Until recently, offering that credit product has been easier in theory, involving getting a bank sponsor to deal with compliance, risk modeling, underwriting – other great tales.
For any FinTech or B2B company seeking to make its mark and make a niche offering, the expense of issuing a branded charge card alone can be prohibitive. Adding buy now, pay later (BNPL) and other flexible, customer-friendly functions? That throws yet another wrench into the machinery.
That's the type of value proposition that Credit-as-a-Service can deliver. Inexpensively.
Stilt, a business that built out a robust business offering loans to underserved consumers, is looking to provide with that value proposition in the B2B world with the launch of Onbo. The offering lets FinTechs and merchants in almost any profession to build and offer a credit product with no bank sponsor and follows a $14 million Series A funding round earlier this year.
Onbo uses Stilt's state lending licenses and compliance framework so businesses can concentrate on developing their very own product with Onbo managing origination, payments and credit rating.
So far, the organization has witnessed about half the demand for its Credit-as-a-Service coming from neobanks and FinTechs, and also the partner from companies in several verticals, including trucking, healthcare, eCommerce and remittance.
A company offering in the fleet fuel card business, for example, can provide truckers a much better credit product than traditional lenders simply because they know the trucking business, Stilt CEO Rohit Mittal said. It's faster and easier for this to underwrite – also it often ends up costing less for that truckers themselves.
\”There a multitude of different verticals where we view this explosion of debit and card products but no real Credit-as-a-Service infrastructure companies,\” Mittal said. \”Credit-as-a-Service obviously gives them an enormous advantage in terms of additional revenue.\”
The expertise and risk models that Stilt has brought to these environments was created while serving another market. Stilt's portfolio historically continues to be focused on the immigrant population, and also the company has been doing hundreds of millions of dollars in loans.
The company has witnessed lower delinquencies among these customers than the average U.S. unsecured lender because its customers generally earn and save more money.
\”All of those lead to better loan performance,\” Mittal said. \”The only thing they don't have is an established credit history.\”
Stilt's experience has been that both consumers and lenders need to act in prudent ways, with consumers avoiding frivolous spending and lenders not only giving money to everyone.
\”We want to extend credit to consumers that they are able to pay back,\” Mittal said. \”We don't want to make anything by putting consumers indebted. Our goal would be to help them achieve something or get access to products that they cannot without debt.\”
Now, with Onbo, Stilt takes that expertise to other environments to expand credit access for companies, enterprises and FinTechs that are looking to do the same for their end users.
\”We built all things in house,\” Mittal said, \”and that's now really powerful because that may make up the base which we are able to offer a lot of credit products to the partners.\”