Dive Brief:
- Fintech startup Stripe entered the lending space Thursday. Stripe Capital will focus on offering $10,000 to $20,000 loans to online businesses that are already customers with the company, and to merchants that sell on platforms such as Shopify, which uses Stripe to process payments.
- The company intends to use its own data such as payment history, rather than credit scores, to determine creditworthiness.
- Stripe joins a burgeoning marketplace that includes PayPal, Square, Kabbage, OnDeck and even Amazon. About 32% of loan applicants turned to online lenders in 2018. That marks an increase from 24% in 2017 and 19% in 2016, according to a survey by the Federal Reserve.
Dive Insight:
The expansion into lending marks a potential new revenue stream for Stripe, which, at $22.5 billion, is the world's most valuable private fintech company, according to CNBC.
The company advertises next-business-day availability for funds and "no lengthy application process." It will deduct 12% of a borrower's daily sales until the loan is repaid, according to its website.
Small businesses are the "engines for job creation in our economy" and it should be "trivially simple and lightning fast" for them to access funds, Will Gaybrick, Stripe's chief product officer, said in a statement.
Stripe is targeting its smaller customers rather than larger ones such as Amazon, which already have access to cash. Stripe's target loan amount is higher than other lenders in the space. Square's average loan is between $6,000 and $7,000 and could be as low as $500, CNBC said. An invitation-only "Amazon Lending" program offers loans as low as $1,000.
The company will draw data from "advanced algorithms" to trends such as payment volume, percentage of repeat customers and payment frequency.
