Palantir Technologies is known for using big data to tackle tough problems like counter-terrorism analysis and measuring financial risk at mega banks. Since 2012, a group of veterans from the Silicon Valley company have taken on an equally daunting task: taking the misery out of the home mortgage process.
The company they founded is called Blend, a startup that sells software to US banks to digitize lending. Getting a home loan can take as many as two months and has traditionally been heavy on paperwork. Blend co-founder and CFO Erin Collard says the company’s technology, used in apps at lenders like US Bank and Wells Fargo, has cut the time it takes by about two weeks so far.
Getting a mortgage in a day isn’t legally possible, but Collard says the objective is to bring it down to a couple of weeks. He says the days of paper-based processing of information are coming to an end. “There will be a point where any financial product is easily achieved with a one-tap process,” said Collard, the former head trader at Peter Thiel’s Clarium Capital Management and an advisor to Palantir, where he met Blend’s co-founders. “We are looking into making that possible.”
Some think Blend, last valued at $600 million according to PitchBook data, could be galloping toward the $1 billion mark. But when the company started out, social media was the preferred entrepreneurial pursuit in San Francisco. To the extent that fintech was a thing, Collard says the the business models more often looked to compete with the banks to provide lending, rather than selling software to them.
There were also doubts about whether financial services via smartphones would catch on, especially for more more challenging things like mortgages. That all began to change when Rocket Mortgage started running Super Bowl ads touting quick mortgage approvals using a mobile phone. “Our phone never stopped ringing,” Collard said.
Blend now employs 350 people and has around 135 banking customers that represent 25% of the US mortgage market. It handled some $230 billion worth of mortgage applications last year. Collard says some of the best advice he got from Thiel, a serial entrepreneur and PayPal co-founder, was to sell the software to banks instead of becoming one itself. “If we sign one contract, overnight we get millions of consumers,” he said.
The company is also riding a fintech mega trend: customer data is getting easier to access. Instead of having to pull three months of accounts statements and send them to the mortgage lender, technology made by companies like Plaid and Yodlee can connect with the bank and pull it out automatically. Online brokerages like Betterment and Robinhood, and payment companies like Venmo and TransferWise, are using this information to quickly onboard new customers without the customary hassle.
“I don’t think people realize how revolutionary it’s going to be,” Collard said.
People prefer to use their phones for simple financial transactions. But a report from Fannie Mae signals that not everyone is ready to do complex transactions, involving hundreds of thousands of dollars, without a face-to-face interaction. While most Americans already use online banking, the majority of people surveyed in telephone interviews said they would rather to talk to a person when getting a mortgage.
Blend’s Collard acknowledged that not everyone is comfortable making big decisions without a customary branch visit. He said the company’s software still allows users to chat directly with a loan officer if they want to, and he argues that mobile apps can make the pool of customers bigger by, for example, tapping into lower-income consumers who don’t have a computer at home. But in the end, the exec thinks the move to digital is inevitable.
“You want more of an Uber experience rather than something with thousands of pieces of paper,” he said.
The future of finance on Quartz
- Wealthfront is adding more bank-like features. The 11-year old robo-investor’s new account offers a 2.24% interest rate, near the top of the charts in the US.
- What Brexit? UK fintech firms, and neobanks in particular, have no shortage of cash from investors. London-based Starling Bank said this week that it raised £75 million ($96 million).
- Revolut sparked a media frenzy when it used (or appeared to use) customer-spending data in a Valentine’s Day ad campaign. Such marketing is common in the payment business, but attitudes may have changed after the Facebook-Cambridge Analytica scandal.
- What does JPMorgan see in crypto now that it didn’t before? The biggest US bank by assets says its JPM Coin will represent one-for-one dollars held in its accounts, and will be used to make instantaneous payments.
- If a JPM Coin is supposed to be worth $1, what is a Binance token worth? According to Quartz’s valuation, the popular crypto exchange’s coin (currently trading for around $9) is about 1,000-times overvalued.
Heard on headphones
“It’s shocking if you come from traditional markets to see all this stuff that like, they would take you away in handcuffs for that in real markets,” Joshua Greenwald, formerly of high-frequency trading firm DRW, talking about crypto-token markets on Chat With Traders with Aaron Fifield.
The future of finance elsewhere
- Goldman Sachs has been on a spending frenzy. The New York bank, along with Point72 and others, invested $44 million in Nav, a credit-report startup, and it also participated in a $20 million round for Second Measure, a company that analyzes credit card data.
- Fintech investment in Latin America picked up in 2018, with Brazil attracting a record $556 million. Meanwhile, deal making in the sector declined in France and Germany.
- Ant Financial bought UK-based currency exchange WorldFirst, reportedly for $700 million, in the Chinese firm’s first deal for a western company. Ant’s attempted acquisition of MoneyGram was blocked by the US government last year.
- The Financial Stability Board is more concerned about big tech than fintech. The global regulator warned that watchdogs should monitor how competition from the likes of Google impacts lending standards and profitability.
- Finablr is planning to launch an IPO next month. The United Arab Emirates-based payments company will be listed in London.
Previously, in Future of Finance Friday
Feb. 1: Apple should issue a debit card
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