Lendful CEO and co-founder, Alex Benjamin, wants to give Canadians more money as quickly as possible.
His Vancouver-based consumer lending marketplace startup, which officially launches today at the LendIt USA conference, intends to eliminate the high fees and slow response times currently plaguing Canadians attempting to borrow money. Much like banking startup Koho, Lendful seeks to do this by cutting out the middle-man, connecting investors and borrowers directly through its marketplace.
The Koho comparison is an apt one, as Lendful is backed by Stanley Park Ventures, of which three general partners are Koho co-founders (noticing a theme?). Despite the pedigree, Lendful is promising a lot, offering loans of up to $35,000 with a delivery goal of under 24 hours after borrowers complete a two-minute application. While some restrictions apply (applicants must be Canadian residents, 19+ years of age, with an income and credit score above 690), the gap, when compared to the current lending process in Canada, is dramatic.
How will Benjamin deliver on this personal credit promise (Lendful hopes to be offering loans by mid-2015)? Through a proprietary algorithm that allows Lendful to quickly build a complete picture of loan applicants to assess risk factors and expedite the approval process. BetaKit sat down with Benjamin to get more detail on his company’s unique approach to disrupt personal credit lending in Canada.
What is the current loan application process in Canada? In what ways is it overcomplicated?
We’ve gone through the application process ourselves for an unsecured loan with the banks. The only thing we were able to find out online was that we had to apply in a branch! In today’s transactional world, to walk into a bank, book a meeting, fill in paperwork, wait, receive a phone call days later, go back to the bank to fill out more paperwork and if you are one of the lucky few, get a loan, is just not a good customer experience. This is not what we expect in an on-demand world.
We found that we had to provide a lot of personal information before we even had a sense for what an interest rate and fees might be. It left us feeling powerless. We want to change that.
The more we looked into it, the bureaucracy is there not to protect the customer but because the banks are complacent and have a legacy of a hundred of years of doing things a certain way. They keep saying that they will change but the reality is that they haven’t and we don’t believe that they will quickly enough.
So how does your algorithm work to improve on that process?
We really want to innovate with today’s technology – it’s really an exciting time to be in the FinTech space. When making a decision to lend someone money, the underlying variables such as employment, loan servicing history and credit score will always be important to understand. But we also believe that there are new data points that we all use every day, that the lending community can also to help assess the likelihood of someone being a good borrower.
Facebook can tell us about someone’s identity and lifestyle; LinkedIn can help us verify someone’s employment history and estimate an income bracket; there are new technologies like Vouch that let friends put in a good word on your behalf. Airbnb operators can screen guests based on user reviews; Uber drivers do the same with passengers. These mediums all provide insightful data points that are currently being overlooked and we think this disadvantages good people out there in the community trying to get a loan. We think we can provide a better and most importantly, a fairer customer experience in the consumer lending space, using our algorithm.
Part of the reason that Canada survived the global 2008 crash is because its citizens weren’t tied down by loans they couldn’t afford. Is there a concern that streamlining the loaning process could put Canadians in a financially awkward situation?
We don’t believe so. The key thing to understand here is that these loans already exit. Canada has one of the highest per capita debt burdens in the world. The crux of the problem is that Canadians are paying off these debts at credit card rates while the savings rate is at an all time low. This doesn’t make sense to us.
We are aiming to help Canadians get their personal debt into a manageable place by lowering payments. Our aim is to help Canadians that pay over 20%+ on a credit card control their financial future, faster. We believe we can save an average credit card holder up to 30% APR.
