Episode 5: How an Innovative Point-of-Sale Loan Platform Has Revolutionized “Non-Mainstream” Consumer Lending
Lending in Digital Times explores the dynamic lending landscape and how the latest technologies are transforming it. John Michael, from Conduent’s Consumer Finance and Mortgage Solutions, interviews fintech leaders and experts to discuss how digital transformation is impacting the lending business and shaping its future.
Read this case study to learn how Conduent's auto finance solutions transformed a small auto lender into an industry giant.
Episode 5: How an Innovative Point-of-Sale Loan Platform Has Revolutionized “Non-Mainstream” Consumer Lending
In this podcast, Camilo Concha, Founder & CEO of LendingUSA talks about his journey from being a 16-year old entrepreneur to founding LendingUSA, a company that helps merchants extend finance support to their customers in unexplored verticals. From financing pets, debt settlements and medical— his company has emerged as a leading lending platform. He gives credit to the evolving innovative ecosystem of fintech that has made end-to-end loan servicing a seamless and efficient experience for the consumer. His advice for the current crisis of the COVID-19 pandemic? Be cautious and play “defense” as a lender.
Founder & CEO, LendingUSA
Camilo Concha, Founder & CEO of LendingUSA is a trailblazing entrepreneur, changing the landscape of the fintech industry. Throughout his career, Mr. Concha has been devoted to building products that help people and have a lasting impact. With over 20 years’ experience and a deeply rooted entrepreneurial spirit, Mr. Concha is a seasoned business leader who has created several thriving high-growth companies and has built up extensive expertise in such diverse industries as point-of-sale, consumer lending, healthcare, alternative assets, digital currency, legal, and many others. Today, he leads multiple companies, including LendingUSA.
John Michael (00:03):
Okay, everybody. Today we are fortunate enough to be sitting here with Mr. Camilo Concha. Mr. Camilo Concha. For those of you who are watching the video, I think it's absolutely fantastic. He has a virtual background there. It looks like he's sitting on a beach and I absolutely love it. Camilo, why don't you go ahead and first of all say hello to the Lending and Digital Times audience.
Camilo Concha (00:29):
Hello, Lending and Digital Times audience. I'm very fortunate to be here and really excited, enjoying the breeze of the Caribbean.
John Michael (00:38):
That's right. Yeah, we'll just assume that is the Caribbean. Mr. Camilo Concha is a CEO of LendingUSA. First of all, Camilo, why don't you go ahead and explain to people, I guess what the jumping off point was for LendingUSA, how you built it and maybe even give it a little bit of a background of color of what brought you to LendingUSA and where you were before that.
Camilo Concha (01:13):
That's great. Thank you. Thank you. Let me give you a little background. I'm originally from Bogota, Colombia. I came here to the US when I was 14 years old, came to study and go to high school here. I actually went to Chatsworth High School and my first experience working was as an analyst for a referral service for attorneys. I was like a Spanish legal counselor. My job was to refer consumers to attorneys. I worked for the Bar Association for many years doing that. The idea came about when I thought this is a great service to connect consumers with attorneys. A lot of consumers don't know where to go to find the right lawyer. So I started a company called Attorney Search Network, which I still own today. It is the largest state bar certified lawyer referral service in the country.
Camilo Concha (02:08):
I ran that company for several years and a friend of mine loved what I was doing and said, "You know what? Can I do the same thing with you in a different market?" And I said, "Let's do it." So we started a company called 1800mysurgeon, which was a cosmetic surgery referral service. What we decided to do was to connect consumers with cosmetic surgeons, like 1-800-DENTIST. We were very successful in both businesses and what we realized is there was a need for financing because a lot of the cosmetic surgeons could not book the surgeries because the client didn't have the means. So we started a company called medicalfinancing.com that connected consumers with merchants, with lenders. It was like a quasi first generation LendingTree, if you think about it. This was a long time ago, so it was a pretty innovative idea.
Camilo Concha (02:59):
We created the platform, we connected them together and we did really well. We were doing billions of dollars of applications to our platform. When we realized that the opportunity was bigger than medicalfinance.com I started acquiring a lot of the internet brands that I thought could be niche markets that could work, so I own petloans.com, bridalloans.com, surgeryloans.com, dentalloans.com, laser loans and on and on and on. The idea was to go to niche markets and be able to capitalize on those by doing lending through third parties. The problem with the business model was that because we're dealing with all these different lenders, everybody had different underwriting criterias for merchants. Everybody have different underwriting criteria for consumers. Lenders used to come in and out all the time, so the platform was not stable. So what I decided to do was I said, "You know what? I need to become the bank."
Camilo Concha (03:54):
I went to a Lendit conference about five years ago and in there I was lucky enough to find my investors, Online Lending Partners. I was able to find our bank, Cross River Bank. I was able to find our servicing company, Vervent or First Associates and I was able to start the company from scratch. We raised about $10 million seed capital and we raised about $50 million in preferred equity to be able to start our company and start lending. So the idea just came about over time and we started completely from scratch.
John Michael (04:38):
That is fantastic. I want to go back a little bit. This very much interests me and that is, you said you came over here from Bogota when you were 14 years old. Can you talk about that experience of coming to the United States?
Camilo Concha (04:53):
Yes. For the people that know, Colombia and especially Bogota, it's a very conservative country. People go to private schools. I remember when I used to go to school, they used to measure the length of my hair when I got to class and if my hair was a little long they would cut it on the spot. They will check the back of my shirt to make sure it was clean and white. They measure what you were wearing to make sure it was the school uniform, but it was perfectly fitted. It was very strict, right? I went from that to come to the United States to a public school. I remember that it used to take me about 45 minutes to walk from my house to school.
Camilo Concha (05:37):
Obviously to me that was a brand new thing, which I'd never seen before. But what was even more interesting was when I showed up to the admissions office to Chatsworth High School. And the first guy who had helped me out was a gentleman with a mohawk with different colors. I never seen that in my life. My poor mom was sitting next to me and she almost passed out because she's never seen that. Literally that was my first experience. Then obviously going from not knowing English was very difficult. You go through English as a second language, so you're put in with a lot of other people don't speak English and transitioning out of that was obviously difficult, but it was very interesting.
Camilo Concha (06:21):
It was people from all walks of life. I think that looking back it was probably one of the best things that happened to me. I came from a private school in Colombia and coming to a public school here was a big change. But I enjoyed it. I actually thought it was... I learned a lot from it and it led me being able to interact with all kinds of people from all walks of life.
John Michael (06:43):
You are a classic story of somebody coming from another country and making it well here. Talk about that experience a little. Were you an entrepreneur at heart when you first started out? Did you know you wanted to make businesses?
Camilo Concha (07:01):
That's interesting you say that. You know what? I'll tell you a little story. I always been driven by building things. It's always been my passion. I was very, very much looking forward to starting my first business when I was 16 years old. And I did. I saw that there was an opportunity where we were staying with my mom. We were staying up at my aunt's house and there are a lot of cleaning products that were just left everywhere. I remember seeing around the house, there were all these nice ladies who were looking for work. So when I was 16 years old, I basically created all these pamphlets with my computer and I started passing them around through the neighborhood for cleaning services. I used to broker deals between the cleaning ladies and the owners of the homes and it actually worked.
Camilo Concha (07:53):
I used to make 25% of whatever they made and I was 16. Everybody thought it was really cute. Then I realized, "You know what? I can actually go to the people's homes that are actually have more money." So I started going to the richer neighborhoods and people thought I was crazy doing this, but actually we got some contracts from celebrities along the way. So I grew that business. I sold it when I was 18 years old. I didn't make a lot of money, but it was my first experience on knowing how to use QuickBooks or learning about marketing or learning about accounting, about taxes. It was just a good school.
Camilo Concha (08:26):
I didn't make a lot of money, but I started from scratch and I remember that people were very shocked to see a 16 year old kid just passing out pamphlets and negotiating deals. I had no idea about cleaning honestly, but I knew what I wanted to see. A couple of the ladies who used to work for me, they still work for me in other companies that I own today so I'm very proud of that. But it was a really interesting experience.
John Michael (08:56):
That's great. I love it. Let's talk about your business a little bit more. I know that you're a point of sale type of loan, right? What sort of verticals do you work in? Is it still the same? You talked about a medical. What verticals do you serve?
Camilo Concha (09:13):
Yes. It's a great question. We are what I consider to be more of an opportunistic point of sale platform. We focus on verticals like [inaudible 00:09:25] that settlement financing. We focus on verticals like legal, tax settlement. We do a little bit of medical, but not much. We try to focus on the verticals where they're not mainstream. They're not huge markets necessarily, but we want to be able to be the market leaders. We also work in the pets market. So in the pets, [inaudible 00:09:54] debt settlement and tax. We are the market leaders for those verticals. My mandate is to focus on verticals that have more potential for growth, where not everybody is competing to lower rates and to gain market share. So they're a little more complicated verticals, but we like them because we understand them and we can price them accordingly.
John Michael (10:17):
So if I were a consumer and I wanted to buy, I'm assuming you're buying a pet, maybe an expensive type of a pet. You go into a pet store or you're working with somebody and so then how does that, I'm assuming there's a merchant and the merchant has your platform loaded up somehow and they can make that point of sale decision. Can you take me through what that process looks like?
Camilo Concha (10:41):
Yeah. It's a very simple process. The idea is that there is no hardware necessary for our platform. It's sits on the cloud, but the idea of somebody comes to a pet store, call it for merchant, the person at the pet store or the merchant's office will offer financing. The client will enter the information on a link that is provided by the merchant. They can enter it on their cell phone or they can enter on the computer of the merchant. They apply for a loan and within milliseconds you get a response whether you're approved or declined. If you're approved, then basically we walk the consumer through the offers and then they can sign the paperwork on the spot. So to do a loan from beginning to end can be done as fast as three to four minutes.
Camilo Concha (11:30):
Our loans are between $1000 to $35000 and we fund the merchant directly. We don't fund the consumer. And they're for specific purposes, right? But the idea is that the consumer can literally just get approved in less than a second. Then they can walk through the process within a couple of minutes to be able to get a loan signed documents and just walk away with the pet or the actual product or service that they're looking for.
John Michael (11:57):
I'm curious about your, I guess, your marketing. It sounds like to me you're more business to business versus business to consumer. How do you find the merchants? I mean, it's not a normal type of a sales and prospecting [crosstalk 00:12:17]
Camilo Concha (12:16):
Yes, that's correct. In marketplace lending, most people are going after the consumer directly. They use platforms, as you know, like Credit Karma, LendingTree. The way we do it is we basically go after the merchants directly. We do online campaigns. We do strategic partnerships with the actual associations that are the drivers of those industries. We do online and offline campaigns. We basically find ways, whether it's through geo-targeting, geo-fencing, we have a tremendous marketing team that is led by Johannes Haze, who is my partner, one of my first partners in the company, and he basically has set up a structure to be able to bring thousands of leads to us. Then we have our sales team talk to the merchants and then give them a demo about our platform, how it works, the benefits and then merchants sign up and the good thing about our model is like an annuity.
Camilo Concha (13:19):
Once we set up a merchant we get X amount of loans throughout their lifetime with that merchant, which allows our cost of acquisition to go down over time and it's like an annuity for us, right? We give loans. Our job is to treat our merchants really well, underwrite them, create the most approvals that we can. An easy process is really important for us and make sure that is reasonable costs for the consumer and the merchant.
John Michael (13:44):
If I'm hearing you right, it sounds like your revenue stream is coming from what the borrower pays in interest. Is that basically the main...
Camilo Concha (13:52):
It's one of them. One of the other revenues is we make, based on the performance of the loans, we're able to make some money based on that as well. If our loans perform well over our cost of capital, we get to keep that. If there's origination fee on certain loans, then we keep that as well.
John Michael (14:15):
What's the interest rate like for most of these loans?
Camilo Concha (14:17):
I'd say the average interest rate is somewhere around 21%.
John Michael (14:20):
Okay. Let's shift gears here a little bit and talk about you and what your thoughts are regarding the industry. What impact has FinTech had on your business and do you see a significant shift in that arena or do you see it remaining as is? Talk about FinTech and how it's affected your business.
Camilo Concha (14:47):
Well, it's made a tremendous impact in our company. When we first started four and a half years ago, you can imagine a loan came in, we had somebody look at the loan, look at the credit report, figure out what's going on and literally just try to punch in the numbers in Excel sheet that we created and create loan documents from Word merge files. It was very obviously old school, but it worked. We spent millions of dollars building our platform and our platform now is able to take a consumer from beginning to end and at times seamlessly, so there's nobody touching the loan, right? All the underwriting, all the checks and balances, everything's done by our computer system. And it flags different people at different stages to be able to say, "Hey, you should look at this. You should look at that."
Camilo Concha (15:37):
So the time for us to be able to go from beginning to end is probably 20% what it used to be in the past. We also have better tools to be able to integrate our marketing into our lending platform to be able to see what's working, what's not working. Then we have our risk side that is able to take all that information, triangulate it and figure out better pricing and better risk mitigation tools. It's all now one big ecosystem. Without all of that, it will be very hard for us to compete and be able to scale our business.
John Michael (16:11):
Are you mainly prime? Subprime? A little bit of everything?
Camilo Concha (16:16):
We're prime and near prime. That's our focus. Prime and near prime.
John Michael (16:22):
Okay. Gotcha. In terms of the industry, if there's a message that you could send out to the consumer lending industry at this time, from where you sit with all the experience you have, is there any particular message you would like to get out there?
Camilo Concha (16:39):
Yes. I think that the message today for me, given all that is going on in the world right now with the coronavirus and all that, in my opinion, I think my message would be, try to play defense as a lender for the next month or two. Be very cautious about the money that you lend out and who you lend that out to. This is not a time to expand and get market share. This is a time to protect your assets and your cash and then just be ready to take advantage of the opportunity once everything goes back to normal because there'll be a lot of opportunities for growth.
John Michael (17:21):
Right. There will be a lot of opportunities and that's what guys like you see when this kind of time is coming around. What's been the best piece of counsel you've ever been given? Is there some mentor or business leader or somebody close to you in your life that has given you a piece of counsel that you still remember today?
Camilo Concha (17:42):
That's interesting. I never really had a mentor per se, but what I did do is, and I still do this, I don't have one specific piece of counsel, but I have hundreds. Every time I hear or I talk to somebody that I think says something that I find interesting, I just write it down, right? I have hundreds of notes of different things that I feel are really important for the business and for me to grow. I like to think, for example, when I learned about, Hey, when you look at your organization, the business should always be first. The team should be second and me should be third. The reason for that is because if you think you're the [inaudible 00:18:29] the business will take care of the team and then the team's going to take care of you.
Camilo Concha (18:32):
If we're all doing the same thing, we're taking care of each other, right? I like to think of that as the business as a way for us to sort of work in harmony. But a lot of people forget that you have to be able to take care of the business to take care of everybody else. That's always been something that is interesting to me, as far as from the business perspective.
John Michael (18:52):
When you think about yourself as a leader and obviously we all have to grow and we all have challenges and areas in which we can grow, where do you think about yourself growing as both an individual and a leader?
Camilo Concha (19:09):
Yes, I think that we always have room for growth. I think the situation with the coronavirus is a humbling experience for all of us and I think it shows us that we're all the same at the end of the day and we all have needs and as much as we may have it can all be taken away from one day to the other. I think for me this has been a great learning experience to understand look, you have to really be humble about what you do and the business that you're in because things can come in today and they can be gone tomorrow so let's use this time to be able to learn how you can do things better. Working from home has been great. Honestly, I didn't expect it to be great, but I spend more time with my family now than I ever have.
Camilo Concha (19:57):
The production in my company is actually increasing right now, which is rare. So a lot of things I never thought could actually happen because I was so set on my ways like, "You have to come to the office. You have to do this." I'm realizing that maybe I was not right about that. I think having a flexible brain is really important to be able to grow. I also think that being able to listen to people a little more is important for growth sometimes. We tend to think we have the right answer all the time, so listen a little more is probably a good thing so that you get other perspective. But I'm in that process. I'm always trying to learn, right? I'm excited about what this is going to teach me as far as my business acumen and what I can do as a person and as a businessman in the future.
John Michael (20:50):
What do you do to keep your skills sharp? In other words, do you read books? Do you read articles? Do you listen to podcasts? Do you exercise? What is it that speaks to you in that arena?
Camilo Concha (21:04):
You know what? One of the things that I do a lot is I have a lot of friends. I'm actually a YPO member. I'm a part of the Young Presidents Association. I'm actually the vice chairman of the Beverly Hills chapter. As a YPO member, you get to interact with other entrepreneurs like me in different industries. What I found really useful is I really take the time to understand all the other businesses from my friends and acquaintances and when I do that and I understand what's going on, I'm able to take some of those learnings and map them out into what I do today for my business. There's a lot of things that another business is doing differently than you are in a different industry, but you can actually apply in your business today.
Camilo Concha (21:50):
I feel that being able to cross train between industries is a really interesting way for you to create new ideas and growth. I also spend about an hour a day on average just doing nothing but trying to think about what seeds can I throw in front of me so that as I keep walking in this journey, I can see trees grow or not. But that's part of my job is throwing seeds in front of me and keep walking forward. If there's a little tree, great. If there's a big tree, amazing. But that's been part of how I do what I do today.
John Michael (22:27):
You are a dream. An American dream. A Colombian dream. It just shows you what ingenuity and hard work can do in somebody's life.
Camilo Concha (22:42):
You know what? I must tell you. Thank you. Thank you for the kind words. I must tell you that I am lucky enough to... I was born in Colombia, but I was made in the United States and I love both countries. But I can tell you that I'm very lucky to be in a country that allows all this ingenuity and the hard work and dedication to pay off. I feel like I'm very fortunate that I have the platform for it. I'm not so sure if it would have been the same if I was in a different country, but this country's always been good to me. It opened the doors all my life.
Camilo Concha (23:19):
I feel like anything I can do to make it better, I'm happy to do it. If there's entrepreneurs listening, I'm always happy to help and give my two cents and tell people, "Look, no matter what happens, the most important thing to me is having grit to be able to get through anything." I think that's one thing that I always tell people is like, "As long as you don't give up, you'll be fine."
John Michael (23:45):
I have so much enjoyed our time together today, sir. If people are interested in getting in contact with you, like you said about the other entrepreneurs, what would be the best way for them to find you?
Camilo Concha (23:57):
Yes. They can email me at Camilo, C-A-M-I-L-O at lendingusa dot com.
John Michael (24:05):
Super. If anybody wants to find me, I'm John J-O-H-N dot Michael at conduent C-O-N-D-U-E-N-T dot com. Once again, Mr. Camilo, I sure do appreciate your time together. Our time together. It has been absolutely fantastic. Thanks for coming on Lending in Digital Times.
Camilo Concha (24:27):
Thank you for your time. It's my pleasure.