James Hobson OnDeck. #LEND360 LEND360.org

Transcription

1

2 James Hobson OnDeck #LEND360 LEND360.org

3 Going Global in Business Lending James Hobson, COO, OnDeck Lend360 October 14,

4 OnDeck: Powering the Growth of Small Business Through Lending and Technology Innovation $3 Billion+ total funded loans 40,000+ small business served 5th Generation proprietary credit scoring model 4

5 B&N Laundry I waited nearly 6 months for my SBA loan to go through 5

6 About Face Interior Painting I ve dealt with [my] bank since 1984 trying to get a small loan or line of credit for your business is very, very tough. 6

7 Small Business Research They have been no help in getting our business off the ground, denied our request for a loan... Our "Business Banker" is the only person we can speak to about our business, yet he refuses to take our calls or complete our paperwork. I have never met my local business banker. He seems to be rather uninterested in my business. I have had many occasions when I asked for him to contact me in regards to loans and banking, I have never heard back from him or any other staff member. I am shopping for a new bank at the moment. Can be difficult to obtain finance even with a good record. Bank managers keep changing because they keep moving, so it can be difficult in terms of communication. SOURCE: OnDeck survey of Australian small businesses 7

8 Access to Capital is Widespread Issue Local National Global 8

9 How Global Technologies Have Played Out THEN NOW RETAIL Brick and mortar stores TRAVEL Traditional travel agencies REAL ESTATE Brokers & classifieds ads LENDING Retail banks and credit card companies

10 Why is access to capital such a problem? 10

11 Diversity of Small Businesses Creates Challenges for Traditional Lenders Cash Flow Profile Restaurant Credit Card Rev. Cash Rev. Monthly Exp. Inventory & Payroll Landscaping Company Landscaping Rev. Snow Removal Rev. Monthly Exp. Fuel & Payroll Plumbing Company CHALLENGES FOR TRADITIONAL LENDERS Diverse businesses require manual underwriting Technology and data limitations Lack of standardized small business credit score Repair Rev. Subcontractor Rev. Monthly Exp. Supplies & Payroll Q1 Q2 Q3 Q4 11

12 Traditional SMB Loans Are Onerous Apply Offline 33 Hours 1 Manual Review Weeks / Months Get Funding Several Days 1. Source: Small business survey conducted by the Federal Reserve Bank of New York 12

13 Leading to a Frustrating Borrowing Experience for Small Businesses FRUSTRATIONS FOR SMALL BUSINESSES Time consuming offline process Non-tailored credit assessment Product mismatch Rigid collateral requirements 13

14 Banks Shifting Away from SMB Lending (US) Small Business Left Behind in Lending Outstanding Small Business Loans at US Banks Includes Total C&I and CRE Loans < $1,000,000 at Year End, in USD Billions Source: Federal Deposit Insurance Corporation; CEB analysis 14

15 The Rise in Online Lending

16 Customer Behavior 4 Reasons National, Online SMB Lending is Rising Access to Credit Economies of Scale Customer Satisfaction 16

17 Customer Behavior 85% of small businesses purchase supplies online 83% manage bank accounts online 82% maintain their own website 72% pay bills online and 41% use tablets for their businesses Source: National Small Business Association 17

18 Customer Behavior: SMB Operating System Moving Online 18

19 And SMBs Looking Online for Loans Almost 20% of SMB applicants looked online for financing in the first half of Source: Joint Small Business Credit Survey Report, 2014: by the Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia 19

20 Access to Credit: A Scalable Credit Model is Critical 5 th Generation proprietary credit scoring model Transactional Data A 100+ external data sources 10 Million+ small businesses in proprietary database Credit Data Proprietary Data Public Records Proprietary Data Analysis Platform Probabilistic record linkage Dimensionality reduction Ensemble learning Exhaustive cross validation Feature engineering Adaptive learning B C D E Risk Grading 2,000+ data points per application Accounting Data Social Data Score 20 20

21 Access to Credit: OnDeck s US Products Term Loan Line of Credit Use Case Buying Inventory Hiring New Staff Marketing Managing Cash Flow Size $5,000 $250,000 Up to $20,000 Term 3 24 months 6 months 21

22 Scale: Marketplace Lenders Growing Fast (US) Source: Liberum. Volumes of Lending Club, Prosper, Funding Circle, Zopa, RateSetter 22

23 Customer Satisfaction Net Promoter Scores 1 Yelp Reviews Bank of America -12 Wells Fargo TD Bank Southwes t Amazon OnDeck USAA 1 Source: Third party NPS scores from npsbenchmarks.com 2 Source: OnDeck Yelp reviews 23

24 Going Global 24

25 Going Global: For and Against FOR Small business lending problem is universal Leverage common tech and data platform Capital formation challenging for new players Business process knowledge is transferable Customer behavior moving online globally AGAINST Data coverage uneven Banking sector differences Local regulation Lack of local brand 25

26 Drivers of Global Online Lending Models How valid are the reasons against multi-country lending platforms? Data Coverage Uneven Some data sources available that are not in the US (e.g. national corporate registries) All businesses have cash flow, a balance sheet, and a P&L Banking Sector Differences Concentrated banking systems usually mean less product variety Non-US payments networks often superior to US ACH system Local Regulation Regulation can be clearer / more uniform vs. US UK has taken pro-alternative SMB lending position Local data storage / privacy issues solvable Lack of Local Brand May not be necessary (e.g. PayPal) Can be addressed through local partnerships, licensing 26

27 OnDeck in Canada: Market Opportunity 41% of Canadian business owners seek capital to grow their businesses, buy equipment, manage cash flow Source: Statistics Canada 27

28 OnDeck in Canada: Market Opportunity Yet less than half get the funding they need Source: Statistics Canada 28

29 OnDeck in Canada: Our Solution + Products Updated OnDeck Score in Canada OnDeck made first loan in Canada First product: $5,000 - $50,000 over 6 months lending + learning May 2014 April 2015 Scor e June 2015 October 2015 Updated OnDeck Score in Canada Expanded Canadian product: $5,000 - $150,000; 6-24 month terms Established on-the-ground presence with hire of Canada Country Manager Gary Fearnall Launched Canadian website 29

30 Organic Models for International Expansion Acquisition Licensing Partnering 30

31 Online SMB Lender Int l Expansion: Now Home Market Expansion Markets 31

32 Looking to the Future Every small business owner in the world will be able to access the capital they need when they need it, without dealing with the hassles of paperwork or extended time away from running their businesses. This means stronger local, national and global economies. 32

33 Lend360 $3B+ delivered to small business 33