How Electronic Signatures and Records Power the new Alternative Lending Marketplace

The digital revolution has produced any number of new industries, but the alternative lending marketplace has had tremendous impact across the globe. At the most recent ESRA conference, Parris Sanz, CAN Capital’s Chief Legal Officer, Chief Compliance Officer, and Executive Vice-President, spoke about integrating e-signatures into marketplace lending.

Sanz noted that CAN Capital has been in business since 1998 and began serving small business owners seeking alternative forms of financing in 2008. The company’s technology platform helps facilitate loans of $500,000 and below, offering a quick, 10-minute application, a 50% approval rate, and a lending process that is typically completed the same or next day.

That compares favorably to a Federal Reserve study that showed the same types of business owners often spend 33 hours, on average, applying to three different traditional sources of capital when seeking a loan. Only 38% of those applicants typically receive most or all of the funding they want, and the entire process can take weeks.

Sanz explained: “The key to success in online marketplace lending industry is that you need a killer customer experience, products customers want, an optimized sales funnel, and solid proprietary underwriting. E-signatures are key to the first and fourth items.”

The Process

He went on to detail CAN Capital’s front-end customer experience, which relies heavily on APIs (application programming interfaces) to auto-populate fields to make the process as simple and quick as possible. E-signatures factor heavily here, as the company asks for authorization to pull credit histories, bank account data, and other important information.

During the decision-making process, e-signatures are also relied on to verify the identity of the person who is requesting funds. (They may be someone operating on behalf of the owner, so the correct identity is critical.) CAN Capital also relies heavily on version control, to ensure loan recipients don’t make changes to documents, as well as creating a strong audit trail, so on those rare occasions when collection actions are necessary, local counsel has the documents they need for court appearances.

“To drive a high-quality customer experience, the e-signature provider needs to be seamlessly integrated,” Sanz explained. “It needs to be part of the experience and not feel cumbersome. Many companies use their CRM system to integrate that.”

He added: “You need to offer good customer support too, including effective e-signature integration on mobile platforms.”

And, he said, “underlying all of this are underwriting and risk models that produce results. That’s not so easy in the small business space because they are heterogeneous. That’s a challenge and as a result, the variables that we use to underwrite small business loans are always evolving. We have what I call a ‘test and learn’ mentality to isolate variables and learn from them for predictable results.”

Other Channels

E-signature integration is an important part of CAN Capital’s other sales channels too, such as their internal salespeople, who often rely on e-signatures for applications, authorization to see bank statements, and other steps in the process. And the company partners with other providers, such as equipment lessors, and integrates with them and their e-signature providers through CRM system connections, so they can, for example, pre-qualify CAN Capital’s customers for other loan products.

“Tech powers what we do, starting with front end that has heavy e-sig verification along with other tools like ID verification so we know we are dealing with a person who is who they say they are. Back end decision-making that provides predictable results. Integration at various touch points is key,” Sanz said.

Three Things

In the end, Sanz explained, CAN Capital relies on three things that use rock-solid e-signature integration:

• Driving the customer experience, from the application through loan funding

• Driving efficiencies and lower costs: The cost per acquisition can be a challenge in this loan space, since there is competition among loan suppliers in pay-per-click advertising.

• Ensuring a consistent audit trail, so there is never a potential problem if the application, the supporting data, or the loan documents need to be pulled