Until recently, offering this credit product was easier said than done, involving finding a banking sponsor to handle compliance, risk modeling, underwriting – the list goes on.
For any FinTech or B2B business looking to stand out and build a niche offering, the costs of issuing a branded credit card alone can be prohibitive. Add buy now, pay later (BNPL) and other flexible, user-friendly features? This throws yet another wrench in the machinery.
This is the kind of value proposition that credit as a service can provide. Inexpensively.
Stilt, a company that has built a strong business providing loans to underserved consumers, is looking to realize this value proposition in the B2B world with the launch of Onbo. The offering allows FinTechs and merchants in any industry to create and offer a credit product without a bank sponsor and follows a $14 million Series A funding round earlier this this month.
Offer a better value proposition
Onbo uses state lending licenses and Stilt’s compliance framework so businesses can focus on developing their own product with Onbo handling origination, payments, and credit reporting.
So far, the company has seen about half of the demand for its credit as a service come from neobanks and FinTechs, and the other half from companies in many different verticals, including trucking, healthcare, e-commerce and remittances.
A company offering fleet fuel cards, for example, can offer truckers a better credit product than traditional lenders because they know the trucking industry, said Stilt CEO Rohit Mittal. It’s faster and easier for her to sign up – and it often ends up costing less to the truckers themselves.
“There are so many different verticals where we’ve seen this explosion of debit and card products, but not true credit infrastructure-as-a-service companies,” Mittal said. “Credit as a service obviously gives them a huge advantage in terms of additional income.”
Offer a growing number of credit products
The expertise and risk models that Stilt brought to these environments were developed while serving another market. Stilt’s portfolio has historically focused on the immigrant population, and the company has made hundreds of millions of dollars in loans.
The company has seen lower delinquencies among these customers than the average US unsecured lender because its customers generally earn and save more money.
“All of this translates into better loan performance,” Mittal said. “The only thing they don’t have is an established credit history.”
Stilt’s experience has shown that consumers and lenders need to act carefully, with consumers avoiding frivolous spending and lenders not just giving everyone money.
“We want to give consumers credit that they can pay back,” Mittal said. “We don’t want to make money by putting consumers into debt. Our goal is to help them achieve something or access products they can’t get without going into debt.
Now, with Onbo, Stilt is bringing that expertise to other environments to expand access to credit for businesses, enterprises, and FinTechs who want to do the same for their end users.
“We built it all in-house,” Mittal said, “and it’s now very powerful because it can form the basis on which we can offer many credit products to our partners.”
Read more: Stilt raises $14M and launches business lending platform