Thrive, Inc. was founded in 2015 and began its life in the direct lending world. The following year, it made a hard pivot into a pure technology realm, now working to connect lenders with those in need of funds and financing.
Though it has become a crowded space in the digital market, founder and CEO Kunal Sehgal sees major demand among those who are still being underserved by the traditional financial services world. A former director of finance at Venmo, he left that financial startup company after it was acquired by PayPal and has seen the major disruption in the industry firsthand.
Automation and algorithms are key to the business model. To find out more about the company in general and how it is using smart technology to help facilitate loans, we recently spoke with Sehgal about Thrive’s operations and view for a future in which lending is more digital.
Jared Wade: Can we start with you just telling us a little bit about Thrive? What is the core problem that this business model is looking to solve?
Kunal Sehgal: Thrive is building digital infrastructure to make the lending process more efficient. Lending today is slow and inefficient — application processes are offline using paper and pen while underwriting is siloed and manual.
Our technology enables the workflow and processing efficiencies to originate and process loans faster and cheaper than before without compromising key aspects such as risk and compliance. Greater than 90% of all lending is offline — this represents a massive global market opportunity.
Jared Wade: So Thrive provides the platform to allow the banks to actually make the loans?
Kunal Sehgal: Right, we are not lending money. Thrive enables digital lending for banks, non-bank lenders, and credit unions. We help these institutions lend more efficiently.
Jared Wade: One partnership I know you recently finalized was with Horizon Community Bank. What does that partnership consist of? Naturally, your company seems to be positioned as somewhat of a disruptor to traditional lenders. But in aligning with established banks, what does that provide in terms of different opportunities, resources, and advantages?
Kunal Sehgal: We complement existing lenders versus competing with them. We have integrated our small business lending technology into Horizon’s small business lending operations. Now, the bank is able to process applications in minutes versus weeks or months. As a result, the cost to originate small business loans has been reduced significantly through the use of technology and automation.
Small business customers are applauding the digital experience that Thrive has enabled. As our partnership continues, we are looking to scale our technology across additional asset classes
Jared Wade: Thrive boasts that, so far, upwards of 90% of loan applications are approved or rejected “near-instantaneously by automated decisions that rely on algorithms.” How does this work exactly? How is automation able to reduce multi-faceted decisions to processes that don’t require human interaction?
Kunal Sehgal: We have the unique ability to configure our algorithms to drive decisioning based specifically on the end user’s credit rules. For example, when a small business loan application is powered through the Thrive infrastructure, the various data points on the applicant — like FICO and cash flow thresholds and limits — cycle through the algorithm and provide a full loan offer or auto decline instantly.
Of course, the underwriters at the bank are absolutely able to manually intervene and dive deeper into the application if needed. As we have more data on performance with our lenders, we will be able to leverage much more sophisticated analysis and data for quick loan decisioning
Jared Wade: While the algorithms are ultimately giving the green light or not, how much human oversight is required? Once loans are approved automatically, are the funds immediately distributed or is there some sort of verification process as well? Does this vary depending upon the amount of the loan?
Kunal Sehgal: Very little human oversight is required. But again, the data is all available for humans to “spot check.” Even with human intervention, the efficiency of the process we enable far surpasses, by an order of magnitude, the current way it is done.
To answer your second question, we run all applicants through an automated KYC [Know Your Customer] check to make sure that they are compliant and in good standing. Loans are then e-signed and digitally closed. After the loan is closed, our platform has the ability to service the loan so funds disbursement can happen instantly as can real-time loan monitoring.
Jared Wade: In general, automation seems to be changing many aspects of the financial services world. What is your view on the interaction between the two worlds? How much different do you think the banking and financial world will look five or 10 years from now due to the emerging and powerful capabilities of automation, artificial intelligence, and machine learning?
Kunal Sehgal: Traditional financial institutions in the lending business do not seem to have met the internet yet. To reiterate, more than 90% of loans are originated in a highly inefficient way. This amounts to trillions of dollars. This is analogous to writing a check decades ago. When is the last time you wanted to write a check?
Digital payments are faster, cheaper, and more convenient. Loan origination and processing, as another form of money movement, needs to be digitized like payments have. Thrive is building this digital lending future.
As our performance shows, the results of implementing a digital lending solution can greatly enhance operational and performance efficiencies, while providing a modern and friendly customer experience. These kinds of lending experiences will be the de facto way loans are originated in the future. The combination of advanced automation, AI, and machine learning will help banks provide better services for their customers while also making them smarter and more efficient.