The Proof is in the Servicing
For most consumers, the lending experience begins with an application process, is punctuated by a series of recurring payments, and ends when the account is closed.
While the application, origination and account closing processes are crucial components of the customer experience, they are relatively short and impersonal interactions. Most touchpoints occur throughout the life of the credit product: talking to customer service, changing payment dates, viewing balances, refinancing and more.
For lenders, the application and account closing processes are bookends to the far more resource-intensive process known as “loan servicing.” The ability to manage and track customer balances, remain compliant with state and federal regulations, and provide a great customer experience is contingent on a robust, scalable loan servicing infrastructure.
Despite its importance, servicing has not seen as much innovation as other parts of the lending value-chain. Given the technical and regulatory complexity of building a servicing operation in-house, lenders have historically relied on legacy servicing tech platforms, many of which are decades old. Software solutions this old are expensive, hard to integrate and often unable to deliver the experiences and functionality that today’s customers expect.
With the proliferation of new-to-lending fintechs and novel credit products like BNPL, gone are the days when customers would tolerate poor customer service or account balances that take days to update. Going forward, a delightful servicing experience will be table stakes. For lenders that have any hope of building and sustaining a robust customer base, their primary engagement method with their customers – loan servicing – must be perfect.
Building a Modern Servicing Platform
Peach’s CEO, Eddie Oistacher, spent years at Affirm and Enova building out their internal loan servicing systems. As he navigated a complex warren of regulatory and technical hurdles, he realized that many emerging lenders were likely facing the same challenges. Along with co-founders Gur Brosh and Eran Sandler, he launched Peach to fill the void in the loan servicing market.
Peach offers three distinct but equally important products – loan management, loan servicing, and compliance. Peach’s loan management suite helps lenders manage their portfolios, launch new credit products and modify existing ones. Whereas legacy solutions often require 6-12 months and dozens of integrations to launch a new lending product, Peach enables lenders to get to market in just 6-8 weeks. With a sleek borrower’s portal, a sophisticated back-end for lenders and built-in payment processing, Peach’s loan management offering gives lenders all the tools they need to deliver innovative products defined by a best-in-class user experience.
On the loan servicing side, Peach’s proprietary customer relationship manager (CRM) comes with fully configurable cases and workflows that make engaging with and supporting customers easy. Their innovative repayment optimization tool helps lenders develop effective collection strategies leveraging smart algorithms and multi-channel communications.
As with many financial products, compliance is a central component of any lending product. Unfortunately, it is also often the most difficult piece to get right and the most expensive piece to get wrong. Peach’s automated compliance tool helps lenders manage federal and state regulatory requirements while its Compliance Guard product continually monitors customers to ensure ongoing good standing.
Given the important role that loan servicing plays in driving customer satisfaction and retention, any modern servicing platform will need to enable clean user experiences, ongoing compliance, flexible bill repayment, innovative credit products and superior customer service. Peach’s solution checks all those boxes, empowering lenders of all types to execute their businesses with confidence.
Partnering with Peach to Power the Next Generation of Consumer Lending
As a venture firm comprised of former bankers, regulators and financial services investors, we at Canapi are well aware of just how thorny an issue loan servicing can be. We’ve seen firsthand the limitations that legacy servicing platforms impose on the lending products banks are able to offer. Armed with what we previously considered a fulsome understanding of what loan servicing is – and isn’t – we’ve been at turns incredulous and delighted as we’ve watched the Peach team redefine servicing from the ground up over the past two years.
Peach has taken a first-principles approach to building a platform that offers all the things that loan servicing
should be. Today, after only two quarters in-market, Peach’s vision of intuitive, flexible, compliant servicing infrastructure is already helping more than a dozen lenders build innovative credit products and superior customer experiences.
When we first began diligence on Peach, we were impressed by the large market the team is addressing; in the US there is some ~$15T in outstanding consumer debt, the majority of which is serviced by legacy technology offering outdated solutions. What we quickly came to realize is that even though consumer debt has grown by 30% since 2010, the market for servicing is
actually growing far faster. In today’s hyper-competitive environment, the need for innovative products and best-in-class CX has never been greater, and Peach is uniquely poised to help facilitate both.
Further, there has been a pronounced recent trend of non-fintech platforms eager to embed lending products into their offerings. Vertically focused software businesses, marketplaces, consumer-social platforms and others are all starting to consider ways that lending can help monetize their large customer bases, decrease friction to consumers and increase LTVs.
While BaaS providers have made some financial products relatively easy to offer, legacy servicing solutions often do not have the capabilities needed to offer modern lending products. We see Peach as a central building block of a whole new market, one in which incumbent FIs, fintechs and non-fintechs can build innovative lending products that capitalize on an expanding audience of global consumers eager to engage with financial products in new ways.
Beyond the exciting opportunity in the fintech and software segments, Peach is highly strategic to our limited partner banks. As many of our banks begin to develop digital-first solutions and revamp their lending platforms to better compete with new entrants, we see Peach as a crucial component of these efforts. Banks today don’t think about servicing technology as a differentiator, but as these borrower experiences improve to meet modern customer expectations, we expect early adopters to generate significant differentiation and customer loyalty.
In the same way that Stripe helped merchants move into ecommerce and Plaid helped companies become fintechs, we feel that Peach’s platform will usher in a new era where any business can be a lender. Peach’s product today is an impressive step function above the status quo, but we’re very much of the opinion that this team is just getting started. Peach is building a much-needed product at an exciting time for the lending space and we know there’s no one more qualified than Eddie to pave the way. We look forward to a future where the majority of loan servicing is powered by Peach APIs and are thrilled to be leading their $20M Series A, alongside other great investors and friends in SciFi VC, Caffeinated Capital, Nyca and Moore Specialty Credit.