This month, we’re exploring some of the most disruptive fintech firms changing the face of banking. Over the next few weeks, we’ll be looking at the 25 most influential fintech firms across retail banking, payments, investments and lending, the secrets of their success and the implications they raise for traditional banking players.
To kick off, we’re looking at five fintech firms reshaping the lending and financing landscape, including Avant, Lending Club, Qufenqi, Affirm and SocietyOne.
A Chicago based lending platform, Avant has demonstrated mastery of two of the trends that have driven the global fintech revolution; leveraging digital and data, and satisfying demand that banking incumbents have been unwilling or unable to meet. Through the use of big data and machine learning algorithms, the company is able to offer a highly customized approach to consumer credit options. This customer-focused flexibility has allowed them to offer responsible credit to millions worldwide whose needs are not currently served by the mainstream banking sector, fueling Avant’s meteoric growth since its founding in 2012.
2. Lending Club
The original pioneer in the peer-to-peer lending space, Lending Club is at the forefront of bringing the sharing economy into the banking space. Lending Club provides a platform for individual investors to deposit as much or as little money as they like at attractive rates of return and for borrowers to take out loans of whatever size they desire at lower rates than high street banks are generally able to offer. How is Lending Club able to do this? The answer is simple; they benefit from the efficiency that being a digital-only platform provides. The huge cost advantage they have over traditional competitors is passed onto borrowers and lenders via preferential rates which, along with the attractiveness of their consumer-focused peer-to-peer ethos, has seen them grow to the point where they have been able to offer $21 billion of credit in 2016 to date.
Asian firms have been at the forefront of the global fintech revolution as digital platforms have brought banking and borrowing capabilities to hundreds of millions of new customers outside the traditional banking sector in new and ingenious ways. Qufenqi, a Chinese lending platform, is just one of these. Founded in 2014, the company specializes in offering students and young, white collar workers micro loans for expensive electronics, white goods and property, working with a number of businesses across China to offer monthly payment plans. In just 2 years, the platform has grown to be worth an estimated $1.3 billion, with sales facilitated by Qufenqi totaling $1.52 billion in the first half of 2016.
The flexible and frictionless banking experience facilitated by fintech has not only provided access to micro-loans to those in developing countries, but has made these accessible and financially viable in developed economies too. Affirm is at the forefront of this trend. An American company formed by former PayPal CTO Max Levchin in 2012, Affirm offers installment loans to customers at the point of sale, quickly allowing people to take out simple loans in seconds, enabling them to turn any purchase into a few monthly payments. Whilst the low costs and efficiency associated with fintech providers allows Affirm to offer competitive rates, their unique selling point is transparency. Through real-time analysis of product and consumer data, Affirm is able to attach risk scores to every transaction and modify prices – and advice as to whether an Affirm product is advisable for a particular purchase – for each individual customer.
Another firm that has made transparency the cornerstone of its business model is Australian peer to peer lending platform SocietyOne. Their carefully curated lending ecosystem leverages big data to match the correct investor (or investors) to each borrower based on the size, risk, and expected return on investment, with a stated aim to provide best-in-class rates across every asset class. By cutting out the proverbial middleman, and taking advantage of the cost and efficiency savings provided by an online-only platform, SocietyOne is able supplement their data driven matching service and pass on the maximum benefits to their customers. Founded in 2011, SocietyOne had received loan demands in excess of $100 million by the end of 2015, taking advantage of Australia’s historically low interest rate on savings to drum up significant interest from career investors and mass market savers alike, who have been able to take advantage of far better returns on savings than traditional bank savings accounts are able to provide.