Sramana Mitra: Does that mean that you integrate with their bank accounts or somehow see their bank statements to verify?
Jared Kaplan: We have a sophisticated bank verification process in most cases where customers send us their bank data. We take all that data and we do a lot of proprietary data analysis. All of those data points boil up into a proprietary underwriting score that the banks ultimately adopt.
Sramana Mitra: How do you find these kinds of people, and how do they find you?
Jared Kaplan: A quarter of the business is through, what I would call, pure organic marketing. That is SEO, email marketing, and customer referrals. About 60% of the business is through key strategic partnerships. That would include companies like Credit Karma and hundreds of others that serve the customers but don’t have a lending product to offer them.
We also receive turned-down business from prime lenders who see this customer but do not know how to underwrite them. The remaining 15% is through direct mail.
Sramana Mitra: How many banks are using this kind of solution?
Jared Kaplan: We work with three banks today.
Sramana Mitra: How many consumers do you have? You said the market size is 20 million individuals. What percentage of that have you penetrated?
Jared Kaplan: We have had a million consumers use the platform since 2012.
Sramana Mitra: What are you seeing in COVID?
Jared Kaplan: It’s been counterintuitive. Credit has been quite strong. The first thing that you think about in a severe recession is credit going the other way. The combination of the stimulus and additional savings has led to more creditworthy customers. The stimulus created more money in the bank account.
People are also saving money because they are locked up and they are not going out. If you also think about the primary uses for our product – car repair and medical – people are not driving their cars, so they are not breaking it and they are not going to the doctor because they are afraid. Our customers now have much higher balances in their bank account. This has created money to repay loans. At the same time, we have seen reduced demand for the product, because if you don’t need to borrow then you shouldn’t be borrowing. The growth has been slower but credit has been better.
Sramana Mitra: Is there anything else that is going in your business that is worth discussing?
Jared Kaplan: Many predecessors in this space without financial technology had not been able to generate a product where customers were raving about the fact that someone had met them at their time of need. This is why I took the job. When they were pitching for a loan, I went and sat there and I was listening to the calls. The first woman that called was thanking us for the loan we gave her because her daughter’s tuition had increased and she couldn’t pay for it. She had been laughed out at her bank when she went to get a loan. She found us online and through the process, she was able to get credit. She was very grateful.