This Chicago startup is partnering with brick-and-mortar banks to shake up the lending industry

In the wake of the 2007 real estate crash, increasing regulatory scrutiny has made lending less profitable for banks, who have largely responded to new regulations with paper processes and additional personnel. Akouba, a Chicago fintech startup, is building software to help streamline those processes for traditional banks.

Written by Andreas Rekdal
Published on Aug. 12, 2016
This Chicago startup is partnering with brick-and-mortar banks to shake up the lending industry

Although a number of technology companies are making moves in the lending space, brick-and-mortar banks are still by far the biggest players in loan origination.

But in the wake of the 2007 real estate crash, increasing regulatory scrutiny has made lending less profitable for banks, who have largely responded to new regulations with paper processes and additional personnel. Akouba, a Chicago fintech startup, is building software to help streamline those processes for traditional banks. 

Originally conceived of as an online lender for small businesses, the company’s early market research brought about the decision to offer automated underwriting services to traditional lenders instead.

“What we realized in that process was that the cost to find these consumers or small business owners was really, really high, and the loans that [online lenders] were making were at interest rates of 20, 30, 40 or 50 plus annual percentage rate,” said Founder and CEO Chris Rentner (pictured right). “To be very frank, it was a moral issue. We did not like the idea of having to lend to consumers and small businesses at [those] interest rates.”

After finding a partner in Metropolitan Capital Bank, Akouba started building its platform in February 2014, and launched in November 2015. Though he declines to share specific numbers, Rentner said the bootstrapped company is currently working with “a few dozen” clients, and that he expects the eight-person team to double or triple in size over the next few months.

Akouba’s early statistics show the total amount of time required for a small-business owner to complete the application process for a new loan through its platform was reduced to four or five hours over a four to six day period. The industry standard, by contrast, is around 30 hours over six weeks. 

A large portion of the time savings come from automated data collection.

“When you’re trying to make a loan at a bank, they have you fill out a 10 or 20 page paper application, while online lenders can collect that data in five to seven minutes online,” said Rentner. “We have implemented a lot of the same technology strategies online lenders use and given those tools to banks as a platform.”

Although the user experience differs, Rentner was careful to note that Akouba’s automated process builds on the same principles as more traditional paper-based underwriting. During the onboarding process, banks plug their internal underwriting policies and risk rating systems into the platform. The ability to adjust underwriting criteria is important, since each bank makes its own calculations about interest rates and risk.

A Chicago native, Rentner attended the United States Merchant Marine Academy in New York and served in the Navy Reserve until June 2013. After moving back to Chicago, he got involved in the city’s tech scene and was part of the founding cohort of the 1871-based Bunker Labs veteran entrepreneurship program.

This summer, Akouba has been part of the Arkansas-based VC FinTech Accelerator, which is operated by Fortune 500 financial services provider FIS and focuses on business development strategy. The company also partook in the Techstars Chicago accelerator program last summer.

Rentner credits Troy Henikoff and the Techstars Chicago team greatly with setting Akouba up for success.

“They helped us focus on the ideas we had and implement strategies, policies and procedures to execute on, which is really what we needed at that time,” he said. “We were getting ready to go live with our first customer, so focus and attention to detail on the processes and procedures that we were going through were paramount.”

Images via Akouba Credit.

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