Building a $100M+ FinTech Venture from Michigan: Ryan Rosett, Founder and Co-CEO of Credibly (Part 4)

Sramana Mitra: Could you double click down on the technical integrations that were required to make all this happen? You’ve talked about First Data on one hand, you obviously need to have an integration with the customers’ credit card system and bank account. So what is the integration landscape of this solution?

Ryan Rosett: It’s evolved and it continues to evolve. I’d say our tech stack is a constant. We have a fairly significant tech team for the size of the company we are. We continue to invest heavily into technology, but the integrations we use have changed.

When we originally started, there was a lot of manual review. When we originally started, Plaid wasn’t around. You didn’t have visibility into bank accounts to see what the deposits look like, if there’s seasonality to it, what are the average daily balances, negative days in the bank, and all the things that we look at from a cashflow lending standpoint.

Now, there’s technology available that does bank parsing or OCR. In seconds, you’re getting back the data, or you can link directly into their bank account, scrape their bank account data, pull it into your system and assess what their cashflow is.

Our models have a ton of automation now, but in the beginning, it was mostly manual. We had underwriters who would review, do web searches, and go into different databases, but as we grew, there was more scale to our business. We had to integrate because servicing our customers was super important. Getting them answers very fast was basically how we would differentiate ourselves from our competitors. Our service level hovers right now around three hours including the full underwrite. Depending on if they accept our offer, it can usually be funded the same day.

It’s a very fluid process today. We’re integrated with all the big databases, all the big credit bureaus like LexisNexis and Clear. We use a number of other technologies that have fraud alerts and reverse phone numbers.

Using geotagging, we use services for site inspection. It’s almost like an appraisal, but it sends an SMS to the phone. They open it up. It prompts their phone to take photos of specific things like the cash register or the inventory. There’s a geotag on it so that we know the location of the business is the location that the applicant is at. We prove the validity of the business, prove that the information that has been provided to us is accurate.

Sramana Mitra: In all the lending services, fintech lending services, that’s the core competency. How do you decide whom to lend to and whom not to lend to? That’s a data problem. People in the business are trying to create unique ways of being able to access data, process data, etc. Now, I guess there are two additional questions that I want to kind of underscore. Does all the credit data come from First Data?

Ryan Rosett: No, that was early on. We don’t do that any longer. So that was initially our edge – what made us different.

Sramana Mitra: Today, when you want to see credit card transactions, is that still a heuristic that you’re using to determine?

Ryan Rosett: It is, but it shows up on the bank statements and it’s sorted through our system that way. So, we see the deposits come through their credit cards, just like on their bank statement. So whatever their credit card processor is, whether First Data ornot, it doesn’t matter.

Sramana Mitra: So, it doesn’t matter. The integration is with the bank system.

Ryan Rosett: Correct.

Sramana Mitra: What is the technical state of the union on the banking system? Is there a particular banking system that you’re seeing over and over again at different banks? Is it Oracle Financial? Or what are you integrating with? Or is it the banks that provide the APIs?

Ryan Rosett: A portion of our business comes from what we call a wholesale channel or through a broker network, and then a portion comes direct. How we integrate depends on how the customer comes to us and if the customer’s a wholesale broker or if the customer’s direct. So, if it’s through a customer that we procure directly, it could be just through an integration, like Plaid where you just log in, they put their user password, and we give visibility into their bank account. We can’t do anything with it. We can’t transfer money and we can’t transact. All we’re getting is view only so that we can get a look at like what their transactions look like.

Again, we only lend to businesses. For example we see a ton of sole proprietors. We lend to sole providers, but they just need to have a commercial bank account. That’s from a compliance perspective; we’re not looking at doing it from a CFPB standpoint. Our compliance team requires us to lend to companies that purely have commercial bank accounts.

This segment is part 4 in the series : Building a $100M+ FinTech Venture from Michigan: Ryan Rosett, Founder and Co-CEO of Credibly
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