The advent of payment platforms as lenders will be a huge growth opportunity for the industry mainly because these platforms already control the payment stream for a small business feels Jorge Sun, CEO and Founder at LendingFront as he discusses his thoughts on the innovative ways in which lending platforms will transform the state of SME business. Catch the complete conversation:
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Can you tell us a little about yourself Jorge, we’d love to hear about LendingFront’s journey (how has the platform evolved over the years) and what are some new upcoming features that users can look forward to?
Prior to founding LendingFront, I was a banker at American Express and JP Morgan, focused on small business lending. I saw first-hand how frustrating it was to not be able to service small businesses in the ways they needed as most of the large banks were set up to cater to large businesses. I joined OnDeck as a founding team member and Chief Credit Officer with the goal of lending to small businesses differently than large banks by using different data sources, product structures and shorter terms. Following some time at OnDeck, I returned to the banking world and joined Capital One as Head of Small Business Credit.
In 2015, I joined forces with Dario Vergara to create LendingFront, designed to help banks, credit unions and alternative financial institutions be better lenders to small businesses and provide them with the infrastructure needed to do this. We combined our deep industry knowledge of small business lending with the power of cloud computing, and LendingFront was born.
Because LendingFront is built in the cloud, we are always striving to be a more complete platform by adding on tools and components to help make the lending process more efficient and profitable. With the cloud structure, it is easier to expand features and functionalities that can grow with the business.
Lending tech has helped ease and automate a lot of the tedious processes involved in loans; can you talk about some of the key areas that still need more human intervention that technology still has a way to go before it solves?
At its core, LendingFront is helping banks and credit unions put capital into the hands of their small business customers more efficiently. In the past, 100 percent of lending services had to be managed by a banker which is a highly manual, people-driven process. LendingFront gives banks a digital channel for their customers to interact with in order to automate the parts of the process that aren’t a good use of the banker’s time. In turn, this frees up more time for bankers to take more of a consultative role with their customers and spend more time focusing on complex, multi-product opportunities. In addition, bankers can deepen their client relationships in order to be able to upsell other products and services.
Can you talk about some of the most innovative lending platforms for SMEs that you’ve come across from the global marketplace?
Right now, there is a lot of innovation happening in the alternative lending space especially with payment platforms like Square, Stripe, Shopify and Uber who haven’t traditionally done lending.
But because these platforms own the payment streams of many small businesses, they have access to a wealth of business performance data such as how long they’ve been in business, revenue trends, etc. And then they can use this information to make smarter loan decisions. Because transactions stay on one platform, they know more about their customers than any bank ever will and, in turn, they use lending to deepen the relationship with those customers even more. In addition, since they are already customers, the cost of acquisition is zero.
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How do you see emerging technologies like AI power newer lending tech platforms?
I see AI as a tool to make the process more efficient. The lending process will always need a banker, especially for the relationship, but there are aspects of AI that can help in the decision process, speed up the application process, dig through data and, overall, make the lending process faster.
What are your top predictions for this space in 2021 and beyond?
COVID shutdowns have proven that every business needs a digital presence for business continuity. Banks, in particular, will be rethinking how they acquire, interact with, sell to, and service their customers in a virtual world without a branch to rely on. I believe that banks will start to spend and invest in technology to reinvent themselves for a digital world–not as a nice-to-have, but for business survival.
We’d love to hear your thoughts on the biggest challenges you see banks / credit unions face when adopting new technologies; how do fintech startups like you typically address this?
One of the biggest challenges is convincing banks to change their business model and overall mindset of how they do business. Rarely are we competing with another technology, but more so with inertia of not changing at all.
However, with COVID and the rush of PPP, many banks saw firsthand how technology could help them process the huge rush of applications they received. Financial institutions realized that they were not equipped to handle large volumes manually and saw the benefit of having tools to help them throughout the process. One of our goals is to help banks shift their mindset from lending as a banker-centric process to become a tech-driven process with human assistance.
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Before we wrap up, what are the biggest learnings / tips you’d share with fintech innovators and founders from your experience and the biggest mistake you’d tell them to avoid!
For anyone planning to sell technology or services to banks and financial institutions, it’s important to understand that the sales cycle can be very long and difficult. Companies need to be prepared to have enough capital on hand to last through these long sales periods and focus on different types of customers to grow beyond just the bank market. In addition, diversify your revenue streams and customer base as much as possible.
LendingFront is a fintech company that facilitates small business lending by community banks, credit unions and alternative lenders. For small businesses, getting access to capital can be a difficult and time-consuming process that more than often ends in a ‘no’. LendingFront enables lenders to separate small business lending from the traditional commercial lending process so they can lend capital in a more efficient, risk adverse manner. LendingFront automates mundane processes so that bankers can spend more time on high touch, complicated work and relationships and less time dealing with paperwork. Its software enables loans to be submitted entirely online, using SMB specific credit criteria to originate a loan and then underwrites and services the loan all from a white-label portal.
Jorge Sun is CEO and Co-founder of LendingFront. Jorge started the company in 2015 after spending time at Capital One as Head of Small Business Credit. He previously was part of the founding team of OnDeck, where he served as Chief Credit Officer.
