The ideas of credit and interest are almost as old as civilization itself, unlocking doors for anyone with a bright idea who can’t bankroll it themselves with a personal fortune. Long dominated by banks, traditional markers like the all-powerful credit score may now serve as barriers to wealth for some communities, rather than enabling wealth creation.
Coupled with advances in digital technology, this calcification of credit into an opaque barrier to wealth (rather than a facilitator) has naturally opened opportunities for entrepreneurs to rethink how and where users access the cash they need. Here, we examine how machine learning, peer-to-peer sharing technology and automated collection of sensitive documents are reshaping the way we loan and borrow money.
Credit Gets a Rethink
The company: With a pair of flagship products — personal loans and a low-cost credit card — Upgrade says it’s taking a more humane approach to credit. Most customers use Upgrade loans to pay off credit cards, and its library of resources to learn how to improve credit scores. Meanwhile, an Upgrade credit card seeks to combine the payment capabilities of a credit card with the low costs associated with a bank loan.
The trend: Cycles of debt and interest can become crippling for those who live paycheck to paycheck, and Upgrade represents a general move by fintech companies and so-called “neobanks” to provide a more forgiving alternative to banks and credit cards. For repayments, Upgrade breaks down owed balances into equal monthly installments designed to pay down loans in shorter time frames, especially when compared to the spiraling costs that can accumulate from paying minimum amounts on credit cards.
It’s like a mortgage or a car loan with a clear payment schedule.”
Quotable quote: “It’s like a mortgage or a car loan with a clear payment schedule,” CEO Renaud Laplanche told TechCrunch last year. “You can budget for it and it sort of forces you to pay down the balance over a reasonable period.”
The Sharing Economy Comes For Loans
The company: Through its online lending platform, Prosper seeks to advance financial well-being among users. The service connects potential borrowers with individual and institutional investors who want to invest in consumer credit. Borrowers then gain access to a fixed-rate, fixed-term personal loan while investors earn returns on their cash.
The trend: Prosper is one of several peer-to-peer lending platforms that emerged in the mid-2000s, and has expanded the reach of its services through partnerships with banks like Spain’s BBVA. The pair announced plans to collaborate on a home equity line of credit through Prosper’s website last year, aimed at BBVA’s U.S. customers in Alabama, Texas, New Mexico, Colorado and Arizona.
We’re excited to be able to offer our customers the opportunity to quickly and easily apply for a home equity line of credit online.”
Quotable quote: “We are thrilled to have a partner like BBVA that believes, as we do, in the power of technology to improve efficiency and deliver a great customer experience,” Prosper CEO David Kimball said in a press release. “Working closely with BBVA, we’re excited to be able to offer our customers the opportunity to quickly and easily apply for a home equity line of credit online, which can be a smart and affordable financing option for things like home improvement and debt consolidation. We look forward to expanding this product offering to more states and continuously improving the experience.”
Machine Learning Transforms Lending
The company: States Title uses patented technology to make real estate closings “instant and affordable.” Lenders, real estate agents, title agents and homeowners use the company’s software to reduce cost and simplify the home closing process
The trend: States Title’s title and escrow product is built on machine learning technology, which the company says speeds up traditionally slow, paperwork-heavy processes around closing real estate transactions. Using data science techniques, users can automatically search for and create predictive title insurance claims. The platform then assigns a risk score to indicate the property’s vulnerability to legal claims and liabilities. In a blog post explaining his team’s overhaul of States Title’s data infrastructure, Data Engineering Manager Matthew Phillips highlighted the importance of machine learning to the company’s operations.
We will…augment the existing data architecture with a data lake to house and curate unstructured data...that is used to power our data science models.”
Quotable quote: “Looking to the mid to long-term, we will…augment the existing data architecture with a data lake to house and curate unstructured data — like text and images — that is used to power our data science models,” Phillips wrote. “This will exist in parallel with a more defined data warehouse model, such that different use cases can be supported with a single platform.”
Automating Real Estate Closing Document Collection
The company: Qualia builds software products to streamline the closure of real estate transactions, combining an enterprise title and escrow production platform, nationwide vendor marketplace and online closing room for a seamless consumer experience. Qualia users are primarily title agents, but also include lenders, real estate agents, vendors, home buyers and sellers.
The trend: Much of the home buying and selling process ends up stuck between mortgage lenders and title and escrow agents in the complicated closing stage — which itself consists of three stages (pre-closing, closing and post-closing).
In January, Qualia launched Qualia Post, which automates sending post-closing documents from title companies to mortgage lenders, streamlining a highly manual and time-intensive process. According to a survey by the Mortgage Bankers Association and STRATMOR Group, the average total closing and post-closing process takes nearly 2.5 months. But lenders using Qualia Post reported a 25 percent reduction in time spent on post-closing operations, freeing them to work on more high-value tasks.
And in November, because the industry hasn’t fully transitioned to digital documents, Qualia also announced its Physical Document Service to outsource the management of physical trailing documents for lenders. The combination of Qualia Post and Physical Document Service provides mortgage lenders with a comprehensive, easy-to-scale, automated post-closing solution.
Lenders using Qualia Post reported a 25 percent reduction in time spent on post-closing operations, freeing them to work on more high-value tasks.”
Quotable quote: “While most real estate technology companies are focused on the beginning of the home buying process, such as the home search for consumers or generating leads for real estate agents, we are committed to making the historically complicated closing process easier from start to finish,” said Joel Gottsegen, Qualia’s co-founder and CTO, in a press release. “Toward that goal, Qualia Post streamlines the post-closing process, reducing the workload burden caused by outdated, manual processes and making it easier for two key partners in the real estate transaction — title companies and lenders — to collaborate more efficiently.”
