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The Fintech Coffee Break – Josip Rupena, Milo

Hi guys, welcome to the Fintech Coffee Break. I’m your host, Isabelle Castro. This week I sat down with Josip Rupena, CEO and founder of Milo, to talk primarily about providing mortgages and other financing for foreign nationals.

Foreign nationals looking to invest in US properties often met with roadblocks to get approved. US banks are often difficult to work with from a foreign country, and international clients can face fluctuations in whether they will be served.

Josip saw the issue mirrored in applicants with crypto while bringing him to the launch of a crypto-backed mortgage last year. However, with continuing challenges in the lending sector, Milo has since been brought back to focus on their original target, foreign nationals. I spoke to Josip about Milo’s approach and where the company was going next to serve them.

Josip Rupena 0:54

Hi, Josip, How are you today?

Josip Rupena 0:57
I’m great. Good to see you again.

Isabelle Castro 0:59
Good to see you, too. I haven’t seen you in ages.

Josip Rupena 1:03
It’s been a little while. Yeah. It’s been a busy summer.

Isabelle Castro 1:06
A very busy summer. So I’m looking forward to talking to you about all that. But first of all, I need to ask what gets you up in the morning.

Josip Rupena 1:19
My kids, they get me up, though, seriously, what gets me up is the ability to come to work every day and really try to try to build good amazing experiences for for consumers all around the world and, and really having the privilege to build and, and great things that haven’t existed before.

Isabelle Castro 1:43
Nice. And that’s what Milo does, really. I’ve always been impressed about Milo’s approach. So I’m really glad to kind of have you on to talk about it. Let’s talk about your career journey to founding Milo. Tell me about it.

Josip Rupena 2:01
Yeah, so So I started my career, not not on the technology side, but primarily on the finance side of the table. And that was really routed around, where I thought I could learn a lot about a lot of different industries. And I felt that going into finance Could, could do that. So I was fortunate enough to go work at some very large successful investment banks. And to be able to spend time with people that were very successful in that field. And that allowed me to pick up a lot of really good practices of how you work in a company in a corporate setting. But be exposed primarily to international clients and people that that had wealth and getting a interesting vantage point to see how, how they had basically built their wealth. And you know, through my career in my journey, I was able to combine those existing experiences with, you know, my interest for technology, and then really blend those together and build Milo today. But it was really it really started with with finance and being able to see a lot of different industries and then ultimately honing my interests and passions and experiences together to build Milo.

Isabelle Castro 3:15
Yeah, no, that’s a really good approach. I think like you have a whole worldview and then you scale down. Okay, so when we first connected for an article, it was to talk about your crypto backed mortgage. But this isn’t where Milo began, right? Tell me about where you began and how you got to the crypto mortgage space. And then we’ll go from there.

Josip Rupena 3:39
So the the original idea for my that was really rooted in my experience working with international clients that were investing in the US and they were investing with me and the firms that I worked that from asset management, personal wealth management perspective. And through that, I saw that a lot of individuals were buying homes and transacting in the US, not just from an investing perspective, right, buying stocks and bonds, and, you know, the typical investment approach. But we weren’t really doing much there as an institution and being able to help them. And a lot of the question, or at least a lot of the responses that I got to the questions that I was asking was, well, people don’t want mortgages, they don’t have an interest for them. And then as I continue to sort of peel that back, it turned out that individuals weren’t even trying but because they didn’t think they could qualify, and the the absence of the social security number or the absence of regular, conventional data points that a US consumer has, they didn’t have that so it really was kind of chicken or the egg. Do they not want it or or do they want it but they can’t access it. And ultimately, I arrived at a place where I felt this experience needed to be digital. These individuals were from all around the world. They wanted to invest in us and that was a common theme. By That was something that I felt that I could, I could do something with that. And, you know, we started the company, the company there. And through the, through the evolution of the company, we saw some experience some similar traits for people that had crypto and we were able to build a crypto mortgage. And, you know, through this period, we’ve been able to see that our international clients continue to want to have the possibility to invest in the US. And that’s where we’re continuing to spend our time not to say that we don’t believe that there’s an opportunity on the on the crypto side, it just happens to be that today, particularly mortgage and real estate is is a very challenging period in the US because of the rapid rise of rates, the absence of available inventory. So all of those are sort of the natural tendencies of the market. But we still feel that we can continue to innovate and create new products and continue to push the boundaries. Even if it’s not just in mortgage for some sets of consumers, we feel that we can continue to contribute and and build innovative products just like the crypto mortgage was astir.

Isabelle Castro 6:08
Okay, are you still operating? Are you still offering the crypto mortgages? Or is that something that you’ve scaled back on?

Josip Rupena 6:15
We are we do, we do offer the product for individuals that have engaged with us and still want it and need it, we’re happy to provide it to them, I think it’s more of a broader focus on the company where we will be working with foreign nationals and the next set of products will be primarily focused for them. And where we think we could probably help the widest set of customers. And, but we do recognise we have the ability to do it, we’ve got a great team, we built a great product. It’s operational, and if someone needs that particular type of mortgage, where we’re happy to offer it to them.

Isabelle Castro 6:53
Okay, cool. Now, you mentioned the kind of rapid rate increases and kind of the macro economic factors that have affected lending as a whole and the mortgage second mortgage area, how has this impacted kind of your target customer group? Like foreign nationals in general?

Josip Rupena 7:14
Yeah, yeah, if you think about different customer sets, and we can, we can talk about three categories, you know, a US consumer, an individual that has crypto wealth, and international art, you know, for national consumer, you think about the US consumer, that consumers primarily trying to buy the home that they’re gonna live in, and they work in the US, they live in the US. So they’re very sensitive to affordability. And their aspect of being able to buy a home is dictated by the rates that they can get, as well as the value of those homes, both of which are up and look like they continue, they will continue to increase. So that’s made that segment of customers where you see the broader trends around mortgage to be to be way down, right from the origination side. So that first category, I think, remains very challenged. The second category, which is individual that has crypto wealth, they have wealth, the value of their assets have fluctuated, you know, it’s recovered this year. So they feel a little bit wealthier. But they’re still part of that first cohort of customers, which is the US customer that is sensitive to rates, the distance if you valuations, and there’s not a lot of inventory. So those customers tend to be in a similar, similar mindset. Now, the third segment, which is the original segment that we started the company around, those individuals want to invest in the US and transact in the US. For other factors that may not be as relevant as rates and valuation. They’re investing because of the diversification of wealth, the concerns with local in country, political instability, safety of their wealth, the possibility of their family, at some point, migrating to the US, or their kids coming to school. But these are all very personal factors that will drive them to want to actually invest in the US buy property in the US, or bank and save money in the US. So those are things that I believe are longer term trends and themes that have played themselves out for many, many decades. And I think they will continue to be and as we’re looking around the world, we see certain rumblings and we definitely see it in our traffic when there are certain things that are happening. There’s a there’s a spike in traffic for those individuals that want to really go and flight to safety and quality which which the US does provide.

Isabelle Castro 9:45
Okay, okay, I’m gonna kind of split up my question. Kind of according to those different groups. So the first and second group you said that they’ve got kind of different issues to the third and it sounds pretty clear why. How are you addressing the issues that are facing the first and second group.

Josip Rupena 10:10
So the way that we thought about that it was really around product, product evolution, right the the mortgage offering flexibility around it, how they would actually be able to qualify and create custom programmes that might be able to help on the affordability side. Now, the things that we don’t really have control over is, you know, how much inventory is available. Whether there’s a statistic that’s going around that says, you know, roughly 90% of all the people that own homes have a mortgage that’s below 6%. That’s pretty significant, right? When you’re most mortgage rates are now sort of in that mid sevens to eight and a half, right, and 9%. So that means you don’t really have a lot of refinance possibilities, we still do see it, we do get applications for refinance. But those tend to be more, again, personal in nature, where someone says, I don’t want to sell my home, I do need some liquidity. I’d like to try to take some of the equity out of that home. But But generally, the way we thought about it is is really around the mortgage offering innovation side of things.

Isabelle Castro 11:12
Okay, Have you have you adjusted your refinancing kind of solution to meet this kind of shift?

Josip Rupena 11:23
We have, you know, I think that we, we play with different segments of consumers and our consumers, you might own a home, that’s $300,000. But we also work with customers that own homes that are 20 or $30 million. And, you know, they have different, they have different needs, that wealthier customer generally, is looking for solutions that help them with estate trust, and tax motivations. Because if they were to do certain things, it would trigger pretty big, pretty big bills, tax bills. So those individuals have different motives and objectives. And we definitely see that, you know, a refinance, for a customer that has a $500,000 home generally is around affordability, and can I bring my payments down? Whereas that individual that has a much larger home? They’re really thinking about it of? Could this be a good strategy to potentially defer taxes?

Isabelle Castro 12:21
Okay, okay. And now turning to the third group, the foreign nationals, maybe give me an outline of you mentioned a few before, but give me an outline of the issues that face these foreign nationals that are trying to kind of get a mortgage in the US to diversify their wealth. Particularly today.

Josip Rupena 12:45
One of the one of the major challenges is that by by every sense of the word, you know, these individuals are foreign, right? The the data points that they have, they don’t pay taxes in the US, they don’t have a social security number, they don’t make income in the US, right, everything is really offshore outside of the US. And when you look at the majority of banking, and lending and all of that, it’s really routed around all the individuals that have very clear data in the US. So that presents that that that first challenge. And then you do have certain institutions, depending on the geographies around the country, that may work with some of these customers, just by the nature that there’s a concentration of certain sets of international consumers that are there, Miami, New York, Houston, place in California, LA, you’ll get these these pockets, and those individuals may be able to work with some institutions. But the experience is not great. It’s very clunky, it takes a very long time. There’s a lot of friction, there’s a lot of unknowns. So all of that creates a lot of angst for these clients, which is one of the reasons why we started the company, because we were starting with the basis of understanding what they have, what they don’t have. And then we built solutions for them that were that were unique. You know, an example of this is if you want to open up a bank account, today, you physically have to go into one of these branches, provide your password, and they’re unlikely to open that account instantly for you. And they may require the for you to have an address in the US which which you’re unlikely to have if you’re a citizen of another country. Or you may walk into that same banks branch and another location, and they won’t open up the account. So there’s a lot of this, that happens. And the other thing that we’ve seen is these institutions tend to ebb and flow whether they want to serve customers or not. So you may be able to open up that account. But maybe two months later, they’re they changed their mind and now they’re going to close your account. And and you and you were in you were dependent on having that that bank account. So those are the things that we are looking to solve is to start off with a baseline of knowing what they have and what they won’t have. And then building things and solutions and products. That that makes sense for What they want to accomplish?

Isabelle Castro 15:01
Okay, and how would you say that you are? How are you addressing it now? And how will you be addressing it with the kind of rollout of new products going forward? Yeah.

Josip Rupena 15:16
Yeah. I think that, you know, when we think about rolling out new products, there’s a lot of pieces that go into into that. And that decision, a lot of it is around the regulatory aspect, the compliance aspect. Where is the technology to be able to deliver a good experience? Where are we today versus where were we five years ago, where we’ll be five years from now. And when we started the company, there were a lot less providers that were really providing services like Plaid in the US, and Venmo and Zelle, to move money, there was a lot less of that that was happening internationally, where today, there are more companies there. And I think that that’s, they’ve been beneficiaries of a lot of the venture capital dollars that flowed into emerging markets over the last few years, which is allowed companies to build and create. And we can actually deliver certain product solutions and evolutions today that we couldn’t do four years ago. And that’s really, really exciting, because the ones who win will be the customers, because they’ll be able to do something that they haven’t been able to do in the past, and could be transformational, from, from a peace of mind perspective, that they, they can now actually have their money safely in the US whether it’s real estate, or whether it’s more, you know, banking savings, wealth management type services.

Isabelle Castro 16:45
Okay. Do you see? Like, all of this kind of conversation reminds me of the kind of obvious kind of march towards open banking, sharing of data, all of that, how do you see that affecting your business, and in general, the market for kind of financing for foreign nationals?

Josip Rupena 17:09
I think I think all of that they’re great initiatives, because it allows you to build better customer experiences. If you have limited data, then now it’s very siloed. And if you want to access that data, you have to go to a customer and you may not be able to deliver the right solution for that for that customer. So the more data you have, in, the smarter your platform is, the more you’re going to be able to help that that customer and things like finance and people’s financial journey. It’s an evolution of where they are in their life. And having context and legacy of what they’ve done, how they’ve invested what they what they haven’t done, can impact potentially the remedy that you you provide for them? So I think it’s I think it’s a very, very positive initiative. I think that there’s a lot of very interesting things that are happening globally with with crypto as well as rails and payment rails. I think that that’s something that it’s still early, but you are starting to see more things that are happening with Visa as an example and and others that are really trying to figure out how do you really solve cross border efficiently, that should help customers to be able to really tap into different places to access financial products in a seamless way that’s efficient for them, as well as cost effective for them. And then that will, I think, ultimately, help democratise global investing for consumers. That’s generally been something that’s very possible for institutional investors. But it really hasn’t happened at the individual level. And I think that that’s what I hope will eventually transpire is that consumers will win because of that.

Isabelle Castro 18:56
Okay, no, that’s really interesting. I hope so too. Coming from Europe, and wanting to kind of like invest at some point in other countries, I hope that becomes a thing. So you mentioned kind of the lack of social security number and all that kind of aspects. But I imagine that you’re dealing with a lot of different forms of kind of identification coming from different countries. I imagine. That’s quite a big part of what you do. How do you manage that? How, yeah, how do you even approach that?

Josip Rupena 19:37
Yeah, that’s a great question. When when you think about a consumer in the US we have a lot of data you pull those social security number, your social your number, which is really just an identification number of your most most countries around the world have their have their unique numbers for for their citizens. It really starts with can you know who your client is right, the KYC aspect Like the AML, the anti money laundering, right? Can you can you gather an identification around the consumer? Can you trust the validity of that ID, you know, different countries have different risk levels, from being low risk to high risk, if there are countries that their governments have good systems in place that introduces greater confidence that the data that you’re getting something you can account for. So that’s a really, really important piece. And I think that that was one of the reasons why we could come up with a crypto mortgage and remain compliant, you know, from a regulatory perspective and compliance perspective is because that was in our DNA from day one, as a company, right, working with international clients, and it’s flowed through the DNA of the of the company, that that’s just an essential piece. And that is something that there are certain kinds of companies that want to avoid that at all cost. And then other companies that embrace that. And the reality is that if you’re going to become a large company, that’s going to have to be part of it. Because the bigger you are, the more likely you’re going to have a target on your on your back. And that’s where regulators will look is to make sure that you do have good, good practices, and that you’re not becoming a conduit to bring illicit funds into the US whether that is through more traditional currency, or whether it’s crypto, it’s all really the same, right? There’s a value right that’s being brought into the country.

Isabelle Castro 21:34
That’s a really good point. And I think it’s something that maybe is overlooked the fact that kind of crypto is a value for some people, and even though the regulatory landscape around it is a bit weird, you can kind of make it fit into what is already there. In terms of regulation. It’s difficult, but you’ve managed to do it. So it is obviously possible.

Josip Rupena 21:58
There is there’s there’s an existing framework, there definitely is right, depending on the products that you’re that you’re offering. I think that when you’re looking at your how you raise capital, right, whether it’s an Ico or an NF T or something like that, right, those are, those are things that probably look similar to something else. And, you know, as much as there’s definitely individuals who would like it to be classified differently. It’s close enough, where where it’s debatable, and you can have two different, different perspectives. But I think that there, there’s enough out there for people to be able to make a judgement and say, is the risk worth it? Can I arrive at some place where I am confident that I’m not going to work very, very hard at something for many, many years, only to be shut down at some point? Because someone could have a change of opinion?

Isabelle Castro 22:48
Okay, yeah, one of my questions was gonna be on the crypto mortgage, how have you managed to navigate regulatory kind of uncertainty, but it sounds like you were thinking about this from day one?

Josip Rupena 23:04
Yeah, yeah, definitely. I mean, those were the first conversations we had around it. And we spent a lot of time with with our legal team and, and definitely advisors and individuals that had been in the space to be able to get comfortable with the idea. And what we arrived at is that we were really part of the existing lending, regulatory framework that we could leverage that are now we were expanding how we would underwrite a consumer. Ultimately, if we were comfortable with the risk, and we were willing to deploy our dollars to that consumer, as long as it complied, then, then we were going to be in a, in a good, safe, safe place to be able to do that. I think we were definitely beneficiaries of the fact that we already were in that regulatory framework, where other companies that were starting with, we’d have to do that first, to be able to get there. And that’s generally very, very costly. You know, we’ve got money transmission licences were registered with FinCEN. We have lending licences, we’re licenced in numerous states. So that’s always been been part of the of the company. So if we want to start a new product, as long as it fits with something that we already have, then we can we can definitely explore it and get something into market, perhaps quicker than someone else that would have to do all of that foundational work that in many of those instances can take two years, and it’s very costly.

Isabelle Castro 24:28
Yeah, no, you’re going about this completely the right way. So it sounds like going back to the kind of lending space for international clients. It sounds like you’re pretty positive about where this is going. But I wonder within the kind of macro economic factors which are global, maybe not so much affecting certain people, but they they are global. In the next year or two What’s your outlook for the lending space for international? Clients?

Josip Rupena 25:06
Yeah, so So my, my personal opinion, at least at this at this stage right, September, September 7, is, you know that rates will probably be higher for longer than then people, people anticipate, I think that at least the US economy, and generally, many economies around the world, they’re, they’re combating inflation well enough, where the economies are still resilient. And that means that this movement of people hoping that rates will be will be lower, I think it’ll be it’ll take, it’ll take longer. And it could be at least another three to four quarters before you see that. So we may go a little bit higher and rates, which that will, that will impact I think, all consumers, I think that in this environment, where the Pope, by a lot of policymakers that are raising rates, is to bring down inflation is that we will slow both the US economy as well as other global economies. And when that tends to happen, the economies that actually suffered the most are the emerging markets. They are those economies have individuals that I’m and have worked with, just to give you some data points. We’ve had individuals who’ve applied for mortgages with us from over 92 countries. So these are individuals from all over the world. And we’ve had over a billion dollars of people that have gotten pre qualified or asked for mortgages from from all over the world. So we’ve been we’ve been very, very global. So I think that in a, in an environment where credit is likely to get tighter, I think that they will, they will experience some type of impact. And when that happens, all governments respond very, very differently. Depending on the size of their economy, some have more options, others less so some are a little bit more extreme, or there’s more tapered. But that uncertainty in itself is I think, what what we want to be able to help customers with is to get them to safety, where we think on a relative basis, the US should do better than a lot of these other emerging market countries, just by the size scale, the ability that US Dollars continues to be the world’s reserve currency. Those are all positive, positive factors. But, but I do believe that there will probably be some type of credit situation that will probably appear over the next four quarters or so.

Isabelle Castro 27:36
Okay. Okay. Well, I have to wrap up the interview, because we are getting to the end of our time. I’m really sorry about that, because that was getting to an interesting point. So it’s always the case with these conversations, because I’m trying to keep to like under half an hour. We get to a really interesting point. And then I have to cut it. Yeah. Yeah. Okay, well, I’m gonna go to my closing questions. So a piece of advice that you’ve been given that you would give to someone else.

Josip Rupena 28:11
So great, great advice that I got when I was younger was early on your career, optimise around, not around how much you’re getting paid, but who are the people you’re working with? So you can learn as much as you can. Because if you work with really great people, they will share incredible advice you’ll pick up perhaps some little keys of what’s made them successful. And and if you’re lucky enough, it’ll rub off on you and you know, those are things that as you continue to grow in your career, you’ll look back on and hopefully you can you can emulate and be as successful as they were if not more

Isabelle Castro 28:50
like that. That applies to a lot of different sectors. So it’s good for all my listeners. So your curveball question. Okay. Yeah. You are stranded on a desert island. You’ve got well is desert but you’ve got water. You’ve got food. You’ve got shelter. What three items are you bring with you?

Josip Rupena 29:14
Desert Island probably rope, right. Probably rope. Probably a knife, just in case.

Isabelle Castro 29:31
We’re very practical.

Josip Rupena 29:34
Yeah. And maybe a cell phone to call someone for help.

Isabelle Castro 29:38
Oh, no. Okay. Very practical response. You probably get saved a straightaway. He wouldn’t have to survive. I like that. Okay, how can people get a hold of you? Like follow you get in contact?

Josip Rupena 29:56
Yep. Yep. So I’m on Twitter @jrupena. I’m on there on LinkedIn and then via Milo. You can reach me at Milo’s website, it’s milo.io, and there you can find my contact information.

Isabelle Castro 30:13
Okay, perfect. Thank you so much for making the time to come on the show. I’ve really enjoyed having you.

Josip Rupena 30:19
Wonderful. Thank you very much for the time as well. I enjoyed it.

Isabelle Castro 30:21
Good. I’m glad.

As always, you can reach out and chat with me or my personal LinkedIn or Twitter at Castro rights. That’s about it. Why but for access to great daily content, check out Fintech Nexus on LinkedIn, Twitter, Facebook, or Instagram. You can also sign up for our daily newsletter bringing new straight to your inbox. For more fintech podcast fun, check out the website, where you can find more fascinating conversations posted by Peter Robinson and Todd Anderson. That’s it from me. Until next time, enjoy your downtime.

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