Dr. Dominik Steinkühler talks all about starting up Lendico and the challenges faced so far. Having previously worked for top leading firms such as Mercedes Benz, PwC and Rothschild, Dominik has had years of experience within the financial sector and provides an insight into what makes Lendico so successful.
Lendico is off to a very impressive start in South Africa. Did you expect that?
Anyone who has tried to get a loan from a bank will appreciate how difficult the process is so that any meaningful alternative can be a success due to the improved customer experience. Lendico offers a much better customer experience in comparison to banks in the area of consumer credit: We provide loans to people when they’re at home, rather than offering them loans in-store during office hours. This makes a difference for borrowers. Then for investors, Lendico provides better interest rates. Lendico is a win-win situation. This was an ideal starting point for a successful launch.
How did you come up with the idea of a credit marketplace? Was this a new business idea?
The first loan marketplaces emerged from England in 2005. In 2013, in the U.S. alone, loans totaling over $2.4 billion had been provided through credit marketplaces. The idea is not new. However, Lendico was the first provider on the South African market to use its own algorithm to determine the interest rate appropriate for the credit risk instead of leaving the pricing to borrowers or investors. Therefore, our algorithm creates security for all market participants – this is our unique selling point.
The core of your business idea is the mentioned algorithm. What does it enable and what is the innovation that lies behind it?
The algorithm automates the credit checks and pricing. For example, it conducts pre-checks, which assess the potential fraud and credit risk of each loan request. The data of the credit bureaus in the respective countries, along with other data sources, is then processed in real-time. However, the algorithm is only a part of the process. Our experienced underwriters also play an important role. They have the final say in whether a credit project will be approved or not.
In the initial phase, what obstacles did you have to overcome?
Before the launch, Lendico’s team already consisted of former board members from banks and other experts with years of experience in lending. This is a different approach to most start-ups. If you want to win over the trust of savers and investors right from the beginning, you need to have a reliable product. Winning over experts for a start-up that hadn’t even been launched was certainly a major obstacle, which most other start-ups have not had to deal with.
You are now operating in five countries, what is the situation like on the South African loan market?
The South African loan market has been very dynamic recently with consumers being pushed towards higher interest rate products. Take payday loans as an example, they are popular but can be very dangerous – their interest rates are so high that consumers can easily get locked up in a circle of taking out a loan for each period. Also, there is a growing demand in underbanked areas for convenient online based solutions. South Africa more than any other country we are working in, needs a game changer. And Lendico wants to be it.