Lending is the ultimate engine of innovation and economy growth. And managing to get a loan with an acceptable interest rate is often what makes or breaks new businesses. The staggering growth of alternative lending worldwide is only possible since the people aren’t happy with the way old-school banks handle their role in making money accessible.
Some of that is due to their bureaucratic nature and very conservative approach to risk, which can be justified. At the same time, banks often rely on outdated legacy systems and loan decisioning algorithms. As a result, traditional lender approved just 26% of small business loan applications in the first half of 2018.
Alternative lending is a global phenomenon, so whenever an innovative startup arises in one jurisdiction, that leads to people around the globe starting to question the status quo in their country. And the good thing is that where there’s a demand, there’s supply. And over the recent years, the lending niche has been quickly filling with new players capitalizing on easy origination, better interest rates, and modern user interfaces.
And even though at first they might have been looked down at by the big players, companies like Lending Club have been growing so fast that they can’t be ignored anymore. In addition, as regulating bodies start to become cautious of peculiarities of digital lending, traditional banks lose the last competitive advantages – government control, security, and stability. So to cut a long story short, let’s look at some of the more prominent startups making fair lending globally a reality.
- TurnKey Lender: TurnKey Lender is a startup from Singapore which already operates in 38 countries on a global scale with a significant focus on Asia Pacific region. The company provides alternative lenders of any type with an end-to-end platform to automate their whole lending process.
The key selling points of the product are its turnkey nature and the AI-driven origination module which uses self-learning algorithms to adjust to each lender’s clientele to help them approve more of the right loans faster. The system includes tools for automation of loan origination, underwriting, collateral management, borrower evaluation, risk management, debt collection, loan servicing, reporting, supervision, and regulatory compliance.
The company offers separate platforms for small to mid-size lenders, peer-to-peer lending, and for enterprises who need more customization freedom without the need to get into the source code. The system even lets you customize business logic within an easy-to-use drag-and-drop interface.
- Tookitaki: Tookitaki is an Indian AI startup. The company specializes in creating predictive models which allow business to replace consultants and ad-hoc decisions with more accurate automated flows which can scale with the company that uses them.
Lenders worldwide struggle with automating and streamlining compliance. Tookitaki team is working on a product that would put this part of their processes on cruise control by implementing actionable, auditable machine-learning solutions.
- October: Formerly known as Lendix, October rides the wave of the peer-to-peer lending trend. The company offers a platform both for investors and for borrowers. The solution is mainly aimed at making business funding more democratic and less bureaucratic by letting the SME companies work directly with the institutional investors.
The history of the company began in 2014 in France. Back then the regulatory climate changed and created an opportunity gap for alternative lenders to compete with the traditional banks. As of now, the company operates in Europe utilizing the legislation to grant cross-border financing for the citizens. The key selling point of October is it’s transparency when it comes to selection criteria of the borrowers and lenders, financing processes and ane other relevant statistics users may need. Add that to the praised user-friendly interfaces and a simple way to diversify investments and you get a leading peer-to-peer platform in Europe.
- Lendio: Lendio is a different kind of a lending startup. The idea behind this company is creating a marketplace of lending companies which connects borrowers with dozens of the biggest lenders. Loan origination and processing which still take old-school banks days or even weeks are reduced to 15 minutes application process with Lendio. Borrowers are promised to get access to finds within 24 hours after applying.
Each borrower who works with Lendio gets a personal fund manager. And even though the company helps businesses and individuals access all kinds of lending services from mortgage to credit cards, the reach doesn’t stop there – the company can also connect you with the specialists in related fields like small business credit repair, bookkeeping services, and legal assistance.
- AND Global: AND Global is another lending tech startup from Singapore. This one focuses on simplifying access to capital for underserved people in emerging markets. The company made it its goal to reach the audiences who have been ignored by the big banks and they do it by means of advanced technologies. The team utilizes AI in credit scoring to take give a chance to people who don’t have a good enough credit history.
The digital-native company relies on technology on each step of the lending process. And the innovation has served them well with plans of further expansion across markets like Japan, Indonesia, and Pakistan.
- RateSetter: Another peer-to-peer startup in the bunch. The company focuses on investors helping them make better returns on their money quicker and easier. As of 2019, there are almost 77 thousand investors and 467 thousand borrowers using the platform for their lending needs. The good thing about this company is that all the funds are protected by a Provision Fund. With RateSetter, both investors and borrowers get access to personalized cabinets with plenty of freedom of operation in terms of amounts, terms, and conditions at which one will be working with the platforms. The company focuses on the UK market. Borrowers can choose from the key products depending on their need in a personal loan, asset or property finance.
- Kabbage: The Kabbage works in two domains at the same time. On the one hand, the company is running a proper alternative lending business. And on the other hand, they offer their own custom platform which can be customized to automate some of the lending tasks of business, mainly connected to origination. That said, the company still focuses on providing business owners with working capital for their needs.
Given that Kabbage can obtain the required data based on your application, the company can automatically provide you with up to $150,000. Other than the website, the company provides borrowers with an easy-to-use mobile app in which the funds can be requested, processed and accessed. The truly unorthodox part though is that instead of interest, Kabbage charges a static monthly fee showing exactly how lending has evolved in the new digital world.
- Climb Credit: Climb Credit takes a stab at an incredibly complex and heatedly debated area – student loans. The company offers millennials an intuitive online experience to work with their education financing. At the same time, each school is evaluated according to the quality of knowledge it provides and the skills it will help students develop. The goal of the venture is not only to try and provide students with accessible funding to pursue their dreams but also do so ensuring they can find the right job afterward to help them deal with the loans easier.
- Better: Another lending area, and arguably the biggest and the most complex one, is mortgages. After all, it was because of them that the global economy suffered a major crisis in 2008. Better not only provides a great experience but also analyzes bank and mortgage company data to find you the best rate at which you can get a home.|The monetization model of Better comes from originating one’s mortgage for less money than traditional lenders would. It’s possible because the team managed to optimize and automate a ton of work which is still done inefficiently by old-school banks.
Alternative lending is already changing the stale environment of the financing world. Of course, big institutions still serve the majority of the clients, but that is going to change if they won’t adjust. And if they will – alternative lending still will be the phenomenon that stimulated them to employ new technologies and smarter approaches which lead to more fair interests and wider coverage.
Fair lending globally is still a little bit down the road. But the startups listed in this post are the one leading the innovation by example and the ones bringing the new reality of lending closer to today.
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