Eyal Elhayany, CEO and one of three founders of Tarya, finds it hard to talk about himself. He is happy to talk about Tarya, Israel’s leading P2P platform operator, but when asked personal questions, he is silent or provides very short answers. The reason for this may be related to the two important women in his life, his mother and his wife. "When my wife reads this interview, I imagine she will discover many new things about me. And my mother will be alarmed by this exposure. She will be perplexed as to why I have a need for it”.
Elhayany’s childhood home is closely related to the idea and establishment of Tarya. Elhayany grew up in Arad, sharing the little his parents handed out with 12 siblings, he being the youngest. The idea for Tarya and its necessity occurred in the summer of 2010, a lightbulb moment, while visiting his family in Arad, where he also met Iris (a pseudonym), a single mother with three children, working hard to support her family. Over that same year one of her children had fallen ill and Iris had been forced to spend a lot of money for his care. These expenses grew and necessitated taking a bank loan. In 2011, the loan ballooned and became a heavy burden. Iris sank into rising debt and was transformed from an independent and strong woman to a broken woman slipping below the poverty line.
"Amongst the people I live”, says Elhayany. "The banking system ensures that people like Iris are always in debt, which becomes more and more expensive. Iris’s story made me aware of a whole stratum in the population that lives like this, families who are unable to break above the overdraft, and when they do - the banking system swiftly shoves them back down.
So it's not by chance that the reason Tarya was established is linked to the nature of the environment you grew up in?
"There is a connection between events in my life. All I have done stems from events in my life, and I believe that we are all like that. I grew up in a house with 13 children, where it wasn’t important how much each of us had but more who you were and what you did with what you had. My mother who is illiterate but is probably the wisest person I have met, taught me and my brothers that children are the most important asset in life and not how many houses or cars you have. My father always said that children are the best investment, so he invested everything he had in his children. ‘It's my real estate, these are the palaces that I build’, he would say. And so it was. All my brothers have a university education.
Tarya launched in early 2014 and was not the first Israeli player in this niche. It was preceded by Meitav Dash's E loan, and influenced by the British industry pioneer, Zopa, which has been around for the past 12 years.
Elhayany, who left a senior position at Elbit Systems to set up the company, claims that the difference between Tarya and other Israeli players, even foreign ones, lies in its point of view: "There are no bankers in Tarya, just tech people. Our perception is unlike that of bankers i.e. how to make more money, instead it is how can technology be used to create a revolution”?
So P2P is not only a business that can be profitable but also an engine for social change?
"Absolutely, and more so: we allow every competitor in the market to use our engine to further the same change, and that's our technology”.
Can bankers, in your view, not think socially?
"No, it's hard to change such patterns in the same way as it would be difficult for me to change my technological thinking, and this is not to say that bankers are lesser people”.
When Elhayany speaks about the engine, he is referring to Tarya’s second source of revenue besides the commission it charges for loans going through its platform: Tarya also offers its technology (White label) to quite a few banks, institutional and credit card companies in Israel and abroad wishing to build borrower’s profiles.
"We developed the unprecedented ability to build a profile in 30 seconds. We wanted to become the infrastructure for this revolution, so it didn’t matter to us who would be using the technology: a private person, a neighborhood grocery, a factory or a bank. I’ll give you an example: one of the largest telco companies in Israel contacted us and offered us its 2.5 million customer database so that we would promote loans to them through our platform in return for a commission on every loan that was approved through us. This conversation ended immediately by us stating that Tarya by definition did not purchase customers from anyone, as it is not in the market for credit pushing. Tarya is in the market for creating value for its customer, and therefore as much as the offer may have been an incredible one, we declined it”.
When Tarya was established was there an intention to sell the technology to a bank that was actually your competitor?
"Tarya's vision has not changed from the start: to offer value to our customers in Israel. Credit is one of the most inefficient areas, and the best people, who work the hardest to make a living and earn a small wage, are also the ones who pay the most for credit. Tarya’s ability to assess the borrower according to his characteristics and not frame of reference - this is the revolution and one which creates value”.
But when your client is actually a competitor, doesn’t this create a conflict of interest?
"No, think about the Mobileye or Intel business model: the important bit is to make sure that the Mobileye chip forms part of any car security system and is installed in as many cars as possible, and that the Intel chip is in every computer”. We operate along the same lines: similar to the Intel-Inside principle, we aim for Tarya-Inside. We want to become an infrastructure, thereby holding the power. The idea of Tarya, unlike the rest of the P2P players in the world and not only in Israel, is not to replace Bank Hapoalim and become the next big bank but to form the basis for a revolution where banks will become obsolete, where anyone can operate as a bank, even the local grocery store."
And yet, you depend on the same bank whose monopoly you are trying to break as a household credit provider?
"No, I don’t live off them, they have no say as to what happens inside my company, and they do not invest money or provide any information. I provide the bank with a service so that in the future this can be offered as an enhanced service to consumers, like you and me. If I can help the bank offer improved credit terms to a woman like Iris, who for the moment is invisible from the banks point of view, I did my job and I don’t care who gave her the credit.”
Elhayany stresses that the P2P revolution is not only intended for borrowers but also for lenders. "The borrower’s side is nice and important, but a revolution of no less magnitude is occurring on the lender’s side i.e. the savers. Suppose you have a balance of NIS 50,000 in your current account. You won’t be able to get any return on this because interest rates are at an all time low, and the bank tends to advise investing in securities only when it comes to a portfolio of hundreds of thousands of shekels. This means that money you have worked for, paid taxes on and are currently paying bank charges for is earning nil. It's oppressive. The Bank earns from both the borrowers and the savers. P2P takes this oppression and creates value from it. It is unthinkable that only one side should enjoy it”.
When it comes to the lender, are there still some psychological barriers that need to be broken, i.e. educating the public to invest in P2P loans?
"Yes, this is working daily: on average a lender X10 his investment amount within 3 months, that is, the loan amount. Still, everyone thinks a bit like you: 'Maybe it's a scam?' But when they invest a little and can track their investment, that is, view who their loan was given too, and finally get an average annual yield of 5.9 % on the investment - no wonder they increase the loan they give”.
Tarya now has a loan portfolio worth more than NIS 200 million and non-institutional organic growth of NIS 30 million per month from the public. The company claims that their uniqueness from the other players, worldwide, lies in their underwriting model, which is based on advanced technologies taken from the intelligence community (Such as the Mossad and FBI) - a world Elhayany originated from. The company scans the web for past lending activities of the potential borrower and thus concludes his level of reliability and commitment to repay loans.
"We are not so interested in how much money the borrower has. It is more important for us to ascertain the potential borrower’s financial efficiency", says Elhayany. According to the company, this model has created a default rate of only 0.4%. The company's borrowers are quite diverse and the lender clientele range from middle class to the top decile. "We do not screw anyone, we don’t offer a loan that does not generate value”.
But Tarya is not a non-profit organization, you want your company to earn so that you as a founder will earn, don’t you?
"True, and Tarya can be described as a fourth sector (a for-profit social business) and it is profitable as opposed to most players in Israel and around the world. This is a modest company. No one here gets up in the morning wanting to scam someone, and no one here is poor, and hence its strength. The company grows exponentially because it always has the customer's best interests in mind and not the exit. We do not do favors for anyone, but as long as we give value to our customers, they will continue to come to us”.
There are other companies that started off like Tarya, i.e. the original goal was the good of the customer, but when losses increased, the price of the product rose and the benefit to customers declined. How can you ensure that this won’t happen in Tarya, especially when interest rates rise?
"Firstly, Tarya is not an interest rate player, secondly our business model is based on social values. We want to earn a small profit from many people, and we direct a major part of our marketing to promoting the risks of taking out loans. On the day you see an ad, no matter where, encouraging you to take out a loan with Tarya - I won’t be here - as far as I’m concerned its hell, and then you can write: 'Tarya has stepped down from its historic role and become just another greedy institute’. Offering a loan to someone who does not need it is equivalent to changing the company's DNA, and does not offer value to customers. If I took your money as a lender and sold it cheaply, that is, I gave it as a loan to someone who does not need it and probably won’t be able to repay it - you will not see a return on your investment, and the whole model of Tarya will collapse”.
As mentioned above, apart from offering the platform to a financial entity such as a bank, Tarya generates revenue by charging a commission: in the case of the borrower, a one-time setup fee; and in the case of the lender, an investment commission deducted from any monthly return transferred to his account. You can invest from as little as NIS 50 for a single loan.
Do you think the P2P industry can become disruptive to the domestic lending market currently controlled by the banks?
"The revolution will happen, but we are still a distance away. The banks, in my opinion, will not lower interest rates on loans or raise interest rates on deposits in response but will rather part from this clientele because it will become too competitive and expensive”.
So will you try and break the bank’s monopoly in this market?
"We will completely break this monopoly, and within 5-10 years the lending market for households will not look as it does today”.
Israel currently has four P2P companies. Isn’t that too many for a relatively small market like the Israeli market?
"Firstly, all the other players combined have a turnover of just over half of Tarya’s turnover, and secondly, without the technology, the company will be swallowed up by a traditional financial entity to become its pet”.
So what you’re saying is that Tarya is the only technology based player and that that is its uniqueness?
"Yes, everyone else has done a copy/paste of what is happening in the world market, we didn’t copy anything. One has to design a product which is compatible with the market, otherwise it doesn’t work”.
I want to return to your childhood as a member of a 15 person family. Did you experience poverty?
"In retrospect, if I calculate the income per child, then there was poverty. On the other hand, our home was always open. We did not consume brands, we did not sit in restaurants, we did not go to hotels and we did not go abroad, but I don’t think any of my brothers felt poor. I remember that our parents did not allow our limited means to affect our external appearance. On the way to school was a wadi that was filled with mud in the winter. In order to not get our clothes muddy, my mother would carry us on her back, one by one”.
Did you not get lost amongst 13 children?
"I was the youngest of 13, and because I was the youngest I grew up in the best economic period, I even had my own room, but I did not receive a scholarship from the university because when I started to study, I was the only under 18 in my home”.
When you look back do you say "we were hard done"?
“I will reply with an anecdote: when I was young I thought I could change the world. I once asked my mother if she was happy in her life. She replied that she did not understand the question and I got annoyed. Years later I watched a program on National Geographic where a woman living in Africa was asked the same question. She answered: 'I do not understand the question, I live every moment and do not stop to think whether I’m happy or not'. The rich have the privilege of asking this question”.
When you grew up, did you ask her the same question again?
"No, and I’m sure that if I had asked she would have answered the same answer. We never had a blaming atmosphere at home”.
And today she is proud of her children?
(Smiles) "She is mainly worried ... amongst other things, worried about articles written about me”.
Automatic underwriting based on digital fingerprint
Tarya is the only Israeli P2P company selling underwriting services to business entities in Israel and abroad, including the largest financial institutions in Israel. "Tarya's technology enables each entity to receive banking style infrastructure with high-tech flexibility, using the Plug and Play method”, the company claims.
This technology is based on five tools: the first, automated underwriting, which includes analysis of documents uploaded by the customer and integrated into the Tarya system, thus generating information about the repayment capability of the loan applicant; Second, profiling - an aggregation of the digital fingerprint of the loan applicant from hundreds of open source bits of data available on the web, creating a sociological and behavioural profile; Third, a digital polygraph that translates human-physical behaviour into a degree of engagement and emotional behaviour pertaining to the loan applicant, including the identification of fraudulent attempts; Fourth, an artificial intelligence system based on statistical engines that automatically improves the underwriting mechanism verticals; And finally, a series of technological tools, some of which are sold as services to other entities, such as a unique protection mechanism for the lender’s funds, a collection mechanism, an advanced risk management and fraud monitoring system and an automatic investment diversification and management system.
Eyal Elhayany, 43, is the CEO and one of three founders of Tarya, a P2P consumer loan platform and leader in its field. His colleagues in the company are Assaf Shlush, VP R&D, and Varda Lusthaus, VP of Regulation and Legal. Tarya is not Elhayany’s first start-up. After retiring from a senior position at I.C.Tel, he founded two companies: WABI do and App4Reg. When Shiron, another company in which he worked, was acquired by Elbit Systems, he retired from it in favour of Tarya after three years as senior vice president R&D. He holds a bachelor's degree in communications engineering from Ben Gurion University.
His father and mother immigrated to Israel from Morocco in 1963. He is the youngest of 13 children. His wife works in education and they have three children: two sons, 7, 6, and an almost 4 year old daughter. The family lives in Moshav Herut in the Sharon.
Elhayany says of his economic situation: "I’ve made a lot of money for my family."
Published by Globes [online], Israel business news - www.globes-online.com - on August 24, 2017
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