In the past, all financial services were provided by traditional financial institutions. However, this is not the case today. There is an emerging trend where financial services are created by a financial technology enabler and then delivered by a corporate client. Often these companies that do the distribution are not even remote financial institutions.
If you’re curious to learn more about fintech enablers, we’ve written an overview of the concept here. This article will focus on how loan services are integrated with other services.
What is credit as a service?
Also known as Loan as a Service (LaaS) and Integrated Loan, Credit as a Service (CaaS) enables businesses to provide loans. Providing a loan service involves the process of credit scoring, credit underwriting, fraud detection, loan disbursement, and repayment collection.
CaaS companies take care of these processes for their clients. At the same time, clients will be responsible for marketing the service, attracting borrowers, disbursing the loan, and collecting the repayment.
Benefits of CaaS
One of the advantages of CaaS is that it provides alternative data. In most cases, customers are companies that have collected huge amounts of data from their customers, and CaaS providers come in to help understand how to use that data to determine customer creditworthiness.
The data includes online behavior, social media activity, call records, subscriptions, and more. This type of data differs from the data that traditional banks and financial institutions use for their credit rating.
Another great advantage of CaaS is digitization. Many traditional financial institutions still handle loan applications and credit scoring processes using pen and paper. Therefore, CaaS providers are not only helping digital-native customers provide loans, but are also helping conventional and non-bank banks to digitalize their lending services.
Notable players in this field
Ezbob: As a pioneer in the rapidly growing LaaS industry, Ezbob started in 2011 in the UK. It provides an open platform that enables financial institutions to create, launch and operate financial products for their clients, leveraging the data-rich open banking environment. The company was able to reduce loan servicing costs by up to 80%, allowing SMB clients to receive a loan decision in as little as seven minutes with funds transferred on the same day.
Rising: Created in 2019 in the United States, Rising became a unicorn in less than two years. Similar to Ezbob, Amount helps financial institutions go digital in months. HSBC, TD Bank, Regions Bank, Banco Popular and Avant are some of Amount’s clients. On the other hand, Amount also allows merchants to offer payout options under their brand. Recently, Barclays US Consumer Bank became one of the first large banks to partner with Amount to provide this type of white label remittance service.
Liberis: Founded in 2007 in the UK, Liberis has provided over £ 500 million (US $ 672 million) of financing to 16,000 SMEs in Europe, the US and the UK. It then moved to B2B2B, now primarily partnering with markets, software vendors and acquirers such as FIS’s Worldpay and Global Payments. These partners integrate with Liberis to offer their end customers personalized, revenue-based, pre-approved financing.
Roostify: Created in 2012 in the United States, Roostify is a LaaS company that focuses on mortgages. Santander, TD Bank and Colonial are among its clients. They use Roostify technology to analyze behavioral data and digitize their mortgage application process.
Linear FT: Linear FT aims to help banks reinvent the business lending process. It provides a combination of software, analytical information and professional services to deliver a revolutionary digital experience. As a wholly owned subsidiary of OnDeck, one of the largest online small business lenders, Linear FT builds on the legacy of US $ 10 billion loaned over the past decade.
Credit: Crezit is one of the few CaaS startups in Japan, if not the only one. The company is focused on connecting traditional consumer lenders to native digital technology companies. Recently he announced a partnership with one of the largest consumer finance companies in Japan, ACOM.