CircleBack Lending hit the ground running in 2014 with a pair of announcements on financing and personnel moves they hope will position the company for growth in 2014 and beyond.
CircleBack, the online consumer credit platform where institutional investors can purchase personal loans made to prime borrowers, closed a $1.9 million equity financing deal with GETCO LLC founders Stephen Schuler and Dan Tierney in late December. GETCO is an electronic securities firm that recently merged with Knight Capital Group.
“GETCO revolutionized the way investors trade stocks by utilizing new technology,” CircleBack CEO Michael Solomon said in a news release. “Today, we see a similar opportunity in the consumer credit market, and look forward to leveraging Dan and Stephen’s experience as we scale.”
The GETCO deal is one of many significant such deals involving P2P firms in recent months.
“This capital raise is definitely a sign of online lending’s rising influence in the U.S. financial services industry,” says CircleBack Co-Founder and COO Todd Walters.
The equity and knowledge Mr’s Schuler and Tierney bring to CircleBack will allow the company to improve the customer experience in a number of areas. The credit underwriting process will now be automated and credit assets can be more efficiently allocated to institutional buyers. The user-friendliness of the interface and the API connectivity will also be enhanced. That will allow investors to easily track their loan portfolios over time.
The second area in which CircleBack has made significant moves is in their human capital. They announced several key hires of people with skill sets that should allow them to contribute to CircleBack’s growth in a number of areas.
One of those areas is finding prime borrowers. Bankless Times first profiled CircleBack last August. During that interview, CEO and Co-Founder Michael Solomon mentioned there was a time when finding investors was the hard part, but now it was the opposite. Several of the people brought in should be able to help CircleBack attract and retain those prime borrowers. New Chief Credit Officer Alan Schiffres previously worked at American Express where he was Senior Risk Officer for the Gold/Platinum Card Division. Mr. Schiffres also worked in risk management and advanced analytics for financial consultancy Novantas.
Three additions to the Board of Advisors will provide further knowledge in risk assessment and customer attraction. Dr. Donald Kumka has been a Vice President at Citibank and Director at credit risk consultancy Portfolio Management Associates (PFA). Richard Taverna was a long-time PFA Director, who, along with Dr. Kumka, will be looked at for their knowledge in forecasting and target marketing. John Donovan was also added to the Board of Advisors. Previously the COO at Lending Club, Mr. Donovan’s long experience in the P2P lending industry will be heavily relied on as CircleBack plots its growth strategy.
“Competition for borrowers is intense,” Mr. Walters said while discussing the new additions. “It is only going to get tougher.” The team is developing a “multi-faceted” marketing strategy that will access these new skill sets to drive sufficient borrowers volumes.
A large part of that strategy involves competing with traditional banks and credit card companies. CircleBack can leverage its powerful back-end technology to deliver consumer credit services at a significant cost advantage. For example, most of the loan underwriting process is automated, and credit assets can be allocated to institutional buyers quickly and efficiently, Mr. Walters explained.
“Our cloud-based loan platform will allow investors to easily manage and track their portfolios over time.”
Given the negative attitudes toward banks many borrowers have today, one would expect people to be flocking to P2P sites. Some are but many are not. Are many borrowers too conservative or unwilling to “think outside the box”?
“Not at all,” Walters feels. “Borrowing from alternative lenders is becoming more mainstream every day, and the banks are taking notice of this and seem to feel threatened. Note that Wells Fargo recently banned their employees from investing in P2P loans.”
But can the industry do a better job of educating prospective clients in their advertisements and public relations activity?
“Absolutely. There will always be room for improvement in this area. There have been some criticisms of the P2P lending model, mainly coming from people who do not seem to understand the industry very well. CircleBack and other P2P platforms need to work continuously to improve our operations and educate the public about how we can offer them unique, value-added services.”