The world of fintech has often tried to focus on radically reshaping the way that banks and other participants in the financial sector do business. This has had generally poor results, with some of the largest fintech companies, like OnDeck and Lending Club, turning out to be colossal failures.
But one company, GreenSky Credit, has taken a far less revolutionary approach. The company was founded in 2006 by serial entrepreneur David Zalik. Rather than seeking to overturn the fundamental nature of lending, GreenSky Credit has instead focused on working within the established system and using its long-mature business model to create value in new places.
Zalik founded GreenSky Credit when he realized that many home improvement customers were unable to complete the renovation projects they started. This was happening as a result of many homeowners simply not being able to accurately estimate the final costs for these projects. Zalik immediately recognized that most of the projects that were in the high-five-figure to six-figure range were being carried out by people who were, in all likelihood, prime borrowers. He knew that if he could create a platform that would allow for instantly approved loans at the point of sale that he could probably generate billions of dollars in additional business for banks, contractors and home improvement companies.
This initial concept for GreenSky Credit would prove to be a home run. Today, the company has more than 650 employees and originates around $4 billion each year in new loans. Because the average GreenSky Credit customer has a FICO score of 760, the loans that can be instantly made often have incredibly good terms. Most of the loans that the company originates require no payment or interest for the first year and have no prepayment penalty. The vast majority of GreenSky Credit customers end up paying back the entire loan before interest rates kick in.
At the same time, lenders ranging from Fifth Third Bancorp to Regions Bank have benefitted enormously from getting a large number of prime-borrower loans on their books. And the contractors themselves may be the biggest winners. They enjoy billions of dollars in additional work that would otherwise not have materialized.