Thanks to her generous parents, Arti Modi made it through university without student loans. Modi did have a credit card, but she almost never used it. It’s the kind of responsible behaviour she should have been rewarded for.
But to a financial institution, the then-recently graduated Modi’s debt-free conduct made her an unknown quantity. “I go to the bank and I try to get a really good loan out,” she recounts. “But unfortunately, I don’t have any credit files, so I don’t have the credit history to be able to receive an affordable loan rate.”
That was just over a decade ago. Today, Modi is the founder and CEO of Lending Arch, one of the many startups recently launched in the financial technology (fintech) space. The consumer borrowing platform, which went live last year, serves customers with the kind of profile Modi once had. Lending Arch, calls them “future prime”—meaning that they may not have a big credit score or a heavy credit file yet, but still have the potential to be good borrowers.
Here are three key lessons Modi learned while starting Lending Arch.
1. Build something more than an MVP
There’s a line of thinking in technology that you should get out in front of potential customers as quickly as possible, and worry about fixes and improvements later. This minimum viable product (MVP) strategy holds that “if you’re really happy with the way that [the product] works, you probably worked on it too long,” explains Modi. She disagrees. “You only get one chance to look good.”
It’s important to be proud of the product you put out into the market, Modi says. But she doesn’t dispute the wisdom of constant improvement. “Use [your MVP] as a stepping stool to be able to do further iterations,” she counsels.
2. Figure out the customer acquisition strategy
Like any good entrepreneur, Modi believes her company has a defensible strategy that differentiates it from the competition. In Lending Arch’s case, it’s the kind of borrower the platform serves. Most lenders work off a potential client’s credit score, but Modi’s firm factors in details like employment, industry, education, and financial literacy. “There’s a huge amount of data that we’re able to put together … to be able to find those future-prime borrowers [among] those that have dropped off what our competitors are able to underwrite, or who the banks simply cannot look at,” she explains.
But Modi is also aware that there’s no shortage of companies trying to attract the attention of Lending Arch’s target demographic online. That’s where capital comes in. “You need to have a decent marketing budget to be able to actually position and market the platform that you’re putting out there,” she explains.
Online marketing is an especially expensive proposition if you’re in fintech. “Some of the most expensive words online are ‘insurance’ and ‘investing,’ and then of course ‘lending,’” she notes. Lending Arch is starting to look for channel and strategic partners to help get the word out about the platform and attract potential borrowers “What that will do is it will basically bring us customers at the point that they need a loan, but without using online digital marketing to be able to market to them,” says Modi.
3. Use your team to proselytize
The profusion of fintech platforms is being driven in part by the demands of a generation dissatisfied with existing options, according to Modi. “Millennials are starting to say, ‘I don’t really want to go to a bank to get any of my financial services. If I can get all of my activities done right now with instant gratification using apps like Uber or Netflix … why can’t I access my financial services the same way?”
Lending Arch understands that mentality, not least because several employees are from that generation themselves. That makes them the perfect people to spread the word about the platform says Modi. “We have people in our team, they’re millennials and they’re part of our marketing division,” she explains. “Friday night, they go to the bar after work, and they are telling everybody about this amazing financial technology company that they’re working on. They’re so proud and so excited about being part of this disruptive world and being able to make a difference in people’s lives.”
Every startup comes equipped with this ready-made team of evangelists, says Modi. You just have to know how to mobilize them. “Treat your team and your corporate culture very, very close to your heart, because they’re the first people that are going to talk good about your company.”
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