Fintech
Somehow, Blueacorn (who?) and Womply (who?) Became the Faces of Fintech in Congressional Investigative Report on PPP Fraud
December 5, 2022
According to a newly published congressional committee investigative report, fintechs facilitated PPP fraud. How this happened is laid out in 130 pages of detail that seemingly puts the brunt of the blame on Blueacorn, a purported fintech that was paid $1 billion in SBA processing fees for its role in facilitating PPP loans.
Of course everyone knows Blueacorn because they… oh wait, they probably don’t because up until April 2020 Blueacorn did not even exist. According to the report, the CEO and co-founder of Blueacorn was in the business of selling cell phone accessories until he founded Blueacorn for the singular purpose of facilitating PPP loans. This highly technologically advanced company consisted of “off-the-shelf fraud screening software” and a “single direct employee who assisted with processing PPP applications,” according to the report. In the eyes of investigators, this apparently qualifies as a fintech.
As 1.7 million loan applications poured in to Blueacorn, the company then relied on an affiliated company that hired friends and family members that had little to no experience and got virtually no training to process the loans. Inevitably, fraud piled up, bad things happened, wrongdoing may have occurred, and Blueacorn was somehow paid a billion dollars for its work. The real villain of this mess? Fintech obviously!
A fintech is how investigators cast Womply, an online reputation management company that helped people manage their reviews online. Womply had no ties to lending or fintech until it suddenly became a PPP loan broker in April 2020.
“Womply entered into referral agent agreements with ten lenders or platforms and ultimately referred approximately 7,000 PPP loans totaling $360 million in taxpayer dollars while acting as a referral agent,” the report says. That was just in 2020 when it earned only $3 million in fees. Encouraged by its early successes, Womply went on to generate $2 billion in fees for its role in facilitating PPP loans. Ultimately, as a company with no background in lending or finance, investigators were shocked to discover what had taken place along the way.
The end result of this report?
ProPublica: Fintechs Made “Massive Profits” on PPP Loans and Sometimes Engaged in Fraud, House Committee Report Finds
Select Subcommittee Press Release: New Select Subcommittee Report Reveals How Fintech Companies Facilitated Fraud In The Paycheck Protection Program
NBC News: Executives at ‘fintechs’ made hundreds of millions handing out PPP Covid cash, report says
NY Post: Tech firms defrauded feds by brokering shady PPP loans to collect fees: report
It would be fair to chastise bad actions and bad actors exposed in the report, but to take a multi-billion dollar industry that has been built up over a decade and have it defined by a cell phone accessory store owner and an online reputation management company hardly seems fair. The committee that published its report should change the title and nearly all mentions of fintech throughout. By the report’s own weak logic, the United States Congress could also be characterized as a fintech.
Putting in the “Work” in Network
November 18, 2022
Working in alternative finance goes beyond sitting at a desk, making phone calls, and closing deals. Social media, networking, and staying up to date on industry current events are just as necessary, if not crucial as a financial professional.
Social Media
While some may doubt social media’s importance when it comes to finance, it holds more value than one may give it credit for. LinkedIn was recently ranked as the #1 platform for financial services followed by Twitter, TikTok, YouTube, Instagram & Facebook. A business social media presence allows potential clients to see the success and growth of a company, remain updated on exciting news, and be constantly reminded of their existence.
“Us keeping our content up and our exposure up is vitally important in social media,” said David Kirk, National Sales Manager at ACH Works. “And not just LinkedIn, but also the blogs and the forums on the different channels.”
“I think the importance of being able to market on social media and being able to show other companies about yourself is huge,” said Josh Feinberg, President at Everlasting Capital. “And the reason why I think it’s huge is because it shows that you’re a real company with real goals, real values, and it shows the outside world you’re a real company.”
Feinberg added that businesses should use social media to support other people and businesses as well and not just talk about themselves all the time.
“I definitely think as an industry as a whole you have to work together and be able to shout out other companies and being able to show support because being able to get to the next level isn’t just a single-handed thing,” said Feinberg. “It definitely takes a team and sometimes that includes other people outside of your own company and really helping other companies grow alongside with you.”
Industry Events
Networking with other colleagues is an essential part of being an active member in the finance community. Forming genuine connections with people around the country can result in partnerships, a broader clientele, or just another ally in the field.
“As far as networking goes, I think it’s the most important thing you can do. You need to know what’s going on in the industry, around the industry, not only for yourself but also for your clients to be able to deliver a better product to the end user,” said Tony Cimino, Director of Partnerships at ROK Financial, during a brief interview at this past Broker Fair. “And that’s what we’re all here for anyways is to actually get deals done.”
“We do a lot of emails and phone calls but when it comes to that face-to-face interaction, it’s a totally different story,” said Brooke Brown, ISO Manager at Lendini, during Broker Fair. “It changes the game, and it just adds a completely different feel to the relationship, so I really look forward to these types of events.”
And one can’t forget the news itself to stay updated either.
“I go to AltFinance,” said Kirk of ACH Works. “I go to the Third Party Payment Processors Association, I get their newsletter, I regularly go to Daily Funder.”
Canadian Lenders Summit a Real Bright Spot in Challenging Times
November 17, 2022
When the Canadian Lenders Association last convened for its summit in 2019, the organization had only 75 members. Today, its membership is approaching 300. Most people I spoke with attributed the rapid growth of membership to the tireless efforts of CLA co-founder and President Gary Schwartz. That achievement was also visually evident on Wednesday when more than 500 attendees literally packed into the MaRS building in Downtown Toronto for the first return to in-person since all those years ago.
The excitement of being back together was bittersweet in that there was collective acknowledgment that the economic climate had become less than favorable. For example, the opening session of the entire day was aptly named Raising in a Downturn. However, the discussion itself was much more optimistic. Neil Wechsler, CEO of OnDeck Canada, for example, talked about the benefits of having operated their business “underleveraged and overcapitalized” to be prepared for times such as this while numerous sidebar conversations suggested that startup fundraising was still very active. Expansion was also top of mind for many with several companies revealing that they had just set up shop in Canada from abroad or that they had expanded their home-grown Canadian business into other markets like the US. 
Predictions for what’s to come were all over the place but few, if any, expressed any real fear (except for the mortgage people). Attendees came to the summit to do business, grow, and to partake in the annual ritual of lamenting the slow adoption of open banking.
The banks, meanwhile, are also warming to fintech (finally) and had ample representation at the event. Innovations in concepts like loan insurance and collections technology also stood out. Seating during the sessions were always completely full throughout the day and overall it was a major success. Despite whatever happens next, I would anticipate that the CLA would probably graduate to an even larger venue next year as the organization grows in importance.
NorthOne is Building Finance Departments For Small Businesses
October 20, 2022
NorthOne recently received $67 million in Series B funding from investors including former NFL star Drew Brees, Battery Ventures, Don Griffith, Ferst Capital Partners, FinTLV, Operator Stack, Redpoint Ventures, Tencent, Tom Williams, and Next Play Capital.
Founded in 2016 by CEO Eytan Bensoussan and COO Justin Adler, NorthOne was designed for small business owners to build a finance department without the complexity of a bank. Coming from an entrepreneurial background, Bensoussan noticed that being a great owner does not make one a great financial manager. With the idea of building good banking and accounting for businesses and combined with Adler’s professional career in the tech space, NorthOne was born.
“We want to build finance departments out of every small business in America, bring the sophistication of what so many of the biggest companies around us enjoy but bring it to the small businesses that could never dream of being able to build a finance department for their small business,” said Bensoussan. “I think that’s the gap that we’re closing.”
Through NorthOne, customers not only get access to a bank account but also technology that organizes and manages other business functions. Business owners can pay invoices, do payroll, and send ACHs or wires in seconds, for example, all while integrating with their existing accounting, e-commerce, and POS software.
Conducting all this from a desk or mobile device without having to go to a bank is a service directed at small businesses with fewer than 10 employees, that are family owned, and are managed locally in the community.
“…here we are talking to a lot of these business owners explaining that there’s so much more that a bank account could offer if it was designed to be more than just a store of money,” said Bensoussan. “I think that’s this eye-opening moment when we talk to them, and we get a lot of folks saying I never even thought that it could go that far. And it’s an exciting moment for us as well.”
Onyx IQ Customers Can Now Use Actum Processing
October 18, 2022
Onyx IQ recently announced a new partnership with Actum Processing. Customers of Onyx IQ, a loan & MCA management company founded in 2017, will now be able to process their ACH payments using Actum.
“The lending space happens to be one of our most productive niches, being that funders and brokers need a means to collect payments and fund deals,” said Vincent Lipari, President of Actum, “the ACH network is that vehicle and Actum takes pride in delivering reliable services for our clients.”
Onyx IQ, described as a “digital lending platform that enables you to fully automate every aspect of your business” and led by smb finance veteran Jay Keller, launched its software this past July.
“It’s a workflow solution with all the appropriate integrations and all of the reporting that the MCA and alternative lending spaces might need,” said Elizabeth Schuerman, VP of Sales at Onyx IQ.
The arrangement between the two companies is not mutually exclusive. Onyx IQ customers can use other processors if they so choose and Actum does ACH processing in many spaces outside of lending including the shipping space, fantasy sports, gaming, and more, but the collaboration is significant for another reason; Both individuals, Lipari of Actum and Keller of Onyx IQ, have known each other for roughly 11 years and ironically had never done any business together. When the opportunity presented itself, their non-business relationship grew into this newfound partnership.
“Integrations like the one we have with Onyx IQ help Actum attract more quality lenders, which is good for growth in transactions and revenues,” Lipari said.
Overall, the deal “allows net new customers to start funding in as little as 2-4 weeks, processing ACH payments and paying commissions on the rails that already exist between the two platforms,” an official statement says.
Rapid Finance Has Evolved Into a Three-Piece Business
October 12, 2022
Historically, Rapid Finance has been a lender, but over the last few years the company has expanded into other areas including portfolio servicing and technology. It’s a three-piece business, one that now includes a new wholly owned subsidiary, Thrive.
Thrive is described as an end-to-end digital lending platform that can be used by banks, credit unions, or other organizations to offer small business loans faster and easier to their customers.
Kunal Sehgal, co-founder and CEO at Thrive, said that Thrive’s technology can handle everything “from the application intake, to actual data collation and aggregation, to underwriting to decisioning, to origination to closing, and then servicing as well.”
The product gives Rapid a unique tool in its arsenal, given the company’s background. Will Tumulty, CEO at Rapid Finance, explained that Thrive’s technology will be greatly enhanced by Rapid’s own experience in the lending business.
“If you want to do a partnership with Rapid [through Thrive], you’re not just signing up for software,” Tumulty told deBanked. “You can get software, you can get potentially balance sheet access, you get expertise in servicing and credit management that Rapid has developed over more than 15 years in small business lending. And we think that’s a big difference for companies that are looking for a partner to help them get into the small business lending space.”
The acquisition was announced on October 3rd at American Banker’s Small Business Banking conference and is part of Rapid’s recent corporate rebrand and restructuring, which includes a new logo and website.
Lavu Adds MCA Product Through Partnership With Parafin
October 7, 2022
It’s not just DoorDash that Parafin has partnered up with to provide MCA funding. Last week, the restaurant software company Lavu launched Lavu Capital to help restaurants owners access capital.
“We are a restaurant software company that focuses on small and medium restaurants,” said Saleem S. Khatri, CEO of Lavu. “Think of your favorite restaurants that have one or two locations that are really really popular, that are ingrained in the community. We do everything from point of sale to online ordering, payment processing, and anything a restaurant would need to start and grow their business.”
Khatri said that one thing they noticed is that these restaurants have a fundamentally hard time getting loans and that led them to connect with Parafin. Parafin’s product is an advance on future sales, not a loan, and their offerings have been simply integrated into Lavu’s technology. Parafin automatically generates an offer for restaurant owners that they can see in their Lavu dashboard.
“…it’s just really beautifully designed,” said Khatri. “It basically says, ‘Hey, you have an offer to borrow up to $5,000. Do you want it yes or no?’ And you just click ‘yes’ and you’re good to go, the money deposits straight into your bank account, and then you have a repayment schedule. And it just pulls it directly from your bank account according to that repayment schedule.”
Khatri says they haven’t really begun to market the product yet and they’ve just started off with a limited base of customers but that the plan is to roll it out to all their customers around the US. They’d even do it with their customers outside of the US if they could, but the tech is not set up to do that just yet.
“This is going to be a feature and an offering that really really benefits our customers because it gets to the heart of what they need, which is they’re in constant need of liquidity, they’re in constant need of kind of tools to run their business better,” Khatri said. “And it just really fits our portfolio of products that we offer to these customers. So the reception has been awesome.”
This New Small Business Lending Tech Started in New Zealand
October 3, 2022
Dave Lewis, CEO at Ranqx, co-founded his company in 2015 in New Zealand. With a plan to help small businesses, accountants, and bankers all understand the financial performance of a business, the company eventually realized that such information could be used to improve the archaic small business lending process with banks.
“The long story short is we pivoted into small business lending because we saw that banks and credit unions were broken and couldn’t efficiently lend to small businesses,” said Lewis, “and we think there’s a huge opportunity to change that going forward.”
At the time, Ranqx was focused on its own domestic market, a nation with approximately 5 million people. It was when Covid started that the company’s technology was finally understood. In 2020, for example, Lewis received a call from the CEO of Kiwibank, saying, “Look Dave I think every CEO of every bank in the world has just figured out that it’s not a good idea to have small businesses visit a branch to fill out forms for a loan because we’re in a pandemic.”
Suddenly, Ranqx became the technology behind Kiwibank’s Fast Capital product, opening the door to a lightning fast online loan application process.
“A small business can apply for working capital in under two minutes. And they’ve got a decision within three minutes of that application,” said Lewis. “Within five minutes they know whether they’re going to be funded by Kiwibank or not.”
More recently, Ranqx is expanding into North America where it sees similar opportunities to improve the loan application process. Though the target customer is still banks, the company is open to working with online lenders, which Lewis thinks can benefit from the tech as well.
“We see a lot of portals that happen in the online lending space, but we don’t see a great use of real time data of APIs, of auto decisioning,” said Lewis, “which we’ll see there are a lot of manual processes that go in there, a lot of document uploading, and a lot of, still people-time required to underwrite and manually spread the financials to be able to get a yes or no decision.”
Ranqx has also recently appointed Ex-JPMorgan Chase CIO and Treasurer John Horner as its new chairman and formed a new partnership with Visa.
“I think the key thing that I would want [the] audience to be aware of is just the alternative data sets that are now available that can be automatedly analyzed and calculated and used within an underwriting decision,” said Lewis. “And the ability to ingest that data from companies like us in an orchestrated way, is something that we can really help accelerate. At the end of the day, it doesn’t matter whether you’re a bank or an online lender, the key fundamentals are, ‘who am I listening to and how likely am I going to get repaid?’”
