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Will short term lending get a boost from new tech initiatives?

Feb 11, 2013 Sean Albert

At least in some sectors, the tech startup industry has moved from social media focus to direct consumer credit services according to sources. Two such companies - BillFloat and Nimble - have made recent headlines with their innovative takes on the short term lending sector.

Tech boom targets short term lending
Investors are drooling over Nimble's technology, which Financial Review says takes 11 seconds to sift through consumer credit data and green-light a borrower. Damien Waller, founder of iSelect, is just one of many betting high on this startup - he told the source such an innovation is exactly what he and his associates are looking for in today's young business pool.

"Nimble really hits my sweet spot," he told Financial Review. "It's at an amazing stage. It's got critical mass and it's incredibly scalable. Big data is pervasive throughout the business."

Competing start-up company BillFloat, although slightly behind in its development with Nimble, raised $21 million in recent months to continue moving along with improvements. The company features similar services on its platform that, according to the San Francisco Business Times, will provide alternative credit options for consumers seeking more affordable options than what they may find at their local bank. Approximately $400 million is projected to be handed out in short term loans by BillFloat in 2013, according to the source.

A lending revolution
Both companies intend to maintain the short term lending platforms as their sole operation, the sources report. What has emerged with this phenomenon is a massive influx of alternative credit outlets promised by intangible means - tech companies whose business models are founded on consumers' use of mobile phones and other internet-accessible devices.

American Banker notes that despite the invisible routes such transactions take, ironically a major part of of these business' catch is the visibility of where money is going, when loans are due to be paid and exactly how the business is functioning. The trend reflects a sense of honesty and consumer participation in their financial operations, as the publication reports, making the adoption of such technology by buyers a positive shift for the consumer credit data industry.

The source claims BillFloat and Nimble are certainly not the first in their class of startups, though they may become the most successful. American Banker also points out the risk in tech companies working as short term lenders, stating the ability to assess consumer credit data so quickly could create abusive systems by rogue techies.

For now, it seems the short term lending startups that are on their way to great financial success are working for the consumer, based on these reports. In addition to internal care, watchdog groups are keeping a close eye on these businesses according to Financial Review. Consumer Action Law Center spokesperson Dan Simpson told the source it is crucial to ensure the compliance of new short term lending tech groups.

"There's a big difference between someone having the ability to pay a loan and someone's ability to pay a loan without causing them to forego basic living expenses," he said.