Boiler Rooms Are Not Brands, Kabbage CEO Says

Kabbage CEO Rob Frohwein has a knack for speaking his mind at lending conferences and LendIt two weeks ago was no different. Below are some of the most notable quotes from his April 10th presentation.

On building a brand

Unfortunately, in the online lending space, most companies basically think that boiler rooms = brand. Boiler rooms don’t equal brand. They have these huge call shops and that’s what they’re focused on. That doesn’t create brand. It just doesn’t. You have to spend money in order to build a brand over time. You have to have a brand obviously from a user experience and a customer service experience that people love. That’s how you build a brand.

We’ve invested over $125 million into building our brand specifically. We don’t use brokers and brokers are those 3rd parties that go out and find loans for you, but they don’t represent your company in the process.

How 2018 differs from 2015

About 6 months ago, I was asked to speak on a panel and it wasn’t this conference. And so, I got on the phone with the conference organizer and he said to me “Hey, we’d like to do a panel on fintech and bank partnerships.” Total yawn. 2015 called. They want their panel topic back. I mean, after all, there are probably more panels on fintech and bank partnerships than there are actual conversations going on between fintechs and banks. 2018 is all about relationships.

If the only thing you’re doing is lending money online, it’s going to go the way of the dinosaur. It’s very important. It doesn’t mean that the companies are gonna blow up. It doesn’t mean that there’s going to be any challenges, you know, trying to grow that business, but they’re not going to be the kind of exciting companies that we saw just a few years ago.

The only way to build substantial enterprise value is to be in a position to expand your brand’s offerings.

On whether or not your relationship with the customer can naturally extend to other products

I’ve heard lots of people say I had 2 million customers so I can sell them an auto loan. Actually, you can’t. That’s not the way it works. That’s not the way you build the company. You can certainly try, but the question becomes do you have implicit permission from the customer to make this kind of an offer?

How close is the next product you’re launching from both the function and a brand perspective to your last product? Right? Is it close? Smith & Wesson came out with a lot of bicycles. I am not sure what amendment covers bicycles, but they did not do great with the Smith & Wesson bicycles as far as I know.

The challenge is that most online lending companies don’t really have much of an idea about what their customers want or need because they only have basic credit info at the time of qualification and they also are just getting repayment information. That does not equal understanding the customer.

On engaging with your customers

If you’re not interacting with them very often, then they’re not thinking about you very often.

Kabbage customers take 20 loans over 4 to 5 years, 4-5 loans a year every year. We have that many positive interactions. Our competitors average 2.2.

Finally, I really think of this as the potato chip dream. And I think about Amazon a lot when I talk about the potato chip dream. What that dream is the day that Kabbage is able to sell bags of potato chips to our customers and our customers are like “of course, I’m gonna buy potato chips from Kabbage, why would I buy them from anybody else?” That will mean that Kabbage is worth hundreds of billions and our customers are incredibly happy in the process because it necessarily means that we will provide them with every product and service between where we are today and potato chips tomorrow. And that’s really the key for what we’re trying to accomplish, is allow us to expand our offerings in a natural evolutionary way and take care of our customers. And I really do think that all of us here should think about that as well especially if you’re running an online lending company. Focus back on the customer. Build those relationships. Figure out how to take it to the next level.

Read Frohwein’s memorable quotes from LendIt 2017