Before is best known among its financial services peers as a FinTech company, founded to pioneer automation and an artificial intelligence (AI) enhanced underwriting process to the problem of creating accessible and affordable personal loans for consumers. Since its founding in 2012, the company has specifically distinguished itself in an area crowded with technology underwriters, focusing on the group of consumers it calls the “underbanked middle class”.
The company’s target consumers have often had few options available, other than payday lenders (and other short-term lenders), when looking to borrow. Avant’s consumer product is designed as a digital alternative to this market.
Prospective borrowers apply online or via mobile, can be approved and offered a rate within 15 minutes, and can have their loans funded within 24 hours. Interest rates depend on the results of Avant’s proprietary credit rating mechanisms – on the high side, borrowers will face APRs in the order of 35%. It’s not a small amount to pay for an installment loan, but it’s far less than the triple-digit APRs that short-term lenders and pawnshops are known to offer.
However, while this is the most well-known part of his business, it is not the only one, according to Former CEO Al Goldstein. Before, they were actually two companies operating under one roof, crucially connected, but separated by function. There is the Consumer Platform (The First Company), best known for making installment loans affordable for a wider range of consumers.
Until recently, Goldstein noted, this Software-as-a-Service (SaaS) business to financial institutions (FIs) (the second business) operated mostly in the background behind the more well-known part of the platform. . But the time has come for this profession to launch out and forge a real identity on the market. That’s why this second line, formerly a business unit known as Powered by Avant, is now coming out with a new name – Amount – and a bigger overall focus on the market.
A better option for banks
For banks, including relatively large banks, Goldstein noted, entering the personal loan markets is daunting, even if it is attractive from various perspectives. Working with small consumer or small business (SME) loans is unprofitable under the labor-intensive, paper-heavy models that are the historic hallmark of bank underwriting systems.
However, embracing the efficiencies that digital lending platforms bring to the table isn’t as easy as flipping a switch and going online, he added. They are extremely complicated and expensive systems to build.
Some players have built them in recent years, however, he said, noting both Marcus of Goldman Sachs platform and American Bankrecently launched a small in-house personal loan product for its clients. US Bank’s offer is very new, but Marcus has apparently been a success for Goldman – with $ 3 billion in loans taken out from more than one million borrowers.
However, Goldstein noted, not all banks have the talent and capital to undertake a construction project of Marcus’ size and scope. Even among the relatively small slice of banks that do, not all of them necessarily want to devote that time and talent to a product that will essentially not be tested until launch. That’s why, he said, partnerships between online lenders and traditional banks have become more prevalent in recent years, especially as both sides have realized that there is customers to reach – combine the speed and efficiency of FinTech in underwriting with the banks’ extensive and established customer networks.
Avant launched its first banking partnership with an Alabama-based company Bank of regions in 2016, using its SaaS product. The company has added three more since then and noted that more partnerships will be announced in the latter part of 2018. Goldstein did not name a name, but teased that one of Amount’s first big partner announcements coming up would be with a “top 10 American Bank.”
The goal of these partnerships is quite simple: to let banks create the lending products they want, using Avant’s proprietary technology and experienced underwriting.
The question of which banks this product will be offered to is designed to expand over time. The first target group of Amount banks will be large institutions looking for a highly customizable lending solution. These options will largely be full-service at first, but will contain more pay-per-view offers and add-ons over time for big banks, especially when it comes to consumer security and verification. The full-service platform will be pre-built with loan origination, verification and fraud, decision hosting, analytics and marketing services.
While Goldstein has said Amount will start with large banks and institutions, the goal (by 2019) will be to focus on banks with less than $ 20 billion in assets. This will involve offering “out of the box” services, which are less customizable, but still “highly configurable” for smaller institutions that understand the need for full-service digital offerings for clients.
The immediate term for Amount, noted Goldstein, is to hire – specifically 50 new engineers to fill the new Amount company, although the new team will continue to work from Avant’s headquarters in Chicago. In the long term, he would like to see Amount work on creating and reengineering core banking systems themselves, moving them beyond legacy core systems on which new infrastructure is increasingly difficult to build.
However, he remains bullish as he believes banks see the need to change and expand their digital toolkits of consumer offerings. They may just not be interested in taking on all that entails on their own.