Like many entrepreneurs, Greg Keough credits a personal experience for the motivation to start his company. In Mr. Keough’s case that company is Finova Financial, which bills itself as a better digital alternative to a car title loan.
Mr. Keough said that while he was CEO of Mobile Financial Services, a joint venture between MasterCard and Telefonica that developed mobile financial services across Latin America, he became aware of a significant problem affecting many people.
“Half of people cannot come up with $400 in an emergency,” Mr. Keough said.
He shared the story of a friend who needed $1,750 to address a surprise expense. That man owned his car outright and used it as collateral for a 30-day loan that charged an effective annual interest rate north of 300 per cent. And it took two hours to complete the work.
Mr. Keough tried to help the man and came away in shock.
“I walked out of there saying this is abysmal,” he recalled. “I looked and said there has to be a better way to do this.”
Mr. Keough set out to develop that better way and created Finova Financial, whose signature product is the Car Equity Line of Credit. It comes with a maximum APR of 30 per cent, 12 month repayment schedule, and the ability to pay the amount off without penalty at any time. A portion of every payment goes to the principal.
“Finova Financial is entirely online,” Mr. Keough said. “That makes it more convenient and efficient for the customer. It has been well received by people outside of the formal economy.”
As clients develop a positive payment history with Finova Financial they receive lower rates, Mr. Keough said. That behavior is also reported to credit bureaus.
Cloud technology makes it all possible, Mr. Keough said.
“We’re a technology company at the end of the day. On the cloud we are totally integrated with credit bureaus and DMVs. We can make quick and effective decisions using a ton of data.”
While there is plenty of data available, knowing where to find it and which sets to use are key, Mr. Keough said. By accessing the latest auction data, Finova Financial can quickly and accurately determine a car’s current value, for example.
Consumers are also finding the process a mobile-friendly one, Mr. Keough said. Most (62 per cent) access Finova Financial via a mobile device. They can sign documents through DocuSign and submit pictures of their car. If approved they get an SMS code and can pick their money up at a CVS, Walmart or MoneyGram location.
Millions of Americans live outside the formal financial system, which does not serve them well, Mr. Keough said. Because it is a binary concept, small differences can hurt, such as missing a payment by one day because that is when pay day is or having a credit score of 749 instead of 750.
“We built our products to understand reality,” Mr. Keough said. “We want to get people on track, not punish them.”