there is no alternative - harnessing alternative data for small business lending and portfolio...

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There is no alternative — Harnessing alternative data for small-business lending and portfolio management

©2015 Experian Information Solutions, Inc. All rights reserved. Experian Public. 2

Rob Frohwein Kabbage

Pete Steger Kabbage

David Huizinga Experian

Introducing:

@ExperianVision | #vision2015

Follow us on Twitter:

3 ©2015 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Overview of Experian’s approach to alternative data

Overview how Kabbage leverages alternative data today

Introduce Kabbage white label product and Experian partnership

Q&A

Agenda and objectives

Data


Alternative data helps

unlock a better

understanding of small

business performance

and ability-to-pay


What is big data?

The datafication of everything.


Making sense of alternative data

We’re drowning in data,

yet thirsting for insight.


New data sources

The new

data

frontier

Transactions

Mobile location

sightings Social media sentiment

(reviews) and traffic

Shipments

Business valuation

Web traffic

Credit history

Financial statements

Timeliness

Sp

ec

ific

ity

Cre

dit q

ua

lity

Co

incid

en

t in

dic

ato

rs

Historical Current Prospective


Opportunities and challenges with alternative data

Opportunities – coverage and timeliness

Coverage: SMB strength, companies with little or no credit history (“emerging” and “thin files”)

Timeliness: Identification of new businesses, early warning indicators, status change alerts / triggers

Challenges – interpretation and modeling can be tricky

Trends matter, but not without context

Context may be specific to industry / geographic “trade area” (restaurant in urban center vs dry cleaner in rural area)


How Kabbage

leverages

alternative data

Rob Frohwein

CEO and co-founder

Kabbage

Pete Steger

Head of Business Development

Kabbage


What if


The future is now Now we can instantly review

and approve small businesses

and consumers for funding by

using their real-time data.

Important Data is Everywhere

Connect the Data Dots

Mitigate

Risk

Rate

Changes

Adjust

Lines Marketing

Payments

Collections

Kabbage 2010 Instant Financing for eBay Customers

Kabbage 2015 Instant Financing for ALL Small Businesses

Kabbage 2015

+ Highly-disciplined credit screening &

real-time monitoring

+ Proprietary “big data” analytics

capabilities

+ Robust credit model

+ Ongoing relationship with customers

creates a recurring revenue stream

+ Over a dozen online and offline data

partners

+ Efficiently reaches SMBs nationwide

& globally via internet

+ Date launched: May 2011

+ # Employees: ~180

+ # Accounts: 320k+

+ # Qualified customers: 40k+

+ $$ Loans: $700 MM+

+ # Loans to date: 246,000+

+ Issued patents: 2

Overview Disruptive Technology

SMB Lending Model is Ripe for Distribution

SMALL BUSINESS IS

BIG BUSINESS

228 MM IN THE U.S.

+ Micro loans (≤ $100K) to SMBs have fallen every

year for the last five years

+ The largest banks (≥ $50B in assets) have shrunk

their SMB lending (↓17%) from 2008-11

+ SMB loans represent only 1.21% of all business

loans and are shrinking

+ CRA institutions reported the number of micro

business loans fell by 2M Y/Y in 2010

65% OF ALL NEW

JOBS IN THE

U.S.

$283 B1

TOTAL OUT

STANDING

DEBT

50+ %2

OF PRIVATE

NONFARM GDP

1. SBA Defines “Micro Loans” to small businesses as under $100k.

2. Office of Advocacy, US Small Business Administration, July 2012. Data as of 2011.

Challenges in Existing SMB Lending

Process

Inefficient, manual and human

intensive

High expenses

Not scalable

Model doesn’t support micro

lending

Lack data

Long and cumbersome process

Paperwork intensive

Collateral required

Time away from business

Ongoing documents needed

SMB Borrowers Traditional Lenders

+ 40% of all SMBs are annually seeking funding

+ 43% won’t get the funds they need

Kabbage Created a Better Way

PAYMENT DATA

SALES DATA

BUSINESS & PERSONAL INFO

AVERAGE >50,000 TRANSACTIONS ACROSS

5 DATA SOURCES ANALYZED PER CUSTOMER

CREDIT INFORMATION

Continuous Monitoring of Payment, Sales, Business and Personal Data

Kabbage collects and analyzes

real-time, verified data from nearly

350,000 SMB customers daily.

Automation, automation,

automation 95 out of every 100 customers have a

completely automated application experience.

Ongoing Monitoring Real-time data are critical

Data Usage

+ Underwriting

+ Line management

+ Pricing

+ Collections / Payments

+ Marketing

Persistent

Real-Time Data

+ Transactions

+ Reviews

+ Vendor Relationships

+ Profit / Loss

Learning Model

+ Origination

+ Repayment Behavior

+ Financial Health

+ Monitoring


Originations models

Account management models

Predictive payment models

Collections models

Smarter funding


Mandatory equipment: Iron stomach

Customers are extremely willing to provide access to data

Model iteration and testing is critical for a rapidly expanding data pool

Sales works – sometimes people actually want to talk to someone

Imitation really is the most sincere form of flattery

Lessons learned


What’s next?

The Kabbage Platform The Kabbage Platform is a superior financing engine

configurable for banks and other organizations looking

to provide financial services to their customers.

Introducing the Experian

Kabbage partnership -

helping make available

Build the solution that

works best for your

business.

The Kabbage Platform gives you flexibility

to select options that meet your unique needs.


[email protected]

For additional information,

please contact:

@ExperianVision | #vision2015

Follow us on Twitter:


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