Podcast October 20, 2021

Why solving the problem comes first

If you look at the best software out there in any category, you find an interesting trend:

Most of it was designed to solve a problem its creators faced.

Whether it’s Slack or MongoDB, these products weren’t solutions in search of a problem to solve.

They’d already solved one.

The same is true for today’s guest, Rhett Roberts, Co-Founder & CEO, Product Officer at LoanPro, a company offering simplified solutions for loan servicing built when Rhett needed to find a way to solve issues faced in his auto lending business.

In this episode, we discuss:

  • Why solving first makes for successful companies
  • How LoanPro is simplifying loan servicing
  • The value and flexibility of a cloud-first API solution

“Instead of having a solution, look for a problem”

Partners at Andreessen Horowitz recently wrote an article explaining their belief that every company eventually creates a spin-off Fintech company. The authors give a handful of examples: Confluent came out of a tool instead of LinkedIn. MongoDB actually came out of DoubleClick. And we all know the story of Slack.

It’s interesting that one of the ways of creating a successful business is to solve a problem. It’s not having a solution and looking for a problem. That’s backward.

The old mantra of entrepreneurship went like this: Fill a need.

It makes a lot of sense. In LoanPro’s case, the company itself had a problem. Turns out other people had the same problem. So LoanPro knew the need existed for the kind of software they wanted to develop.

You see that kind of genesis story happening over and over again. Entire organizations emerge out of tools they create to solve their problems. See Slack as the primary example.

“One of the best ways create a successful business is to properly solve a problem first, instead of having a solution looking for a problem.”— Rhett Roberts

The plug-and-play call center

Traditionally, lending worked something like this: A lender would underwrite a loan. Then, they would hire a third-party company to do the servicing activities such as engaging with the customer and handling collections.

Now, LoanPro has built software to run that servicing component. Essentially, they have decoupled servicing from the loan servicing software. LoanPro provides the tech stack for the software, allowing users to run their own plug-and-play call centers or manage to serve in-house.

Basically, LoanPro picks up the customer at the point of decision and remains with them through the rest of the life of the loan.

How LoanPro simplifies loan servicing

Customers need help getting financing, and they reward the company that provides that help. In the ecosystem that existed when LoanPro began, you could get prime and subprime financing.

But there was no man’s land in the mid-market area. LoanPro started giving auto loans, what is now known as a related finance company, almost 20 years ago. They grew that business and they discovered they really enjoyed the lending space.

LoanPro leaders decided to scale that organization and began looking for software that could help them grow from hundreds of loans to thousands of them. No such software existed. Even the large lending organizations were using software designed and built in the 1980s or early 1990s. It didn’t have the tech stack required to do the job properly. Two or three software packages were needed to do the job, and even then, the calculations would be inconsistent.

LoanPro decided to build its own. With no background in the software space, they set up a cloud-first solution, a configuration where — without programming — users can stand up additional lending products within the organization.

“It has always struck me as ironic the amount of energy and effort that’s put into customer acquisition , when, often, after many organizations get the customer in the door, they then outsource the rest of the engagement with that customer.”— Rhett Roberts

Two key themes emerging in the lending world

In conclusion, let’s take a look at a couple of key themes we’re seeing across the lending world in general and in Fintech in particular because, for many people, Fintech has become the focal point of interest in this landscape.

  1. We see the bundling and unbundling of financial services. Whether it is a bank offering a loan or a lender offering a payment service, the boundaries are getting smudged and even erased. It seems clear that once you’ve built a strong brand in the Fintech world, you can offer different products to your customers.
  2. We’re seeing a rise in embedded lending. Non-lenders are pushing their way into this space. They believe that if they have a qualifying customer base, then a certain amount of data will help them compete as a lender. Leveraging that brand data lets them be competitively provided they can offer their customers a great product.

As financial services grow more democratized, everyone is becoming a lender. And LoanPro is providing the tech stack behind those lenders to enable them to move money to their customers.

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Until next time!

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