LendKey’s Vince Passione on partnering with banks and credit unions and the future of lending as a service
- Back in 2009, everyone was talking about disrupting banks, not working with them.
- Founder and CEO of LendKey Vince Passione joins us to talk about his B2B approach.
Back in 2009, it was all the rage to build a direct lender. It didn’t matter where the capital came from — it could have been from a marketplace of investors or off a balance sheet. But the idea was that you could build a massive scalable business by going direct. There were some companies that emerged from that time period successful with this model but it proved — and is proving — very hard.
Others like LendKey took a B2B tack. Instead of going out and building a borrower acquisition model, they would work with lending institutions like regional banks and credit unions to power their own lending businesses. After growing and exiting Dealertrack, Vince Passione, the former CTO of Citi’s US consumer bank, saw an opportunity to found and lead LendKey.
Vince joins us on the show to talk about his partnership model and the challenges and opportunities of working alongside banks and credit unions, which have deployed more than $2 billion in lending capital on the digital platform.
Using technology to democratize an industry
I had exited Dealertrack where I was president and chief operating officer. We were very successful there empowering auto dealers to submit electonic credit applications to banks and credit unions. I learned how to use technology to democratize an industry. We did that to auto finance. Prior to Dealtertrack, you had the captive finance arms of the auto industry and several dozen large regional and money center banks originating almost all of the auto finance in the U.S.
Now, there are over 3000 financial institutions originating auto finance loans. When you look at how the market was redistributed, credit unions have about 25 percent of the market, second only to the captives.
An industry looking for a balance sheet
In the shadow of the Great Recession in 2009, the student loans industry was highly reliant on securitizations. It was an industry starving for a balance sheet. We launched with the idea of building out an end-to-end turnkey solution that would allow banks and credit unions to originate private student loans using our technology and call center. We could bring a bunch of credit unions and banks to fill the balance sheet that had been voided by major money center banks leaving the industry. Today, we have 300 clients originating private student loans.
Partnering with banks
This concept of fintechs partnering with banks isn’t new. I was previously the CTO at Citigroup. In 1993, we had an innovation lab and were partnering with fintech startups on everything from internet banking to call center technology. We’d invest in them, integrate them, and work with them to build a solution.
LendKey went into the marketplace with a lending a service offering. It was an outsourced solution. We would go to a client who didn’t have the ability to build this technology or run their own call centers. Understanding what we were doing was easy for banks — we didn’t compete with our clients.
Working with a regulated financial institution, there is a significant amount of due diligence that they need to do to work with us. We learned early on to engage with the regulators. We asked them what they were concerned about. We made it easy to pick and maintain us for their infrastructure. We’ve been through literally thousands of regulatory examinations.
Moving forward with lending as a service
Our view of lending as a service is asset agnostic. Given the hurdles of the sales and diligence cycles, our goal is that whenever a customer wants to launch another type of consumer loan, they can launch that on our platform. Our team is working on breaking up this architecture to a number of services that can be assembled in different ways so our clients can turn around and offer any type of consumer loan in the future.