Here's how we disrupted traditional banking and opened up access to credit for America’s underestimated

We relied on technology, talent, and a commitment to mutual success.

Eight years ago, we created Applied Data Finance with the mission of using technology to better address the borrowing needs of millions of Americans who have been ignored by legacy financial institutions.

Since then, our team of data-science rock stars have built an AI-powered personal loan lending platform that more accurately predicts creditworthiness than the traditional players do. Along the way, we’ve implemented a world-class customer experience, which we’ve wrapped in a robust compliance framework.

Clearly, we did something right: Just last week, we passed $1 billion in loans originated via our platform.

It’s a huge milestone for us, and I couldn’t be prouder of everyone whose hard work and dedication made it possible. I really do think we’ve assembled a Dream Team at ADF, and the results bear this out.

But as we celebrate this moment, I’d like to reflect on a lesson that I think our success holds for other business leaders. For while our people, our technology and our processes were all instrumental in getting us to the $1 billion mark, none of it would have been possible had we not built our business on a simple idea: We only succeed if our customers do.

Main Street America

To understand how we help our customers win, we need to look at who they are and what we do for them.

ADF is in the business of using data in a way that opens up access to credit for America’s underestimated consumers – people who traditionally have been frozen out of borrowing altogether, or unable to borrow at rates they could afford.

According to a recent report by Oliver Wyman, at least 100 million American adults cannot access credit at prime or mainstream prices. And 39 percent of Americans could not cover an emergency expense of $400 without assistance, according to the Federal Reserve.

Who are America’s underestimated? At ADF, we see them not just as our customers. They are our neighbors. They are Main Street, USA.

The typical ADF borrowers are people with average but stable incomes – often professionals such as nurses, teachers, flight attendants or store managers. Due to a life event, such as a medical issue in the family, home or car repairs, divorce, or similar issues, they have an urgent need for a few thousand dollars – with costly consequences if they are unable to raise money. Because these individuals have non-prime credit profiles, loans carrying annual percentage rates (APRs) below 36 percent are not an option.

Traditionally, these customers have had to consider taking out payday loans that carry APRs of 235 to 330 percent or more. Often these extreme-interest loans are made with little regard to the borrowers’ ability to successfully repay them, which traps them in a cycle of debt.

Going for the win-win

At ADF, our win-win mentality is rooted in a central premise: that the problem isn't risky customers but rather the limited data and old-fashioned analysis that financial institutions have historically used to assess them. When the problem is redefined this way, it follows that the solution is to first measure customers’ real credit risk.

The problem isn't risky customers but rather the limited data and old-fashioned analysis that financial institutions have historically used to assess them.

And so we built an innovative, AI-powered financing platform that offers a superior alternative to many of the other types of non-prime loans available to underestimated consumers, and we’ve refined our models to the point where they now have 2.5 times the predictive power of the standard FICO score. Instead of just looking at a borrower’s credit score and a handful of other data points, our models draw from a set of over 30,000 predictive variables – giving us a crystal-clear snapshot that allows us to match the customer with loans they can afford to repay at risk-appropriate rates.

But connecting customers to loans at rates that reflect their true creditworthiness is only the start of our win-win approach. Our platform provides three-year, amortizing installment loans with no prepayment penalties or balloon payments. On most of our loans, we automatically reduce customers’ interest rates for every six consecutive months of on-time payments. Finally, all our customers get access to free, online financial education tools to help them create lasting improvements in their financial health.

Passing the $1 billion financing milestone is a measure of ADF’s success, but to truly gauge the effectiveness of our win-win approach I like to look at a few different metrics. One involves our customers’ improving credit scores over time. Eighty percent of our customers who had FICO scores below 620 when they first borrowed money using ADF’s platform were able to improve their credit scores after 18 months of being in good standing with us.

For decades, America’s mainstream lenders have been content to mostly focus their activities on prime customers and ignore the two in five American adults who don’t meet that standard. The digitization of financial services and the advent of Big Data have combined to create a new financing paradigm, one that can unlock economic opportunity for millions of Americans. I’m proud of what we’ve been able to do in a few short years at ADF to meet the needs of the historically underestimated, and I look forward to continuing to grow our business in a way that ensures mutual success.