Kabbage Co-Founder On Lending $1B While The Banks Were Closed: Expectations With Financial Services Is Changing

The Benzinga Fintech Summit is a gathering of the top leaders in payments, lending, capital markets, blockchain and cryptocurrencies in San Francisco Nov. 14. Ahead of the Summit, Benzinga is profiling fintech thought leaders who are speaking at the event.

For this installment, Benzinga interviewed one of our keynote speakers, Kabbage co-founder Kathryn Petralia.

Tell us about your background and current role in fintech.

I have always worked in technology, predominately in financial services and before Kabbage in the consumer lending space. As a co-founder at Kabbage, we help small businesses spend less time managing finances and allow them to spend more time running their business. In three simple steps and in as quickly as a few minutes, small businesses can be approved for an ongoing line of credit to access the exact amount of capital they need, when they need it. Today we have helped more than 150,000 small businesses access over $5 billion of working capital.

What trend in fintech and online lending are you paying the most attention to right now?

Machine learning and AI continue to be a major focus of ours. The discussion of supervised versus non-supervised models, the appropriate and responsible way they can be applied, how each can solve certain challenges for a small business owner, and how Kabbage can give back data and insights to its customers are all compelling.

How can a lender offer more than just capital to its clients, be it a small business or a consumer? What is the nature of relationships between lenders and customers in an age of maturing lending technology?

This goes back to the previous point. Kabbage today has more than 2 million live data connections with its customers, putting us in a unique position to give actionable data back to small businesses. Beyond that, the customer experience continues to be a major factor in all of this. We recently announced that of the total $5 billion accessed by our customers, $1 billion was during non-banking hours (from 6 p.m. to 6 a.m. and on the weekends).

The expectations of small businesses and how they engage with financial services is changing. Kabbage is in the business of simplifying their financial life and ensuring our services fit their business, instead of requiring them to fit the bank.

Fintech funding rounds are getting larger, some consolidation is occurring, and the space in general is maturing—is there still room for small startups to have a major impact? Which verticals are ripe for disruption?

Fintech is a big category. There will always be room for innovation and growth and we certainly see it at Kabbage every day. Data science and technology-based companies can simplify arduous financial processes or give greater opportunity where human biases may interfere. Kabbage has helped positively impact both of those for small business lending. Another category that’s ripe to benefit from this is insurance.

Five years ago, what did you think would happen in the online lending space? What has ended up happening relative to your predictions?

We knew that mobile would be important to our customers as so many business owners are constantly on the move and even a simple online application via their laptop would sometimes be unmanageable. We launched the Kabbage mobile app a couple of years ago, and today nearly 17 percent of all loans and 15 percent of all dollars accessed are via the Kabbage mobile app.

I’ve also been wrong - five years ago I would have said all lenders, both traditional and alternative, would embrace automation and technology but adoption has been much slower than I expected.

As someone who has been instrumental in creating a flow of capital to small business through technology, on the consumer side, what risks are present in the record level of personal loans that many commentators are crediting to fintech? What should players in the lending space make of institutional investment in lending products such as Marcus by Goldman Sachs?

Convenience will drive greater adoption every time, just as Google GOOGGOOGL has made accessing knowledge ubiquitous and Uber has transformed transportation. This shift to online personal loans from traditional credit card lending simply demonstrates that consumers are interested in a markedly improved user experience and greater control over the process of borrowing and using funds. Credit cards are only one way to use credit, and younger borrowers may see greater utility in general purpose loans that carry lower fees and predictable repayment schemes without the lure of future debt.

What advice would you give to someone with an idea that could disrupt financial services?

People more often think of more reasons to say no rather than yes. Don’t be one of those people.