Frohwein: Fintech underwriters must retain credit risk to align incentives
Rob Frohwein · 859 How Kabbage Took Small Business Lending Crown: $500m raised, $4b Lended · Nov 30, 2017 · at 8:50
Rob Frohwein, co-founder of Kabbage, contrasts Kabbage's balance-sheet risk model with marketplace lenders that sell loans to third-party investors.
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“I think it's important to have real alignment between those who are calling the risk, which is us, right? We're trying to figure out whether there's, you know, a, you know, whether a customer's credit, whether you're not, and those that actually hold the, you know, that take the risk. And I think there's been a lot of misalignment over time in that continuum where those that you know, figure out what they think the likely, you know, the likely risk of default is, and then sell the loan to a third party. We believe that it's important to hold, you know, hold that risk, or at least hold a bunch of that risk.”
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