Some of the greatest innovations stem from unbundling old processes and rebundling them in a way that best suits the end user.
Uber unbundled taxi companies into drivers and the rebundled them as a service to the user in one convenient app. iTunes unbundled music albums and rebundled the songs. Netflix did the same to cable TV.
Now, thanks to a collaboration between payments solution Klarna and credit risk analytics provider, Provenir, credit scoring, loan origination, and payments are being unbundled and then rebundled together at the point of sale in big ecommerce websites.
The process is seamless, so the customer might not even be aware of what is happening.
In essence, Klarna buys a product for customers and then instantly offers them a line of credit. The customer pays Klarna later. The company allows ecommerce customers to complete their purchase before entering payment information, solving the big pain of cart abandonment for online retailers.
Provenir’s risk analytics is the engine behind Klarna’s speed.
Though Provenir has the term “loan origination” front and center on its website, Provenir’s managing director, Paul Thomas loathes it. “The word ‘loan origination’ is tied to the archaic world of core banking,” he said, explaining that his firm supports traditional businesses, but is more excited to work with innovators such as Klarna.
“Klarna separated the transaction from the payment,” Thomas said. “It is real time, instant, credit decisioning.”
Klarna takes into account about 1000 different variables about a customer when making its credit decision, Mikael Hussain, vice president of credit at Klarna told Finextra.
“Provenir supports and is the core of our underwriting and decisioning platform. They enable our analysts and data scientists to deal with all the complexity that is needed to make good risk decisioning,” he said.
Using a drag and drop interface, Provenir’s ecommerce customers can create rules and automate credit decisioning. Easy integrations are a big part of the firm’s value proposition, as they allow the customer to access public and private data sources like alternative credit ratings companies or advanced analytics services. Earlier this month, Provenir announced it had integrated its platform with alternative credit bureau, FactorTrust.
Among Provenir’s main competitors is Experian, though decisioning analytics only accounts for 13 percent of the group’s $4.8 billion revenue.