By Jared Kaplan, CEO, OppFi
Ever since the Atlantic wrote its seminal May 2016 cover story, “The Secret Shame of Middle-Class Americans,” there’s been acute awareness by the general public about the lack of savings for everyday consumers. Not only are many Americans unable to afford a $400 emergency, about 60% are living paycheck to paycheck. Despite the fact that this is the financial reality for almost 150 million people, there remains a dearth of products to promote long-term financial health.
Take for example, the lack of options for everyday consumers when it comes to credit. Living paycheck to paycheck leaves vulnerable consumers in a position where it doesn’t take a lot to fall behind on bills. And when emergencies hit and shortfalls emerge, many rely on access to credit to stay above water, though for many with poor credit — or a lack of credit — options are limited and outside of the traditional financial ecosystem.
For the 60 million Americans with credit scores less than 620, emergencies mean turning to the neon-lit signs of payday lenders, who offer a quick fix with a poor customer experience — hardly a sustainable solution for a financially healthy future. At OppFi, we think this reality — in a country where access to credit is so important — is totally unacceptable.
Credit scores — the very thing that excludes many from the traditional financial ecosystem — are not always the most accurate indicator of an individual’s ability and willingness to repay, effectively serving as a barrier to financial inclusion for many consumers we believe can and should be brought under the tent.
Technology and alternative data should be used to expand access to those who may be locked out, and that’s where OppFi comes in — we facilitate access to credit, blending smart underwriting technology with our core competency of a human-centered customer service — to provide a first-rate experience and middle ground option.
We serve the everyday consumer: someone who is employed and has access to a bank account, but may have limited to no savings because they are living paycheck to paycheck. This cohort isn’t always well served by a traditional financial system that relies on access to credit and we believe there should be more options — and opportunities — for this vast, underserved market. This is where innovation is important to our model.
At OppFi, we have developed a technology platform that uses alternative data that reflects a customer’s unique situation to help identify both who is likely in that “good risk” subset and the products through our platform that are affordable for each individual. More than 75% of the lending decisions through the OppFi platform are made with real-time AI tools, meaning that as our platform grows, we are collecting more informative data points, helping us and our partners make better decisions and reducing the cost per funded loan. This is how we get customers a better price, when they otherwise might be forced to turn to high-cost operations, but this is only one part of what makes OppFi stand out.
Our real competitive advantage, I believe, is our core competency of customer service. Delivering a high-quality customer experience is something we believe we do better than anyone else and makes a real difference in the lives of the people we serve.
In shadowing hours of customer calls, I’ve heard customers express their gratitude and shed tears of relief for being treated like a real person. I’ve seen how our Advocates, the OppFi employees who directly work with customers, lead with compassion and a doggedness to find the best solutions for difficult situations, even if this is not a product through the OppFi platform. Our commitment to providing the best customer experience means that we actively help customers find a better priced product with other financial providers before we do anything.
As CEO, I am proud that the key to OppFi’s success, both previous and forthcoming, has been the company’s ability to marry an old-school approach of caring about the customer with an innovative high-tech platform and thoughtful products that help the everyday consumer gain access to credit. With a Net Promoter Score of 85, which is higher than the many admired brands, and an A+ Better Business Bureau rating, OppFi is a trusted company that we believe proves fintechs can provide financial inclusion in an accessible and affordable way. And we’re just getting started.
Despite the gulf between services offered to credit-challenged individuals and everyone else, the spectrum of borrowers isn’t as binary as prime and subprime. During the pandemic, we’ve seen that banks have faced additional challenges identifying the customers who represent good credit risk. Because a credit score isn’t always a good indicator for future loan repayment, and the ability to get a loan over the past year has become more difficult for many everyday consumers despite rising credit scores, we’ve experienced more demand than ever during this period from people who previously would have been considered near prime borrowers.
The pandemic has really illustrated a need for the middle ground option for the everyday consumer, and so we entered 2021 exploring options to support more customers than ever before. Some of this has manifested in new products, SalaryTap and OppFi Card, to drive financial inclusion. SalaryTap is a prime rate small dollar instalment loan that can be accessed by non-prime borrowers through their employers. Later this year, we will launch OppFi Card, a mobile-first credit card that can further help expand credit to those locked out of mainstream products. OppFi Card represents a building block, helping credit-challenged individuals on path to financial wellness by helping them improve their credit, in time graduating to mainstream options.
This desire to do as much as we can to serve the everyday consumer is also why we have entered into a business combination with FG New America Acquisition Corp. (NYSE: FGNA) to become public through a SPAC (special purpose acquisition company). Doing so we believe affords us a chance to pursue the next level of growth that comes with being a public company, while removing the distractions of a traditional IPO and letting us remain focused on helping OppFi customers grow their financial health. It also allows us the chance to work with Joe Moglia — former football coach and TD Ameritrade Chairman and CEO– who is similarly focused on building companies that improve the lives of everyday consumers.
There’s a lot of work to do when it comes to expanding financial access and better servicing the everyday consumer, and we’re excited to do it.
