Goldstein’s Avant focuses on middle-class consumers to great success
The CEO and Co-Founder of one of the nation’s largest online lenders did not take long to celebrate the first $1 billion in loans funded.
Avant’s Al Goldstein said at his company’s current monthly pace of $200 million in funded loans, the $2 billion milestone should come at some point this fall.
While Avant is most definitely benefiting from the increased awareness of the alternative finance industry, including the recent announcement of Goldman Sachs’ looming entry in consumer loans, Mr. Goldstein said most of their success comes from minding their own store and focusing on delivering high-quality products to a surprisingly underserved market.
“We are unique in that we are the only lender as I view it that is focused on an underserved market that needs access to money and that is middle-class consumers,” Mr. Goldstein said.
Defining the middle class as those with annual household incomes between $40,000 and $100,000, Mr. Goldstein said Avant is meeting their needs by providing better products for this group which they are finding easy to apply for.
In one sense, it seems surprising, given the size of the middle class, that more lenders are not competing in the space. Mr. Goldstein said the reason is because the amounts being lent are smaller and the recipients have smaller incomes, so some see it as more risk for less return.
“You have to be a lot better at risk assessment and underwriting,” Mr. Goldstein said. “Super prime consumers come with less risk, which makes them easy to serve.”
The tricky relationship millennials have with credit has been a hot topic in alt-fi circles of late. The CARD Act produced some good results, including creating more transparent credit card originations, Mr. Goldstein said, and while it hindered a younger person’s ability to obtain a credit card, millennials are not the first generation to have difficulty establishing themselves in the credit marketplace.
Mr. Goldstein said many millennials are early adopters with higher demands for better products. They want unique products catered to them and delivered in real time.
“I don’t fully buy into the narrative (of millennials turning away from banks because of the harder time getting credit),” Mr. Goldstein said. “Most are not using banks because they do not like going to a physical branch. I know I don’t.”
“I order my food from Grub Hub and my car on Uber. They’re specifically catered to my needs.”
Avant is among the companies revisiting the relationship between its various departments. Especially when your product is a technology-driven one, it makes no sense to operate with a silo mentality.
“We view Avant as a technology and analytics company as opposed to a finance company,” Mr. Goldstein said. “And collaboration is the core behind the creation of better products.”
Start with great people who are highly motivated to solve problems, Mr. Goldstein said. Being only two years old, Avant still has a startup’s mentality where engineers will work long hours but have fun at the same time. A compensation package which includes a lower base plus equity tends to attract younger workers open to creative problem solving and not married to one outlook.
By mixing staff from different departments, Mr. Goldstein said, those solutions foster buy-in from the company as a whole because more areas have input into their creation. Better products are a result.
“Another differentiation point for Avant is we have better analytics, better science, and better modeling,” Mr. Goldstein said.
Looking ahead, Mr. Goldstein said there are plenty of things which excite him. He envisions Avant being a leading credit platform in many parts of the world. In order to realize that goal, Avant will have to apply more advanced algorithms to create products which solve problems, an area he said he finds very interesting.
Such an outlook is not limited to finance, Mr. Goldstein said, adding the same principles can be applied to solving problems in areas such as health care and education.
Avant also operates in the United Kingdom and Mr. Goldstein sees Canada and Australia as natural expansion opportunities. While each country’s markets can be unique and there some cultural nuances, Mr. Goldstein said there are important similarities.
“The core thesis is similar in every country – what is the hole and how can we use analytics to solve that hole.”
Once you isolate the firms looking beyond their own borders, the view changes drastically, Mr. Goldstein offered.
“While it seems like it is getting really crowded, There’s only a few at scale, ” Mr. Goldstein said. “Avant is one of the few thinking globally, and that is strategically unique.”