New partners, new products help mReferral survive slowdown

Companies diversify for a host of reasons. Howard Chu Ho-hwa did not have a choice: for his firm, diversification was a strategy for survival.

Chu joined mortgage brokerage mReferral Corp (HK) as chief executive in September 2012, a month before the government started to implement a series of tough measures to check the city's soaring home prices.

The slowdown in mortgage financing started even earlier, as tightening measures by the Hong Kong Monetary Authority, which regulates the industry, began in October 2009.

These steps included limiting the loan to value ratio and requiring banks to ensure mortgage applicants have the ability to repay their loans.

Last year, the value of new residential mortgage loans fell 17.3 per cent in the fourth consecutive annual decline to HK$158.6 billion, the lowest in eight years.

But Chu said mReferral had outperformed the market.

Thanks to his decision to diversify the company's business products and partners, he said revenue remained at 2012 levels. He did not disclose the figure.

Before he joined mReferral, Chu was the chief financial officer of Trony Solar. He is an independent non-executive director of Weichai Power and mobile telecommunications firm Directel. In 1999, he co-founded web portal myrice.com.

What have you done with the company to cope with the slowdown in the market?

We made a lot of changes last year. First, we expanded our partnership network. We extended the network of partners from banks to finance companies.

Now mReferral has more than 80 partners, compared with just more than 20 early last year. They can provide different services to fulfil the demand of different kinds of clients.

As the government introduced policies to tighten mortgage lending, even first-time buyers sometimes need help from finance companies rather than banks.

(Finance companies are not regulated by the HKMA and do not need to follow the authority's mortgage regulations. They usually charge customers a higher interest rate than banks do.)

Secondly, we extended our products from mortgage referrals to private loan referrals and tax loan referrals this year. That has helped business growth.

We changed our positioning in the market. We enhanced the branding.

There are many mortgage referral companies in the market. Some of them are very small, with only three to five staff. They charge clients 1 per cent of the loan amount applied for as a commission. But they do not necessarily provide good service.

Our positioning is we provide free but quick and professional service to clients. We do not charge clients; we get rebates from banks and financial institutions.

Will you reduce costs, for example, by cutting staff?

We do not prefer cost-cutting, we prefer to enhance sources of income. We are still hiring.

We improved our internal management, such as customer data base management and sales management.

We spent a lot of time and money to improve the IT system. It is good for the company long term. We were not that busy last year, so we had time to do it.

Last year, we did a lot of charity work. When the market is bad, I want to let my staff experience that there are still many unfortunate people in society. They will treasure what they have got. You may think you are in a difficult period, but more people here have more difficult lives.

Why do buyers need mReferral's service?

Let me put it this way: if the client has a lot of time, they can find the same offer provided by us. But they cannot find a rate lower than what we offer.

Banks have different lending attitudes, depending on their business performance. For example, if they want to do more mortgage business at the beginning of the year, the pricing could be better.

We have connections with them every day. We are close to the market. We will find the right bank for clients.

A client may be familiar with one or two banks, such as HSBC. They need to spend more time to contact other banks. If clients get to contact the third and the fourth bank and gather different mortgage terms to compare, they may need to spend a lot of time. That will become complicated.

What is the outlook for the company's business this year?

As we had developed different businesses last year, we will go in this direction in the next two years.

We will deepen the relations with partners.

We will see the harvest this year. I expect our business will grow, even though the overall mortgage financing market is expected to fall a further 10 per cent this year.

The new businesses are at the development stage, and the contribution remains very small. But we may see one-third of business coming from these new businesses, and two-thirds from mortgage referrals, in a few years' time.

How do you rate your performance?

I am satisfied with the company's development. We have some new ideas, but we cannot mention them now.

You are an internet pioneer, establishing myrice.com targeting mainland internet users, as early as the 1990s. Could you share your experience in the e-commerce industry? What have you learned from it?

[Building on] my previous experience, mReferral has been very much concerned with new channels and new media - for instance how Facebook could be an effective medium to connect with homebuyers.

We have also used search optimisation to reach the ever-changing market and will continue to make the best use of technology and networks to improve business performance.