Kiva

Alternative lending has become somewhat of a saturated market, to the point where some of the old disrupters need disrupting. Kiva, a non-profit alternative lender, which started back before the fintech boom in 2005, is approaching the space a little differently.

The platform cuts out the middleman of lending with an old favorite: crowdfunding. The company works a little like a Kickstarter, but for business loans: borrowers sign up on the platform with the pitch, and lenders can give amounts starting at $25 until the loan goal is met.

“We want to create a community of support for these businesses,” Jonny Price, senior director for Kiva U.S., told Bank Innovation. “Many [of these businesses] are financially excluded, and wouldn’t qualify for a loan with traditional lenders.”

Building this sense of community will remain Kiva’s focus, according to Price. “Many of the P2P lenders–Lending Club, Prosper–there’s no connection between lenders and borrowers at all,” Price said.

In addition to crowdfunding loans, the company also charges zero-percent interest–borrowers simply pay back the loan, until the lender has received their $25 or more payment back in full. Lenders can then re-use this to support another business.

“Zero-percent interest, no fees, crowdfunded–that is unique, I don’t know another lender in the country that does that,” Price said.

Affirm

Affirm is on a mission: the online lender is spearheading a new category in fintech, which it calls “honest finance.” The goal, as the name may suggest, is to offer “transparent” and “honest” financial products, which do not hurt consumers’ financial health, Ryan Metcalf, Affirm’s chief of staff, told Bank Innovation.

“A lot of financial products out there really hurt the customer with retroactive interests, or late fees, and people accept that’s the way it is,” he said. “ In retail and banking specifically, you see banks lending to more people, knowing they will be late with payments. We want to show that customers can have honest financial products that don’t hurt their credit.”

The lender is planning to roll out more announcements on “honest finance” this year. In the meanwhile, the company, launched by a PayPal cofounder Max Levchin, provides point-of-sale loans that allow customers, particularly millennials, to finance purchases with participating merchants.

Once approved, consumers receive a one-time use virtual card via Affirm’s app, which they can use for the purchase. Then Affirm splits the bill into monthly payments. The company is now looking into launching another virtual card, “which consumers can use every day,” Metcalf said.

“Currently, customers use Affirm two to three times a year on average for purchases, and then just repay the loans,” he said. “So now we want consumers to use our card on daily basis, from purchasing, to cash flow management.” The company plans to roll out the service in the next year, according to Metcalf.

Launched in 2012, Affirm raised $425 million in total debt and equity, originating “hundreds of millions of dollars” in loans. At year end 2016, the lender had signed north of 900 merchant-partners, up from 100 from the year prior.

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