One doesn’t build a FinTech in New Zealand — with a population of five million souls and a bit more than half a million SMBs — to scale only in New Zealand.
As Dave Lewis, CEO of Ranqx, told PYMNTS’ Karen Webster, the goal was always to go big in the bid to fix what ails millions of small- to medium-sized businesses (SMBs) seeking faster access to capital from banks and other lenders across the globe.
“We’re only a small country,” he remarked, “and we’ve always been looking to the U.S.”
As he told Webster, the company, based in New Zealand, traces its roots back to pre-pandemic days of 2014, when the company saw the opportunity to help democratize finance. They did it for the company’s fifth largest bank, Kiwi Bank — launching Kiwi Fast Capital — right at the start of the pandemic.
“That’s a freaky time to launch something,” Lewis said, only a bit tongue-in-cheek. Now Ranqx has crossed the Rubicon, announcing last month that it has formally launched operations in North America.
See also: Small Business Loan Platform Ranqx Launches in North America
The Mechanics
In terms of mechanics, the company’s platform expedites and accelerates banks’ existing credit and underwriting processes, without changing the underwriting risk parameters or underwriting principles. The platform provides straight-through small business loan applications, unsecured or secured, and offers an instant decision upon the SMBs’ applications.
The banks, he noted, benefit from more accurate decisioning, and can benefit from the myriad data points gathered by Ranqx (in partnership with Visa), spanning years of data including financial statements, balance sheets and information from the credit bureaus.
Lewis noted that the platform, in a sense, offers up a form of new wine/old bottle combos for the would-be lenders as they grapple with new business applicants that may have unfamiliar business models or thin credit files.
“What we are doing in a two to five minute process is we are saying, ‘This is who this company is, this is their financial status and their ability to service the loans,’” he added. “They get the insights in a far less friction-filled way.”
With at least some stats that show the success of the model, in New Zealand, Lewis proffered the details where, with data-driven insights across 100 applications, a third would be an automatic yes, a third a hard no, and the remainder would be referred for further review — and a significant majority of those (almost 80%) would be approved, too.
The platform also allows for the real-time monitoring of performance over the life of the loans, which can help foster conversations between the banks and the SMBs to triage things before delinquencies become unmanageable.
The data-rich environs help the banks answer some age-old questions: Just who are the lending to — and when will they get paid back? Along the way, with so much of the data collection automated, the banks themselves can save the thousands of dollars — as much as $4,000 — it can cost to originate loans.
If the loan isn’t approved, said Lewis, well, that’s a massive sunk cost that’s spread throughout the bank’s business. As a result, many of the mega banks push anything “below” a $500k loan down into their retail banking system, sending applicants into a branch setting to begin the traditional, paper-laden process.
An Extensible Model
The Ranqx model stands in stark contrast to traditional channels, where banks take days, weeks and even months to onboard enterprises and extend loans. He likened the model to Blend, which has been busy digitizing the mortgage lending process.
Time is of the essence, of course, for the SMBs — many of them eCommerce firms and other companies that are seeking loans in the range of $10,000 to $500,000. The platform is also extensible to other stakeholders in the financial services ecosystem, such as merchant payments provider and even brick-and-mortar services and trade firms.
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That means that the spigot opens a bit for lenders and the companies seeking loans, where many of the loans extended through the platform average around $25,000 to $35,000. That money can be used by the SMB to buy inventory or hire additional staff — and by extension, keep the U.S. economy humming.
“There’s the opportunity to extend your loan book to the smaller end of the market, because you can do that efficiently,” he said.
Some Market Differences
There are at least some differences in the New Zealand and U.S. markets, noted Lewis. For one thing, an overwhelming majority of SMBs in New Zealand use cloud-based accounting software, and there is robust federal-level registry data. However, in the U.S., there’s a lot more disparity in data quality and sources.
To that end, Ranqx has been working with partners, Visa among them, to have everything from tax data to accounting data to address those disparities and create a data ecosystem. Absent that collaborative efforts, he said, banks and credit unions — which are swimming in data — struggle to orchestrate that info into a meaningful workflow.
“We sit in the cloud and we can say, ‘Look, you don’t have to fix everything internally to be able to offer a more frictionless customer experience here.’ We can look after the data, we can do it on your brand,” he said, with adherence to the banks’ internal policies and risk scorecards — across the country and without the retail banking frictions. The banks wind up effectively competing with FinTechs on digital services and on access to capital.
Looking ahead, the greenfield opportunity is significant for the banks and SMBs navigating through what looks to be a tough, recessionary environment.
“Everybody’s got to work together to figure this out,” he said — and using the platform and the data points can help the smallest companies not just survive, but thrive.
As Lewis told Webster, “Every big business started as a small business.”
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