t really see — even now, I don’t see how the situation is getting better. We’re talking about debt forgiveness, this and that. But the underlying problems have to be dealt with.
Lee Kantor: [00:03:33] Right. That’s one — forgiving the debt is great for the people you’re forgiving the debt for. But in five or 10 years, like you haven’t fixed anything.
Farrukh Siddiqui: [00:03:41] Exactly.
Lee Kantor: [00:03:41] The problem is going to bubble up again. So, but — you’re — it sounds like you’re connecting dots in a way that haven’t been connected before. You’re putting people together or groups together that maybe hadn’t necessarily thought to combine forces and join forces to help kind of the greater good here.
Farrukh Siddiqui: [00:03:56] Yes, yes. Let’s talk about investors, right? Like we’ve basically turned income into an investable asset. So, for the first time, an investor can actually invest in the American workforce and the earning power of the great American workforce.
Lee Kantor: [00:04:09] Right.
Farrukh Siddiqui: [00:04:09] And that’s something that, at least, to my knowledge has not been done before. So, yes, I think like you’re saying, we are connecting some dots that we feel it’s a very new concept. But it’s a much-needed concept. And it makes a lot of sense because, you know, growing up in the ’80s, right, the greed is good, Wall Street culture —
Lee Kantor: [00:04:27] Right.
Farrukh Siddiqui: [00:04:27] — that we had in those days. Where now it’s so much different. And I really commend the younger generations for really focusing on social responsibility, on finding purpose, living with purpose. And now we want to work with purpose, too, right? So that’s what we’re trying to do.
Lee Kantor: [00:04:40] And then what is the biggest challenge of when you have these disparate groups with their own kind of objectives? How are you kind of focusing them all on this true north?
Farrukh Siddiqui: [00:04:52] Well, because ultimately what you have to — it has to make sense for both sides. So, we have to have a competitive product for the person that’s refinancing. So, we need to make sure that, you know, we’re competing with the refinancing lenders and all those. And for the investors, the same thing, right. We have to offer them something that ultimately we want to prove that this is an investable asset and our fund makes sense to an investor whether they care about making an impact or not, right.
Lee Kantor: [00:05:17] Right, it has to —
Farrukh Siddiqui: [00:05:18] Because if that —
Lee Kantor: [00:05:18] — has to check that box.
Farrukh Siddiqui: [00:05:20] — yes, it has to stand up on.
Lee Kantor: [00:05:20] For sure.
Farrukh Siddiqui: [00:05:20] Yes, exactly, for the first and foremost. So, for us, impact is icing on the cake. It is not the cake.
Lee Kantor: [00:05:25] Right.
Farrukh Siddiqui: [00:05:25] Right.
Lee Kantor: [00:05:26] Yes, so the why and the mission that is — it’s not relevant for everybody, but it is relevant for some people.
Farrukh Siddiqui: [00:05:34] But, hopefully, if you do it right, you know, people are contributing to that mission.
Lee Kantor: [00:05:37] Right, everybody wins. It doesn’t matter.
Farrukh Siddiqui: [00:05:39] Yes, exactly.
Lee Kantor: [00:05:39] It’s helping anyway. So, how are you attacking Fintech South? Like, what’s your objective here? Are you a sponsor? Are you listening to the panelists? Are you going to these things, networking? Like, what was your intention of coming here?
Farrukh Siddiqui: [00:05:51] We were fortunate enough to be one of the innovation challenge companies, seven companies that got a chance to sort of pitch. So, that’s how we — I mean, I’ve known of the conference, of course. But — so, we — we’ve — we’re here as one of those seven companies. So, we were able to kind of do a pitch last — yesterday for investors downstairs.
Farrukh Siddiqui: [00:06:08] And then now we’re just here networking, meeting people, getting the word out. Our solution is fully live. As of about a month ago, the fund was the last thing that we launched.
Lee Kantor: [00:06:19] Right.
Farrukh Siddiqui: [00:06:19] So, now, you know, we’re in go-to-market mode and sales mode.
Lee Kantor: [00:06:22] So, what do you need more of? How can we help?
Farrukh Siddiqui: [00:06:24] Well, obviously, we need investors for — we have a pipeline of $12 million of people that have already applied to refinance student loans. So, we feel — obviously, there’s a big need there. People that are —
Lee Kantor: [00:06:33] Obviously. Right.
Farrukh Siddiqui: [00:06:34] — already going outside. But now we need investors to become aware of what’s going on with us and the great opportunity. And we also feel like with the way the investment climate has changed this year, right, the stock market, kind of, going into this bear territory. Crypto coming off its run that’s been going on for a while. Interest rates going up, so bond yields are decreasing.
Farrukh Siddiqui: [00:06:55] Well, imagine, you know, what we’re doing is not pegged to any of those things.
Lee Kantor: [00:06:59] Right.
Farrukh Siddiqui: [00:06:59] People are, like, unemployment is so low right now, we’re investing in people’s earning potential.
Lee Kantor: [00:07:03] In people, right.
Farrukh Siddiqui: [00:07:03] People are working. And data shows that even during recessionary times, incomes are still stable and growing. So — and our core expertise is we’re underwriters, we’re risk people. We know how to underwrite people and assess someone’s individual risk. And we’ve developed our own algorithm and underwriting criteria for doing that.
Farrukh Siddiqui: [00:07:21] So, I think investors can rest assured that we know how to do that part of it. And the more we can get capital into our fund, we can create diversity — in our fund as well, diversification fund, different types of people. And really, over time, build a scalable solution that can withstand different economic climates.
Lee Kantor: [00:07:40] So, now walk me through from that student, you know, former student, what they go on the website, what happens?
Farrukh Siddiqui: [00:07:47] Yes, they go to our website. There’s an apply option there. They go, sign up to our portal, fill out their application, apply. We give them a quote, so they can decide between a five-year income sharing versus — up to 15 years, whatever goal they want to accomplish. Whether they want to end it soon or they want to lower their payments for a longer period of time. So, they select the option that they want then they get prequalified. And as we’re getting investor capital in, we’re going to start doing more and more deals.
Lee Kantor: [00:08:15] So, now when the student comes through, you’re vetting them, like if they’re a computer science major, then that’s — everybody’s like, oh, this one for sure, right? But what if they’re like a marketing major, you know, or like something that their future isn’t as stable. Maybe as somebody that is in a kind of a sure thing. Like if you’re a computer science, the unemployment rate for that is negative.
Farrukh Siddiqui: [00:08:41] Yes. I mean, we want to find people — I’m going to give you a general statement, with stable, growing income streams, right. With — even if unemployment may be high, as long as we’re able to predict it and sort of price it in, it’s OK.
Lee Kantor: [00:08:58] Right.
Farrukh Siddiqui: [00:08:59] It’s going to happen as part of life. Unemployment is going to happen.
Lee Kantor: [00:09:02] Sure.
Farrukh Siddiqui: [00:09:02] So, it’s about being able to predict future income and having that data to do that effectively. So, we can fund a marketing major, we can fund a teacher, we can fund a psychologist, a doctor, a lawyer. But, yes, somebody who’s just starting in a sales job with high commissions, that’s tough.
Lee Kantor: [00:09:16] Right, exactly.
Farrukh Siddiqui: [00:09:17] Because of that, the income is volatile. We have to be careful with that.
Lee Kantor: [00:09:19] Right.
Farrukh Siddiqui: [00:09:20] But if the income is like W-2 income, 1099 income, they have a work history that shows how they’ve done in their career. So, it’s not — we don’t even have to rely on their education background as much. If they worked for five, six years, we can see how they’ve done. What role they’re in in the company.
Lee Kantor: [00:09:34] Right
Farrukh Siddiqui: [00:09:34] All of that goes into our algorithm to help calculate that. So, you’d be surprised how many people we can fund if we have the right kind of information and data to go off of.
Lee Kantor: [00:09:42] Well, it sounds exciting, and congratulations on the momentum that you have thus far.
Farrukh Siddiqui: [00:09:47] Thank you so much, Lee. Appreciate it.
Lee Kantor: [00:09:48] And if somebody wants to learn more on both sides of, I guess, the marketplace, where should they go? What’s the website?
Farrukh Siddiqui: [00:09:53] Simple, deynance.com, D-E-F-Y-N-A-N-C-E.com, they can actually go to apply there. There’s also an investor tab there which takes them to the separate website for investors because this is dedicated site. And that site is called ISA Credit Fund, isacreditfund.com.
Lee Kantor: [00:10:12] All right. Well, thank you again for sharing your story. You’re doing important work, and we appreciate you.
Speaker3: [00:10:16] Thank you for having me.
Lee Kantor: [00:10:17] All right. This is Lee Kantor. We’ll be back in a few at Fintech South 2022.
Outro: [00:10:29] This episode has been brought to you by Atlanta Blockchain Center, the catalyst for Atlanta’s emergence as the premier blockchain innovation hub globally, through cultivating entrepreneurship, inclusivity, and education. To learn more, go to atlblockchaincenter.com.
Fintech South 2022 is a world-class summit with its nexus in Atlanta live and in-person, a global financial technology hub that is home to more than 200 fintech companies. The top 15 public fintech companies in Georgia alone generate more than $100 billion in revenues.