Canapi Ventures, venture capital firm Live Oak Bancshares launched in 2018, led a $ 20 million Series A funding round for online lending software startup Peach Finance, the companies said on Tuesday.
Canapi is led by former currency controller Gene Ludwig and James “Chip” Mahan, CEO of Live Oak, an asset of $ 8.2 billion, of Wilmington, North Carolina. Other participants in the round included SciFi VC, Caffeinated Control, Nyca Partners and Moore Specialty Credit – some of whom had previously invested in Peach Finance.
The Oakland, Calif., Company offers software for the management and post-origination service of several types of credit: personal loans, buy now / pay later, credit cards and lines of credit.
According to Craig Focardi, senior analyst at Celent, many lenders have focused on modernizing their loan origination systems in recent years, but neglected what happens after a loan is granted.
“Digital loan origination solutions have received the lion’s share of technology investments in recent years,” he said. “However, digital loan management systems are essential for financial institutions to achieve rapid product innovation, effective cost management, low default rates and lifetime customer profitability. Lenders cannot create new loan products if they cannot manage them. Yesterday’s loan management systems are tightly coupled and can be difficult to update for new product innovation and integrate for digital customer management.
Older loan management system providers, said Jeffrey Reitman, a partner at Canapi, typically offer rigid systems that are not driven by application programming interfaces and that were built in the 1970s and 1980s.
“They just don’t adapt well to the borrower’s expectations,” Reitman said. “We think these banks and fintechs are adding lending to different money products, they’re going to look to next-gen platforms to serve their new net volumes, and we think Peach is going to be the leader there. This is the bet we are making in this investment.
Peach Finance’s software is modular, so banks and non-bank lenders can use the complete solution or choose parts of it to complement their existing in-house solutions, said CEO Eddie Oistacher. The software is also designed to provide agents with the same user experience as customers.
“Which means our system is very intuitive and easy to learn,” Oistacher said. “You can respond to the customer no matter what channel you use. Peach has also built several compliance modules to help lenders comply with state and federal regulations, he said.
One feature of Peach Finance’s software is critical during a pandemic: it can easily make adjustments to accommodate grace periods and payment schedule changes, Oistacher said.
“When we started building this, that’s one of the things everyone started talking about immediately – what’s going to happen with the industry? ” he said. “People have lost their jobs, they need support in times of difficulty. We have therefore integrated many tools for difficulties from day one into our platform. Agents can easily waive fees, lower interest rates, defer payments, or set new payment schedules, he said.
The software can also automate communications with “super cases,” such as a large group of people injured by a disaster like a hurricane.
Peach Finance is one of four companies that have raised Series A funds involving Canapi in the past year. The others are Laika, an information security and compliance software developer; Capitalize, which has built an online platform that allows consumers to renew and consolidate their old retirement accounts; and Blooma, creator of an artificial intelligence-based digital underwriting platform for commercial real estate.
Reitman said the first thing that caught his eye (and his dollars) about Peach Finance was its leadership team – starting with Oistacher, who was director of product management at Affirm for three years before launching Peach Finance. and previously responsible for business development at the online site. lender Enova.
“I’ve known Eddie for about two and a half years now, from the time he started the business,” Reitman said. “During this period, I have met several companies in the market, including incumbents who are trying to improve after-sales service. None of them have as much experience as Eddie and the team. He collected previous versions of this from Enova and Affirm. I don’t think there’s anyone in the market who knows how to build the next generation of what we’re building here at Peach better than Eddie and the team he’s put together.
Reitman is also seeing a high demand for software that can help banks and fintechs easily come up with new loan products, like buy now / pay later.
“At Canapi, we’re seeing a lot of consumer-focused banks and businesses starting to think about adding more loan products,” he said. “A lot of these companies spend a lot to acquire customers. They have to add these new products and you can’t really add a loan product without a service solution.