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Pioneering Data Analytics Firm PeerIQ Acquired by Cross River

The leading fintech bank expands it capabilities with the acquisition of data and analytics firm PeerIQ

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I first met Ram Ahluwalia, the CEO and co-founder of PeerIQ, back in 2013 when he was working at a family office focused on alternative investments and structured credit. We shared a love of peer to peer lending and we had a lively discussion on the state of the industry. Since then Ram was a regular at LendIt events even before he started PeerIQ in 2015.

It has been exciting to watch him grow PeerIQ into one of the leading data and analytics firms in the fintech lending space serving institutional loan buyers which, more recently, have also included community banks. They have been focused primarily on the consumer loan space.

I caught up with Ram this morning as the news was breaking and the first thing he said was that PeerIQ and Cross River have been partners since 2018. Early that year the two companies announced a new partnership where PeerIQ would combine its risk management platform, data-verification tools as well as its deep borrower data sets with Cross River’s capital, technology and regulatory compliance tools. Clearly that partnership has gone well.

Ram said that talks with Cross River actually started pre-covid and really began organically in conversations he had with Cross River CEO Gilles Gade. Ram pointed out that Cross River has a unique place in fintech as “they are often the first stop for a fintech looking to offer lending or payments access.” He also said that, “PeerIQ will be able augment Cross River’s already impressive banking-as-a-service toolkit.”

PeerIQ has built up a roster of community bank clients in recent years and when I asked Ram about those relationships he was quick to point out that all their data firewalls will remain in place allowing them to service their customers and safeguard borrower data as before. Also, all their clients received a heads up on this news before it hit today.

The deal actually closed in Q1 but they had to wait for regulatory approval from the Federal Reserve before it could be fully consummated. Officially, PeerIQ will be wholly owned by CRB Group, Inc., the parent company of Cross River and thus will be a sister company, or affiliate, of the bank. Ram would not disclose terms of the deal other than to say it involved cash and stock.

Here is a statement from Gilles Gade from the press release:

Cross River is constantly adapting to the evolving landscape of financial services with an insatiable thirst to innovate. PeerIQ has established itself as a leader in capital markets innovation and our newly expanded offerings will make us even more compelling.

My Take

So the consolidation in the fintech space continues. While we don’t know whether this was a good deal for PeerIQ investors we do know that Cross River is becoming a fintech rocket ship these days and hitching your company to the leading fintech bank in the country is likely a smart move. As Gilles said in one of the articles I read this morning, this is just the beginning for them, there will be more acquisitions to come. And probably an IPO is not too far off although there was no mention of that with this news.

From PeerIQ’s perspective they will now potentially get in the door with new lending originators that inevitably find their way to Cross River. This will also help Cross River in their risk management of these new originators as well as with their long list of existing lending clients.

The movement towards banking-as-a-service or embedded finance is a secular trend that will dominate finance this decade. The combined companies now have more tools to help them lead the industry as this trend accelerates. Personal loans as an asset class will continue to grow as more banks see the wisdom in adding this high yield asset to their portfolios.

Congratulations to all involved. It is going to fun to see how this unfolds.

Inside the New Cross River Bank Venture Arm

The bank that has been powering much of fintech for the past decade has launched its own venture capital business

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Cross River Bank has been at the center of fintech for more than a decade. They started working with fintech lenders as a bank origination partner way back in 2009 when they teamed up with GreenSky. Soon, they because the de facto bank partner for much of the online lending industry.

Today, they have a wide range of banking-as-a-service offerings including payments, bank accounts, credit and debit cards, savings and more. They are the bank behind Affirm’s new savings account, Upgrade’s new rewards checking account and Dwolla’s real time payments offering just to name a few. They also facilitate the money movement for Stripe, Coinbase and Plaid.

Of course, they were also very active in the Paycheck Protection Program, jumping in on day one and reaching more than 475,000 businesses over the course of the two programs.

Now, they are doing what some of the big banks have done – starting their own venture capital arm. Cross River announced this week that they have recently established Cross River Digital Ventures, and they have already made a handful of investments.

I caught up with Hillel Olivestone, the Head of Corporate Development at Cross River, earlier today to talk about their new venture arm. He said it all began about a year ago and they have made a number investments already, three of which they have made public:

  • Innovative Assessments (IA) – a fintech startup that uses psychometrics to personalize financial services and promote financial inclusion
  • Lev – a technology-focused commercial real estate financing advisory firm
  • Finix Payments – a payments infrastructure provider enabling software that develops a payment processing platform for businesses.

While they are looking to invest across all of fintech they are most interested in embedded finance, lending and payments. Through their banking-as-a-service business they see a lot of great companies come through their door. It felt like a logical extension to start investing in some of these companies.

They will do seed stage through Series B but may consider a later stage company. These companies don’t have to be Cross River clients, they will invest in the companies they view as having the most potential.

My Take

It has been so interesting for me to watch the Cross River journey up close. They were a supporter of the very first LendIt event back in 2013 and I have worked together with their team on many different initiatives since then. I have seen them grow from a small team with a tiny asset base to the leading fintech bank with $13.5 billion in assets.

Along the way, Cross River has created the most complete suite of banking-as-a-service offerings in the industry. And with the movement towards embedded finance just getting going their future looks bright.

Now, they are in the venture capital game at a unique time when money is flowing into fintech like never before. When will the music end and valuations start coming down? No one knows the answer to that question but one thing is for certain. Finance will undergo more change this decade than last decade. And Cross River will continue to be in the thick of it all.

The Top Ten Biggest Fintech News Stories of 2020

It was a tumultuous year with the pandemic impacting fintech companies in different ways but here are the stories we think were most important

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As the sun sets on 2020 and we look back at this past year nearly everything is viewed through the lens of the pandemic. Many fintech companies did surprisingly well while others, particularly in the lending space, struggled. When we look at the year as a whole we see that it was M&A activity that consistently showed up in the news, some related to the pandemic, some not. But the biggest story 0f the year, in my opinion, was how fintech came to the aid of millions of small businesses in the PPP. Here are my top fintech news stories of 2020 (with my usual focus on lending and digital banking):

1. With the PPP Fintech Comes of Age

Rob Frohwein, CEO and Co-Founder of Kabbage, said it best on the LendIt keynote stage this year: “Kabbage was built for the PPP”. So, it was was for many fintech lenders in the small business space. Tasked with having to develop new systems for the Paycheck Protection Program in a matter of days, rather than months, the fintech industry responded and helped provide a huge number of small businesses with the loans they needed, saving millions of jobs in the process. It was not just Kabbage, we had Cross River Bank and Square as well as the loans marketplaces like Lendio leading the way.

2. Intuit to Acquire Credit Karma for $7 Billion

Credit Karma has almost singlehandedly increased the awareness of credit scores for tens of millions of Americans over the last decade. Intuit realized the value in the incredibly rich dataset that Credit Karma has created and wanted that, and the huge customer base, for themselves. And they were willing to pay to the tune of $7.1 billion. In the end this deal closed for $8.1 billion earlier this month with Credit Karma having to divest their fledgling tax preparation business, it was sold to Square for $50 million. For more on this deal read this interesting piece in Fortune.

3. Visa to Buy Plaid in $5.3 Billion Deal

[Read more…]

The Bank Partnership Model Affirmed in Settlement With Colorado

This groundbreaking settlement resolves the "true lender" issue in Colorado and could be used as a regulatory framework across the country

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The issue of “true lender” has been one that has dogged the marketplace lending industry virtually since its inception. When a borrower takes out a loan from most marketplace lenders the loan is often originated by a partner bank then held on their balance sheet for a short time before being sold to the lending platform. There has been debate about who is the true lender in these circumstances.

In 2017, the Colorado Attorney General filed two separate lawsuits against Marlette Funding and Avant alleging violations of the state’s Uniform Consumer Credit Code by charging interest rates in excess of those allowed under Colorado law. These loans were originated by out of state banks, Cross River Bank and WebBank, who were also party to these lawsuits. These banks are allowed to export higher interest rate caps across state lines but Colorado was saying that this was all a scheme to lend above Colorado’s usury rate limited.

The upshot of these lawsuits was that Colorado consumers had less choice as both Avant and Marlette, along with WebBank, started excluding Colorado consumers from their loan offerings. And it even called into question the business models of Cross River Bank and WebBank as both banks have established long running partnerships with many marketplace lenders.

After years of back and forth, and much time and expense, today the Colorado Attorney General announced a settlement with all parties. It is hard to overstate how important this is for the industry. These lawsuits have been hanging over the industry for years and even though the OCC recently proposed a new true lender rule there was still a great deal of uncertainty.

With this settlement, which amounts to $1.55 million in total, the companies have “committed that they will not lend to Colorado consumers at rates above 36% and will provide consumers with other protections required by Colorado law. In addition, non-bank partners will maintain a Colorado lending license.” There are also certain oversight requirements and they laid out a model for successful bank-fintech partnerships in Colorado. It is this model that could be adopted by other states and become a de facto national standard. Which is why this is big news today.

The industry was clearly pleased with this settlement. I reached out to several parties to get their commentary on what this means. First, Nat Hoopes from the Marketplace Lending Association: [Read more…]

All of the Fintechs Involved in PPP Loans

We share all of the fintech lenders who are currently involved in the Paycheck Protection Program

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It has been an interesting to say the least as we have watched everything play out with the Paycheck Protection Program loan process. Fintechs were eager to help small businesses with the $349 billion initially allocated to small businesses but initially there wasn’t clarity on when it might be possible. For many who wanted to be among the first to apply, going through a bank was the only option as LendIt Fintech experienced firsthand. As we stand today there are now many fintechs, both lenders and banks involved in the process although the initial $349 billion allocated to the PPP has run out, according to Senator Rubio this morning. It is expected that Congress will appropriate additional funds soon.

Approvals started with small business lenders like Kabbage, made possible through an unnamed bank partner. Then this week we saw lenders get approved on a standalone basis. Other fintechs have taken an entirely different route. StreetShares had originally planned to offer SBA loans but then opted to instead partner with Fiserv. They are providing to them a secure portal for bankers to review and prepare documents while also providing application processing and eligibility checks.

If you’re looking for a full list of PPP lenders, Gusto has created this helpful Google sheet which continues to be updated with the status of each lender.

We will continue to update the list below as more fintechs get approved.

Approved Fintech PPP Lenders

PayPal
Quickbooks
Square
OnDeck
Funding Circle
Kabbage
Bluevine
Credibly
Fundbox

Fintechs Working with Partner Banks for PPP Loans

Fundera
Lendio
Brex
Nav
SmartBiz
Biz2Credit

Fintech banks processing applications

Cross River Bank
Celtic Bank
Radius Bank
Sunrise Banks

It is difficult to overstate the importance of the PPP for the health of American small business. For many, it will have come too late but for millions of small businesses this money will allow them to stay in business and keep paying their employees. Congress needs to set aside its differences and provide more money for this program immediately. There is still a huge number of small businesses that need this money.

Cross River Bank Partners with Stripe for Faster Payments

Cross River Bank's latest partnership adds a critical piece to their API platform.

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Cross River Bank is one of the most forward thinking banks in the US. This is due to early embrace of fintech and their relationships with most of the major companies operating in fintech today.  Today, they announced another significant partnership with Stripe, the popular online payments processor to better serve their customers.

This partnership is tackling the segment often referred to as the marketplace or gig economy, those who work in ridesharing, food delivery and other freelance occupations. Through Cross River’s API platform, workers will have access to their wages through push to card payments and most importantly the move will speed up the time in which they get access to their funds.

Gig economy companies like Uber have worked to providing a better experience to their drivers by delivering payments within hours instead of days. The main issue with issuing payments to debit card accounts is that there are 12 national debit networks and each bank isn’t on every network, slowing down the transaction time. Stripe has solved this problem allowing for transactions to post instantly no matter where the merchant or payment recipient is located.

Not only is Stripe’s network faster, but it also is more reliable as most payments systems rely on legacy infrastructure. According to PaymentsSource who interviewed Aite Group senior analyst Talie Baker, only 3% of freelance workers received payments via push-to-debit cards last year, so this is an area which has significant room for growth.

Cross River Bank Raises $100 Million Led by KKR

Fintech pioneer Cross River Bank has closed a large funding round led by one of the world's leading private equity firms

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Today, Cross River Bank (CRB), one of the leading banks supporting marketplace lending platforms, has announced they have closed a significant funding round, $100 million, led by private equity firm KKR. This is by far their largest funding round, dwarfing the $28 million they raised in 2016 and is a validation of the unusual path the New Jersey-based community bank has taken.

Chairman and CEO Gilles Gade shared his comments on this funding round in their press release:

We are very pleased that our growth and progress has the endorsement of leading investors such as KKR. We also welcome new investors CreditEase and Lion Tree Partners and are especially grateful for the continued confidence of our previous investors Battery Ventures, Andreessen Horowitz and Ribbit Capital. This is a very strong signal that we continue to execute on our plan and are poised to take Cross River through its next phase of successful development here in the U.S. and across the globe.

Started in 2008, which in itself was an interesting time to start a bank, CRB first got involved in fintech very early on when they partnered with GreenSky on home improvement loans. They have since become the go to bank supporting many leading marketplace lending platforms including Marlette, Upstart, Affirm and RocketLoans just to name a few. While maintaining their community banking roots they have become one of the driving forces in the growth of the marketplace lending space with their banking-as-platform solution. They have also become a significant player in broader fintech working with leading players such as Coinbase and Transferwise on payment processing.

CRB is also a founding member of the Online Lending Policy Institute,  a nonprofit public policy organization based in Boston, MA whose mission is to encourage responsible innovation in online lending. Their leadership in that organization has helped the industry connect with regulators and lawmakers in Washington.

It is interesting to me that in his quote in the press release Gilles ends with “and across the globe”. I don’t know of any other community bank in America that has global aspirations but with CRB’s success in this country it seems that global expansion is on the horizon. However they choose to grow the company they now have a well funded war chest with which to attack any new market.

Cross River Bank and Marlette Funding Close $100 Million Securitization Transaction

In the newest marketplace lending securitization Marlette Funding and Cross River Bank are teaming up to share the equity tranche.

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Marlette and Cross River Bank Securitization

In the United States, almost all marketplace lenders use a partner bank. It adds to the operational efficiency of the marketplace lender by having a partner bank who can steer the platform through the myriad of state and federal lending laws, as well as handle much of the compliance and operational activity. A borrower will apply for a loan on a platform, but behind the scenes the loan is actually being originated by the partner bank. The loan is typically held on the bank’s balance sheet for just a few days before being assigned to the platform. Historically, this has been the extent of the involvement of the bank.

However, Marlette and Cross River Bank today announced a $100 million securitization that is a little different. Marlette Funding operates their personal loan business under the name Best Egg and originated nearly $1 billion worth of loans in just 15 months. As part of the transaction, Cross River Bank and Marlette Funding will share a 12.5% equity tranche with Deutsche Bank acting as the lender. This is the first time a marketplace lender and an FDIC-insured bank have completed a joint transaction. We spoke to Jeffrey Meiler, CEO and Founder of Marlette as well as Paul Ricci their CFO and also exchanged emails with the team at Cross River Bank to learn more about the deal. [Read more…]

ABOUT LENDIT FINTECH NEWS

LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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