A strange thing about FinTech loans is that after attracting a potential customer, companies have to decide if they want to sell the product to them or not, says Dr. Gal Aviv, CEO of BLender Financial Technologies. He explains that BLender’s technology allows them to quickly analyze a borrower’s default risk to make an instant loan decision. That speed and ease of use is even more important to customers than price, he says. Aviv shares that BLender is part of a huge shift in the financial world, moving from all-in-one institutions that are good at nothing to very focused and specific FinTech companies that can deliver exactly the right product. He explains that this focus on customer needs and what drives them is very similar to the passion he had throughout his physics studies as he sought to understand what drives systems.
You have a doctorate in nanophysics. And today you’re using BLender, you’re doing phenomenal things in the lending world. How to move from physics to Fintech?
From becoming a scientist to moving into the business world, and from the business world to FinTech, it’s a pretty quick transition. This is mainly about our passions as people. For me, what motivates us is a big thing.
In the world of physics, we are always trying to explore and understand. And you understand that you understand almost nothing. But you try to discover the pilots who pilot the people and the systems.
In the business world, I think it’s a bit the same thing. It’s about constantly thinking about your customers, what motivates them, what gets them to use your product, and how your product can be better for them.
Describe yourself to me, as an entrepreneur, as an executive, as an academic. How have you evolved in these areas?
I played sports for many, many years. I raced sailing for ages. I am also a seasoned runner. I started physics, I believe, out of passion. When I started a PhD, I got accepted into a phenomenal lab in the UK that made atom chips. We have reduced our temperature to absolute zero where there is no movement. It’s like living in a completely different world.
But alongside all of that, I was in the investment and venture capital world all the time. The first startup I created dates back to 2004, I believe. It was in medical devices. Then I moved on to investments a few years later. I built a company that was investing in venture capital that is in transition state. We were involved in 13 different ventures and seven of them were successful.
But when I finished a doctorate in England and we came back in 2012 to Israel, there was this passion to build something. From this passion was born BLender. We are a wonderful group of founders. It’s me, my brother and another friend who studied physics at the undergraduate and master’s level with me. Together we launched BLender, which is very different and unique from what we initially thought.
Before even talking about BLender, how do you see the world of loans?
It’s not just the world of lending, I think the whole world of finance and FinTech is changing completely, and it’s being rebuilt from the ground up in every aspect, in all channels, in all directions.
I think what’s happening now is a process of segregation and each of these companies are getting very good at specific channels. From old type banks that try to do all in one thing and actually nothing is really good to become very specific companies that do something very well. We see it in all channels: trading, current accounts, buy now-pay later and deposits.
As a result, we see financial institutions that are very specific. They bring real value to the customer in what they do. I think that’s one of the important aspects here: being very specific, very well targeted and bringing the exact product.
When we come to the world of lending, there has been a massive change. If we start looking at LendingClub, Prosper, etc., where it was basically “get an unsecured loan and do something with it,” that’s it. Now we are at the “let’s control our cash flow” stage. Let’s bring products that help people rise. This means that a loan must be specific to a cause. You take the loan as the method of payment. To turn a loan into a form of payment, you need technologies that will drive this transaction at lightning speed.
Why do existing solutions not allow this?
There are two factors here. One is understanding the customer and providing the customer with the exact products they need at the exact time; the second is to have the technology and infrastructure that would allow you to create instant transactions. To make a cashback, it’s very simple.
When you make a loan, you don’t even send the money to the person, you send the money to a store where they’re standing or browsing, and you assume you’ll get the money back in 24 hours. Payments. You need a lot of technology to figure out that there’s a genuine person on the other side, and how risky the person is and how likely they are to default. It is complicated.
How do you see this consumer behavior changing? You say, “We as independent people can provide loans and not just banks.” How do you think through this change in consumption?
First of all, BLender is becoming a bank here, a trans-European bank. This is the next step in our evolution. Banks’ cost of capital is the lowest in the market. You get deposits and so you can provide the best products to our customer. Price is one of our customers’ questions. We were quite surprised that the price was not the main issue. The main issue is the simplicity of the transaction.
You need to have exactly the product that creates trust, and at the same time you need to have the infrastructure to enable the transaction. Why don’t banks do it as much? I don’t think they can be there so easily. It’s a completely different infrastructure, a completely different DNA.
How does technology help reduce the risks of such a situation?
Our technology has powered over half a million people now, so we could really build statistical models, but at the beginning or when we enter a new country, there is always this question of what you check. First, there’s the anti-fraud part, which is really the person. The other side is to understand what the risk level of the client is.
We have built a system that we call the “Anti-Fraud Iron Dome”. It combines hundreds of small checks and we look at correlations between small checks. They are all automated; it takes less than a second. But we accumulate all that and it gives us a good broad image of the person.
The other part is about understanding the customer’s risk level and probability of default. There we mainly use a database. There are credit reporting databases; we check them. We never trust scores, so we’ll always take the raw data and analyze it ourselves. And today there is open banking. You can access all the transactions that the person makes on his current account and you can analyze them. This allows the models to be really much more accurate.
This type of FinTech is very strange. It’s not that you just need to win the customer, but after winning the customer, you need to consider whether you want to give them the product or not. This is one of the problems of FinTech in general.
How is BLender moving the needle in terms of society? Or what impact does it have on people’s lives?
We focused primarily on two channels: car loan and buy it now, pay later. And on the other side, with the depositors. We do not believe that depositors should earn a negative return. This is not reasonnable. If the bank is very focused on a profitable channel, we can give our depositors the good returns they are looking for, and for our borrowers, good pricing and a very fast and well-managed borrowing process.
Michael Matias, Forbes 30 Under 30, is the author of Age is Only an Int: Lessons I Learned as a Young Entrepreneur. He studies artificial intelligence at Stanford University, is a venture capital partner at J-Ventures and was an engineer at Hippo Insurance. Matias was previously an officer in Unit 8200. 20MinuteLeaders is a series of tech entrepreneurship interviews featuring one-on-one interviews with fascinating founders, innovators and thought leaders sharing their journeys and experiences.
Contributing Editors: Michael Matias, Megan Ryan