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A Q&A With The Startup CEO Disrupting The Credit Bureau With Blockchain

September 14, 2018 4:42 pm
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The Benzinga Fintech Summit is a gathering of the top leaders in payments, lending, capital markets, blockchain and cryptocurrencies in San Francisco Nov. 14. Ahead of the Summit, Benzinga is profiling the fintech thought leaders speaking at the event.

Our next installment features an interview with Spring Labs CEO Adam Jiwan, who explains how the startup is disrupting the credit bureau space with blockchain.

BZ: What is Spring Labs? What financial services problem is it solving?

AJ: Spring Labs is the company building out the Spring Protocol, a network designed to allow network participants such as financial institutions, to share information about data, such as credit and identity, without needing to share the underlying data itself. Initial use cases include ID verification, fraud mitigation and access to credit reporting data — though the protocol and network have potentially far-reaching implications and applicability.

Those using the Spring Protocol transact with peers via our decentralized, blockchain-based network, rather than centralized entities like credit bureaus or ID verification services. 

Our objective is to lower overall data costs while simultaneously allowing institutions to retain full control over their data, facilitating more transparent and secure sharing than is currently possible today.

BZ: Spring Labs was born out of Avant, a leading fintech lender — how has this positioned the company to attack the credit space?

AJ: Our relationship with Avant was — unsurprisingly — integral to the formation of Spring Labs. Since 2012, Avant has been able to serve more than 600,000 customers, originating nearly $5 billion in loans. Our experiences at Avant and other fintech companies we helped establish really highlighted the need for significant changes to how data is processed in the financial services industry. We observed firsthand significant frictions involving security, privacy and data control in the existing centralized ecosystem for credit and identity. It is a system that is also very expensive and opaque, with terribly misaligned incentives among the various actors that mediate data exchange.

Personal sagas of credit bureau breakdowns and tales of frustration due to inescapable inefficiencies were far too common among fellow industry executives and the public, more generally. The insight and experience gained during our time at Avant and with our other businesses positioned us well to develop a game-changing network.

Put simply, we believe we understand the problems that need to be solved — and importantly, believe we have the team that knows how best to solve them. 

BZ: Fintech funding rounds are getting larger, some consolidation is occurring and the space in general is maturing — is there still room for small startups to have a major impact? How can a company like Spring Labs make waves?

AJ: Absolutely there is. First, I think it’s important to recognize what’s happening more frequently in the fintech space. Most of the industry’s newer entrants could be described as startups, sure, but there’s a common class of players that I like to refer to as “emerging disruptors.” 

Emerging disruptors enter their respective industry segments as startups, but they’re typically:

  • Managed by seasoned executives.
  • Well-funded.
  • Well-connected with key stakeholders.
  • Extremely familiar with the value propositions of the solutions they’ve set out to build.

They build teams who are unburdened by traditional legacy problems, including technical or process-related debt, yet maintain a realistic view of the regulatory environment, and that’s exactly what we’re doing at Spring Labs. 

Our executive team has nearly a century’s worth of experience in fintech, giving us a perspective on what we need to do to drive systemic change.

BZ: What's a myth about blockchain technology that needs to be dispelled?

AJ: There’s this notion about enterprise blockchain implementation projects that the underlying technology is new. This is just not true.

None of the underlying technologies that combine to form a blockchain are new; rather, it’s the novel and simultaneous combination of the three that we’re all exploring together. Private key cryptography, platform-level service incentives and distributed networks have been around for decades. 

Similar to the major components that combined to create an automobile — wheels, engine, steering mechanism — none were new in their own right; it was simply their combination that initiated a technological revolution.  

BZ: Five years ago, what did you think would happen in fintech? What has ended up happening relative to your predictions?

AJ: Five years ago I thought that the venture community was misleading itself, believing that marketplace lenders were purely technology businesses rather than businesses with the credit sensitivity of more directly capital-intensive business models. 

The reality is that these businesses, whether they employ their own balance sheet or someone else’s, such as P2P or wholesale lenders, are credit originators. If they originate poor credit, their growth and values will suffer — even if they have much better technology for customer experience, better processing and the like. The best fintech companies are ones that have great technology for both UX and for credit decisions. 

As it turns out, some of the largest “P2P” lenders have suffered from poor credit experience, and their growth and values have greatly suffered.

BZ: What advice would you give to someone with an idea that could disrupt financial services?

AJ: You need to develop your business with three things in mind: technology, industry adoption and regulation. 

You can build a novel technology, but without regulatory compliance or industry and consumer adoption, it is worthless. You need to find product-market fit for a technology to drive adoption, and a lot of thought needs to go into developing technologies that can and will be used.

Similarly, in the highly regulated financial services industry, you need to keep regulatory compliance in mind as well. This needs to be architected into technology from the outset rather than after-the-fact if you ever want to have a hope of driving adoption.

To meet thought leaders and the hottest fintech startups in person, be sure to grab your tickets to the BZ Summit before they sell out.

Related Links: 

3 Ways Technology Is Changing The Financial Sector 

Top West Coast VC On A Maturing Fintech Space: 'We're In The Very Early Innings Of Fintech Disruption'

Courtesy photo. 

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