Building a Public FinTech Company From Scratch: OppFi CEO Todd Schwartz (Part 5)

Sramana Mitra: What about going beyond Illinois? How long did you do just Illinois?

Todd Schwartz: We scale nationally now. What was interesting to me was there were 17 other states that had small-dollar lending laws that we could use. What’s difficult is that each state has its own rules. We started to scale that way. There are 35 states that have payday lending laws, but only 17 have small-dollar lending laws.

Our goal was to provide credit access in a better way and, essentially, eradicate the payday loan. That was our original mission. That’s when I stepped down as CEO. I became Executive Chairman and hired a CEO.

We talked to this community bank FinWise. Community banks are getting left behind. They want to provide credit access, but they don’t have the budget, technology, balance sheet, or branches to be able to compete with Chase and some of the larger banks. They see that there are credit access issues.

We started to talk about a partnership where we could help them. To this day, we have 81 plus NPS. That’s very encouraging for them. We always verify people’s ability to pay. If a customer comes to us, we screen them against a lower cost of capital first. Once we determine that they’re eligible, we would then introduce them to vetted sources. If not, then we engage with them and see if we can help serve them. We designed a really unique offering.

Sramana Mitra: Do you white-label your service for them?

Todd Schwartz: The bank originates the loan. We are the servicer. We both have clear roles and responsibilities around the process. They are federally-insured banks. We were able to expand our footprint to about 35 states with that. It’s been really successful. That was one of the big points. They had the willingness to expand credit access. We had the willingness to expand credit access. It made sense.

Sramana Mitra: How many banks do you work with?

Todd Schwartz: We work with three. There is a heavy compliance and regulation load for each partnership. We’re essentially a trusted partner. More is not better. Adding a lot of bank partners is good, but you also want to be really good at maintaining the relationships you have today.

Sramana Mitra: What is the primary source of borrowers? How do you acquire these customers?

Todd Schwartz: Number one is, our referral programs still remain the lifeblood of the business. That was one of the things I never want to give up, also to engage customers. We’ve been around for 10 years. We rank pretty well on all search engines.

We also have something called OppU. It’s content for personal savings, financial literacy, budgeting, and tools for customers for them to improve their financial health. We also did video content on YouTube. SEO has been a driver. We have large partnerships with some of the credit-rebuilding tools like Credit Karma and Lending Tree. People are joining them to improve or look at their credit scores and know where they stand. It aligns well with our brand.

Sramana Mitra: You buy leads from them?

Todd Schwartz: Yes, not leads. It’s more on success criteria. There’s direct mail. That’s one thing that I’ve been very careful on. A lot of businesses in our industry get very dependent on direct mail. It’s a higher-cost acquisition channel. We self-govern our direct mail. Those are some of the main drivers.

Sramana Mitra: There’s a whole industry sector that has emerged in the time that you have been building this business, which is these FinTechs that do paycheck-based financing like Earnin and Payactiv. What is your perspective on those?

Todd Schwartz: Any company that comes along and rewards good behavior and provides credit access is a positive.

This segment is part 5 in the series : Building a Public FinTech Company From Scratch: OppFi CEO Todd Schwartz
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