At Peach, we work with many early-stage fintechs looking to launch new lending products. A common question they face is whether to buy a piece of the lending technology stack or build it in-house.
These fintechs are technology companies themselves, with strong in-house product and engineering teams. So it’s no surprise that they’re often strongly inclined to build. Here’s how we help our customers think about this decision with regard to servicing tech specifically.
The first question is: What functions are core and differentiated to your business? Our view is that in lending there are two core differentiators: 1) marketing and customer acquisition, and 2) underwriting and risk management. Though loan servicing is an important part of the lending business, it isn’t core or differentiated.
From an investment standpoint, our customers typically find that it isn’t a good use of engineering resources to build and maintain a proprietary servicing platform. At least not if there’s a flexible, modern servicing technology partner that can support the needs of your current and future lending products without months of customization effort.
Fintechs who come to this view naturally gravitate toward a partner like Peach that specializes in modern servicing technology and gives lenders a choice between a true all-in-one solution (including system of record, payment processing, white-label borrower portal, CRM and compliance) and modules with open APIs they can build on top of.
Other fintechs go through the exercise of measuring and comparing the costs of buying versus building. However, the cost to build servicing technology is surprisingly difficult to forecast, for a few reasons.
First, lending products often start off simple—no interest accruals or fees, simple terms, single repayment method, etc. The requirements (and costs) for your servicing tech will grow as your product requirements change. Second, servicing tech has many constituents, including finance and accounting, credit risk, operations and collections, legal and compliance, and capital markets. And don’t forget about your end users! Building technology that truly works for all these stakeholders is not easy or cheap.
And third, approximately 90% of your servicing costs will come from 10% of your customers. Within that 10% group are many different cases you’ll need to deal with—payment failures, product returns, bankruptcies, identity theft, active military cases, FEMA federal disasters and identity theft, not to mention hardship and loan modifications (which can be forward-looking or retroactive). To forecast accurately you have to plan for every corner case and build these into your cost model in advance. It’s difficult to do this if you haven’t built a servicing system before.
That’s why we built Peach. Peach is the third generation of the modern servicing platform our team has worked on at companies like Affirm, Enova International, and Prosper. We support a wide variety of asset classes, including credit cards, charge cards, cash advances, BNPL/POS, RISAs, personal loans (installments and lines of credit), home improvement loans, private student loans, business loans, MCAs, and auto loans and leases.
Our loan management system has 250+ configuration variables that define loan product behavior. We can configure new loan types in a day and launch new lending programs in weeks. And if your requirements change or you want to launch a new product, we’re well-positioned to support your growth.
We love consulting with early-stage fintechs! If you’re planning to launch a lending product, please connect with us at info@peachfinance.com. We’d love to hear from you.
lender’s priority list. But that doesn’t mean compliance is straightforward, even for lenders with the most earnest intentions. Often, legacy infrastructure is the culprit, making it difficult for lenders to take the actions clearly outlined in the law. Even regulations that haven’t changed for some time—like the—still present significant challenges for many lenders.
The SCRA grants active-duty service members the ability to request certain protections during the period of their deployment, enabling them to devote their energy to serving the country. These protections include a reduction in interest rate to a maximum of six percent on any pre-service loans. While the SCRA in its current version has been law since 2003, the number of recent enforcement actions indicates just how difficult it is for many lenders to comply with the SCRA’s interest rate protections.
Blunt tools in the absence of a scalpel
For example, in October of 2022 the Department of Justice (DOJ) announced that the financial leasing arm of GM agreed to pay over $3.5 million to resolve allegations in relation to
Peach’s approach to SCRA
At Peach, we brought real-life lending experience to the design of our platform. So from day one, we recognized the importance of being able to make retroactive changes to loans. (There are numerous applications beyond SCRA, including our Supported Portfolio Migration.) In the case of SCRA, Peach has long enabled lenders to retroactively change interest rates and waive past fees—as separate, manual actions.
Peach’s approach to SCRA
This was functional, but the ideal way to implement SCRA is to make these changes simultaneously. We now support this capability by leveraging the power of Peach's Loan Replay™ engine, which can make changes to the ledger at any time, and then recalculate a loan’s history in light of those changes. The new combined functionality is as user-friendly for your agents as processing a payment.
Peach’s approach to SCRA
Specifically, the new SCRA feature allows your agents to perform the following adjustments simultaneously on a loan of an active-duty service member:
- Lower interest rates to 6% (and lower the recurring payment during the active-duty period to account for the interest rate reduction)
- Waive fees, if necessary
- Enact these changes retroactively, if necessary, and replay the loan history with the rate and fee adjustments
- Preview the intended changes
“We launched our first product on Peach in six weeks. Eighteen months later.”
John Smith, CMO
Our SCRA functionality is available via API as well as through our white-label agent tool. The white-label agent interface can be seen here:
Peach’s approach to SCRA
Our SCRA functionality is available via API as well as through our white-label agent tool. The white-label agent interface can be seen here:
For those working directly with the API, this can be as simple as sending the following request body to the SCRA endpoint:
You’ll receive a response with either the actual post-SCRA adjusted payment plan or a preview of it. Below is a comparison of a payment plan prior to the SCRA adjustment, and the expected payments after the SCRA adjustment. The SCRA period is in effect for the first two months, and thus you will see the interest rates lowered to 6% in the response body (and the recurring amount due lowered by the amount of the interest rate reduction for the two relevant months). The origination fee has also been canceled.
The breadth of loan data needing to be adjusted means that rewriting loan histories requires the right design and abstractions, and having a built-in layer of abstraction to handle retroactive changes is the only feasible approach. Because of our team’s combined experience in the real world of lending, we know that the need to edit past loan events is inevitable. So we’ve designed a system that makes these changes as painless and automated as possible.
