[00:00:00] Rich: Good morning. This is Rich Alterman with GDS, and the Lending Link. We're broadcasting live this morning from FinTech Meetup in Las Vegas, I'm pleased to be joined by Nate Bray, who is the Chief Innovation Officer with LoanPro, where he drives innovation to enhance client experience and foster strategic partnerships and finance opportunities. Welcome, Nate. How's it going today? Thanks for joining and looking at your LinkedIn profile, I see it’s interesting the way your positioned as “Zero to One GTM,”?
[00:00:31] Nate: The fun part of the job is taking an idea and getting the first five customers live and then moving that over to a predictable go to market, which moves into the sales team. So, I get to do the fun, heavy lifting of inventing something and getting the first couple of customers on that.
[00:00:50] Rich: So, for our audience not familiar with LoanPro, why don't you Give us a little bit of an elevator pitch on what you guys are about.
[00:00:56] Nate: Yeah, sure. So LoanPro is a modern lending core. We have been around for about 15 years. We were founded by three brothers who owned an automotive company, and they wanted to sell more cars. They built a lending company and then realized that they needed to get their money back. So, they built a lending core to figure out how to get their money back. Most of our customers. They explain to us, is what FIS and Fiserv are to banks, we are to brands, but we have been growing in the banking ecosystem here over the last couple of years. So, we sit as the true lending core, modern lending core, API first, kind of the next generation of lending.
[00:01:33] Rich: So when we were chatting with you about joining us this morning, one of the things that was talked about was what you referred to as a transactional level credit. And, just as a way of some history, I had a flashback when I read that term, because, back in, 96-97, when I was working with Computer Science Corps, we had the CAMS credit card processing system, and I can remember a long day discussion on the ability to charge different rates down to the sku level. And, we got into a whole discussion about how to charge a different price for socks that you would buy from the gap and that was back in 1996. So, here we are back to the future. So why don't you talk to us about transaction level of credit and really, you know, how that works and what bring, what value it can bring to?
[00:02:23] Nate: Yeah. That's funny. I mean, that sku level conversation has been going along around for a while, right? But given we are the lending core; we've been able to innovate at the core. And as we looked at the way we do our installment lending business, we do highly personalized installment lending. We wanted to bring that forward, that same kind of concept to the credit card market. Nothing in my opinion, I've been in the smart in this industry for a while. Nothing cool has happened in credit cards since tokenization hit our phones, which is 2014. And it was really exciting to be able to think about how we could innovate at the lending core. And what transaction level credit is, is the ability to do exactly what you said. You can treat a swipe as an independent financial instrument. You could decide at the core to have swipes at Starbucks be 5 percent and swipes at Target to be 10%. We take all of that transaction data that's given to us by the networks and the issuer processors. And then, we've built inside our core as a way to treat those independently. We've got an entire categorization engine that recategorizes, on top of the MCC code categorizations, another 90 different kind of categories that we've built. And then we place those into a unique container and then charge interest independently. The awesome thing about it is a single payment back for the consumer, and we take that waterfall and apply that in a Carter Act compliant law. This is the future of personalization in my mind, if you are a fanatic of a sports team, imagine geofencing the stadium where you go to see games. And restaurants after five o'clock are treated differently. And when you go into the stadium, those purchases are treated differently. Then when you travel to away games, all of those purchases are treated uniquely. Right? That's where we built. So super exciting.
[00:04:20] Rich: Is artificial intelligence used in that?
[00:04:26] Nate: No, we are not overlaying a large length model around that yet. We've just specifically been using our data structure, and we use our categorization engine and that capability to decide where this needs to land. But there was lots of fun stuff that, that is headed that way. You’ve got to have a real clean data lake to do that. And we all know how hard that really was. AI on the word, but not in this use case.
[00:04:55] Rich: So, as you were developing this capability, one thing that comes to my mind is, could there be any concerns about disparate impact, disparate treatment? That, are you charging people appropriately across all credit spectrums, let's say for that same purchase.
[00:05:12] Nate: That's a really good question. One of the core values of LoanPro is putting the power back into the hands of the financial institution. I think it's easy to forget in our industry who owns the real lending program, right? There's so many fancy Fintechs and they do amazing work. Most of them have just built incredible things. But at the end of the day, it's the bank's program. We just met with Trust for a Bank. They are the ones deciding how this would work, right? Fintech has the ideas, they enforce it, we do all the policy management around that.
[00:05:47] I believe it's going to be the opposite of detrimental. I think this is going to open up. It's going to treat a group of people that have been underbanked, I don't know what the best term is there. But this is going to allow access for them and meet them where they are. So for example, we're working on this exact use case, where we've got a huge migrant population for this FinTech and we're treating their state government ID fees super unique to their interest abated. They're trying to get a passport. They're trying to get their driver's license, right? They're trying to get a state ID card. We also treat their schooling differently. So are their books, all their education, their tuition, that's all now moving from what would have traditionally been a 28 percent interest rate, to a 6 percent interest rate. That's the absolute opposite of the concern. So any patent is pending there. We have 17 patents pending in motion and a couple more that were filing. We just continue to innovate on that and feel like we're first to market and any other do it, because we own the court.
[00:06:53] Rich: One of the things that when you have a software company like yourselves. Keeping up with all the various state regulations. When you have lenders that are licensed in various states, how do you just walk us through that?
[00:07:04] Nate: Yeah, it's so crazy. We have a term internally that compliance as a strategy at LoanPro. Our Genesis story was that our initial customers all required a sponsor bank partner. And what we learned really quickly 14 years ago is that reporting back to that bank and getting the bank’s real time data and real time information was critical. And they actually taught us what the exams were, right? They helped us with the test. And then we built that as a native template inside of LoanPro. We have an ongoing template for each sponsor bank, but we also have an awesome team that's looking at the compliance, looking at the regulation, actually posted today. So today, this is a good question. Today, the CFPB announced that it's 8 maximum for credit card fee, right? I went inside our loan program this morning, took me less than one minute to deploy across the enterprise. Which, I could deploy across our entire ecosystem and solve that problem in less than a minute. I think about what that means, right? A true configuration compliance first value that we could deploy in less than a minute. That is the future. Regulation is going to get worse. It's going to get harder. And we're feeling like we're positioned to do that. When you think about trying to do that in the legacy system, it's going to be 60 days to just get scope and probably another 18 months to figure out how to get it deployed in the single like development cycle that they release in, because they release on a yearly basis. It's going to be tough.
[00:08:42] Rich: I was reading that change is going to cost the industry billions of dollars, billions of which means where are they going to look to make that up? So unintended consequences to changes like that always. So, we're sitting here in Vegas and you can't get to this meeting hall without passing by some of the gambling tables. Anything that you like to partake in?
[00:09:02] Nate: I think I'm going to plead the fifth on this question. No, I actually love the craps table. If I'm going to play, I'm going to play craps. I do not do much gambling. I worked pretty hard for that money and it's hard to see it go. So, I've been very careful on where I'm walking in Vegas right now.
[00:09:21] Rich: Well, we all know that people only tell the stories about how much they want to talk about.
[00:09:26] Nate: Yeah, exactly. I'm never going to win it. That's the problem. I never win. I win all the other tournaments, cheering and screaming. I'm always at the tables. It's like people are out in the weather with their head hung low.
[00:09:37] Rich: Well, good. I appreciate your taking time to meet with us this morning. Any disclosed remarks on other product enhancements that you might be looking at?
[00:09:46] Nate: We've been thinking a lot about on the innovation side, payment modality and payment optionality. So the root payment loans, as we look at our customers, we look at their data, spend a lot of time with the customer and in their customer success systems. And we're just seeing, ‘Hey, I want to repay my loan with Venmo or I want to repay my loan from cash app, or I want to repay it from Apple pay.’ It's just this interesting shift in mentality where, I would probably not do that, but if my college daughter has a loan, she's going to want to pay on Venmo. So, we're looking at payment modality in loan pro and how real time payments is going to look like on the loan repayment and also on the disbursement. So money in money out. Big deal for us and for our customers. We want to make sure that when a loan is funded, that that money's landing in a spot that makes sense for the customer, whether that's their phone or how that looks. The only other thing I'd say is we love GDS Link. Appreciate what you guys are doing on the front-end and just an awesome partner and super happy to be here.
[00:10:50] Rich: Well, great. Well, this is a Rich Altsman and we've been meeting with Nate Bray, loan pros, zero to one go to market chief innovation officer here at FinTech Meetup, and I want to thank Nate once again for joining me. Yeah, Rich. Thanks.
