Enhancing Capital Markets with Technology

Enhancing Capital Markets with Technology

By Ege Tanor, VP, Capital Markets, Insikt

Ege Tanor, VP, Capital Markets, Insikt

In the aftermath of the global financial meltdown, most would have considered it an unlikely notion to make small, credit-building loans to working families shunned by banks, and then securitize those loans in frequent, small bond offerings sold directly to accredited investors online.

“Technology is changing capital markets in profound ways. By leveraging technology, INSIKT is turning the old model on its head”

But technology is enabling INSIKT to do just that. INSIKT is leveraging technology to help borrowers rejected by mainstream lenders to achieve their financial dreams by building (or re-building) a credit score. INSIKT provides $300 to $5000 credit-building loans that avoid costly debt traps to lower income families, and attractive bond returns, both financial and social, to individual investors whoare demanding full transparency in how their money is being put to work.

Allow me to describe further how we utilize technology to build a bridge between working families needing responsible loans and accredited investors searching for attractive fixed income investments with monthly cashflows.

Lending-as-a-Service (LaaS): A platform anyone can use to lend to their customers

We believe that brands, not banks, are the lenders of tomorrow. Why struggle to create a new brand or distribution when it already exists? INSIKT has built Lendify, a cloud-based platform that handles application taking, loan processing, risk scoring, and all the back office functions involved in making loans.

We find companies that have customers and distribution but lack the capability to make loans. We partner with them to help their customers get approved for basic loans up to $5000. By deploying our system, our partners make loans under their own brands to their customers, face-to-face or online. Today, INSIKT’s Lendify platform is installed and processing applications in over 200 of our partners' stores across California and Texas.

In a typical retail example, the employees of our partners enter application information from prospective borrowers into Lendify on their terminals. Applicants are able to follow along from a consumer facing tablet, which also allows them to test-model various terms of their loan to find the best match of amount, repayment period, and cost. All credit decisions are automated so our partners can provide initial loan decisions on the spot. The cloud-based system also incorporates useful data housed by our partners, such as how often a customer sends money abroad, into its risk scoring to help more individuals get approved. Tapping into new data sources also helps INSIKT reduce losses – a boost to its mission of helping deserving American families access affordable loans that build credit.

Lendify’s in-store tablets also ease the process for the borrowers, who can scan in their IDs and any documents we require for income verification along with taking their picture through the tablet’s camera. Before finalizing their loans, borrowers can review all loan documents on the tablet and sign using their finger, eliminating the need for long paper based forms and processes.

INSIKT uses text messages and other alerts to remind borrowers of their payment dates and other key information. Borrowers can make payments in person at the retail store where they applied for their loan or via ACH and other electronic means.

Bonds with monthly coupons that pay more and also help working families

INSIKT’s Lendify platform analyzes thousands of data points to ensure our loans have low loss rates and perform in good times and bad. So, if we are making sound loans on the one hand, why not turn those loans into investment opportunities on the other? INSIKT aims to offer bonds to investors on a monthly basis, backed by our loans to consumers – securities that provide a unique combination of economic and social returns for accredited investors across the country.

Investors use high-tech tools on our website, provided at no cost, to review the risk and reward of the various investment options and to track performance, down to individual loan level, with data that is updated every month. Our idea is to provide all the information necessary, but in a simple and user-friendly way. In addition to transparency, we build a safety net into all of our investments by retaining the riskiest bonds – the ones that take the first losses in the underlying loan pools -- in our transactions, which aligns our interest fully with investors.

On our website, prospective and actual investors will find MyCRO (My Chief Risk Officer), which enables loan analysis using filters for such factors as loan amounts, origination dates, repayment terms and borrowers’ FICO scores. Another tool, MyCIO (My Chief Investment Officer), generates instant report cards on our past investment products, enabling easy tracking of investments from risk, return and cash flow perspective. In the interest of full transparency the information is available publicly and updated every month.

Technology is changing capital markets in profound ways. By leveraging technology, INSIKT is turning the old model on its head and providing transparency to investors and loans that open up opportunities for advancement to its borrowers.

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