Until recently, offering that credit product has been easier said than done, involving finding a bank sponsor to handle compliance, risk modeling, underwriting — the list goes on.
For any FinTech or B2B company looking to make its mark and build a niche offering, the costs of issuing a branded credit card alone can be prohibitive. Adding buy now, pay later (BNPL) and other flexible, customer-friendly functions? That throws yet another wrench into the machinery.
That’s the kind of value proposition that Credit-as-a-Service can deliver. Inexpensively.
Stilt, a company that built out a robust business offering loans to underserved consumers, is looking to deliver on that value proposition in the B2B world with the launch of Onbo. The offering lets FinTechs and merchants in any line of business to build and offer a credit product without a bank sponsor and follows a $14 million Series A funding round earlier this month.
Delivering a Better Value Proposition
Onbo uses Stilt’s state lending licenses and compliance framework so businesses can focus on developing their own product with Onbo managing origination, payments and credit reporting.
So far, the company has seen about half the demand for its Credit-as-a-Service coming from neobanks and FinTechs, and the other half from companies in many different verticals, including trucking, healthcare, eCommerce and remittance.
A company offering in the fleet fuel card business, for instance, can offer truckers a better credit product than traditional lenders because they know the trucking business, Stilt CEO Rohit Mittal said. It’s faster and easier for it to underwrite — and it often ends up costing less for the truckers themselves.
“There are so many different verticals where we have seen this explosion of debit and card products but no real Credit-as-a-Service infrastructure companies,” Mittal said. “Credit-as-a-Service obviously gives them a huge advantage in terms of additional revenue.”
Offering a Growing Number of Credit Products
The expertise and risk models that Stilt has brought to these environments was developed while serving another market. Stilt’s portfolio historically has been focused on the immigrant population, and the company has done hundreds of millions of dollars in loans.
The company has seen lower delinquencies among these customers than the average U.S. unsecured lender because its customers generally earn and save more money.
“All of these result in better loan performance,” Mittal said. “The only thing they don’t have is an established credit history.”
Stilt’s experience has been that both consumers and lenders need to act in prudent ways, with consumers avoiding frivolous spending and lenders not just giving money to everyone.
“We want to extend credit to consumers that they can pay back,” Mittal said. “We don’t want to make any money by putting consumers in debt. Our goal is to help them achieve something or get access to products that they can’t without debt.”
Now, with Onbo, Stilt is taking that expertise to other environments to expand credit access for companies, enterprises and FinTechs that want to do the same for their end users.
“We built everything in house,” Mittal said, “and that is now really powerful because that can form the base on which we can offer a lot of credit products to our partners.”
Read more: Stilt Raises $14M, Launches Business Credit Platform
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