Thought Leaders in Artificial Intelligence: Venkatesh Bala, Chief Risk Officer, Biz2Credit (Part 1)

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Small business credit has been upended in COVID. Banks are processing PPP loans at a frantic pace without the scalable infrastructure to do so.

This discussion delves into the realities of that world.

Sramana Mitra: Let’s start by introducing our audience to yourself as well as Biz2Credit.

Venkatesh Bala: I’m the Chief Risk Officer for Biz2Credit. We are an online marketplace for small business credit. Since its inception, we have been responsible for originating more than $3 billion in credit to small businesses.

We have two parts to our business. One of them is Biz2Credit which is for providing credit. The other part is Biz2x, which is the SaaS analytics technology provider for financial partners, banks, credit unions, and other financial services companies. We provide a wide array of solutions to them. 

Sramana Mitra: Your focus is small business lending?

Venkatesh Bala: Correct. 

Sramana Mitra: In the previous hour, I did a similar interview in the Thought Leaders in Financial Technology series. It’s not an AI solution but a solution for consumer credit for subprime lending. It seems like you are doing it AI-enabled for small business. It’s both a solution from banks and helping small businesses get access to credit, is that right?

Venkatesh Bala: That is correct. There is one important distinction between consumer retail FinTech and what we do. The small business space is incredibly hydrogenous and complex. Being able to offer small businesses of this kind is a different kind of proposition. 

Sramana Mitra: Let’s talk about segmentation. Yes, it is a small diverse business. How do you segment the market? Which segments of the small business lending do you serve? 

Venkatesh Bala: Small businesses are defined in different ways in various countries. We are in four countries – the US, Canada, India, and Australia. In the US, it’s defined as having less than 400 employees. The segments that we have found to be the most useful are actually by industry, especially in analytics and AI. There are a lot of differences that are happening.

For example, the US Census Bureau has something called the NAICS classification which has 19 major industries and 800 sub-industries out of it. We serve all over the US. They could be different sizes. We see a lot of women entrepreneurs and minority businesses.

Sramana Mitra: I completely agree with you that different industries have different signals that you can use to base your decision on who is creditworthy or not. Which segments do you focus on?

Venkatesh Bala: We apply to all the different industries. There are some differences that we take into account. For example, if I had a retail industry or a combination of food service, then I would have a large number of customers. You have transactions happening all the time.

Whereas if you have something like wholesale trade or construction, you have a few of these transactions that take place over a much longer period. The common thing in all of this in terms of assessing creditworthiness is cash flow.

Everywhere in the world, it all comes down to cash flow. This has been known by the bank industry for a long time. If you think about the three most important things in real estate, they say it’s location, location, location. In the case of small businesses, it’s cash flow, cash flow, cash flow. 

This segment is part 1 in the series : Thought Leaders in Artificial Intelligence: Venkatesh Bala, Chief Risk Officer, Biz2Credit
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