Building a Public FinTech Company From Scratch: OppFi CEO Todd Schwartz (Part 3)

Todd Schwartz: The technology wasn’t there. I didn’t know anything about lending. I didn’t know any other way to do it except take $100,000 of my own savings and open a one-room office in the north side of Chicago, get a printer, and use Excel to originate loans. I applied for the CILO license. Six months later, I was granted the license. I was getting referrals from the pawnshop.

I made the first 3,000 loans in person by myself. I handed the check to every borrower. I got to know every borrower. I understood why we were better. There were no prepayment penalties. I had to hire people. We were getting so much referral volume. We have such high customer satisfaction. We weren’t really measuring it, but I could just tell by the way people were overjoyed and the referrals we were getting. Our interest rates were much lower. Our payment terms were much more beneficial.

The attitude of payday is, “Let’s make the most money off of the customer from the first transaction.” If we keep customers happy, they’ll pay in full. In six months if their situation changes, they can get a lower cost to capital. We didn’t try to take advantage of them. I started to open satellite branches in Illinois. Two things happened. I was only able to help people in a geographic location based on where the branch was. I was only able to help a small number of people. I want to help as many people as I can.

To this day, we’ve never raised outside equity. I didn’t want to bring other equity into the cap table and have to deal with that. I wanted to keep it under our control of us so we can create the company in our vision. At the same time, customers that had met me already would say, “Can I fax in my information and you can wire me the money?” They started to prefer being serviced through technology. I was using a fax machine. It makes me feel old. At that time, it was all there really was.

As I started to do some investigation, we were in the early stages of being able to digitize some of this. Email was getting better. Scan was getting better. There started to be some technology to pull people’s bank statements digitally as opposed to having to have them fax them in. I also realized that we can start to help people all over Illinois. Our license is not just for Chicago.

The first two years were designed to get the service delivery model and get the product figured out. When I got that, it sounded like the branches are not the way I want to go. People are going online. Financial services are definitely going to be done through people’s computers and phones. That was a very tough decision – to close the branches. We’re essentially taking away service levels from customers who use those branches. But that’s where the world is going.

Three years in, I started to find the technology to centrally service. We opened a location in downtown Chicago. It was designed as more of a centralized operation and we closed all the branches. We still have customers coming into that office but far fewer. It was a scary time because I didn’t know if we can recreate the in-store experience that we had. I didn’t know if we can underwrite customers. There was a lot of trial and error.

This segment is part 3 in the series : Building a Public FinTech Company From Scratch: OppFi CEO Todd Schwartz
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