By Imani Moise | April 11th, 2022
I recently chatted with Justin Wickett, CEO and co-founder of informed. IQ, an AI company helping lenders such as Ally Financial add automation to the loan underwriting process. The former Credit Karma director founded the company alongside his mother, Magdalena Yesil, in 2016. Informed. IQ now automates income verification for over 125,000 applicants a month and Wickett expects business to double over the next year.
How did you get started? I got the opportunity to see financial institutions get leads from Credit Karma and really struggle to originate loans. These lenders had thousands of people whose jobs it was to manually review pay stubs and bank statements and calculate income. In that process, oftentimes applicants would have their incomes miscalculated, there were biases that were introduced, different loan officers had different ways of accounting for someone’s overtime pay or their night shift pay. I knew that there had to be a better way.
How much money have you raised so far? $33mn
Major shareholders? NYCA, a boutique fintech investment firm and US Venture Partners
What’s the revenue model? We are a software as a service business. We charge banks a transactional fee. Every loan that we analyse is a transactional charge. Banks today have to pay for armies of staff and software systems to originate a loan — we’re automating that process.
Why can’t traditional lenders do this in-house? Today, the incumbent process is very manual. It’s very time-intensive. It’s very costly. And there are a lot of mistakes that are made about 15 per cent of the time. Staff at the bank will miss a certain line item on someone’s bank statement or a certain form of income . . . And so what we’re doing is enabling AI to automate those types of calculations and validations, so that in real time, information can be provided back to the consumer and the consumer can have access to more financial options than ever before. Today, that’s just not possible. You’d have to staff tens of thousands of people to be able to review income documents as applicants are applying for credit. It would just be cost-prohibitive to have all of that staff and even if you did, those staff still would be making mistakes, introducing biases, implicit or explicit.
What regional differences do you see in credit reporting? Different regions have different amounts of data that are made accessible to lenders. In the US region, we’re actually seeing lenders moving away from using traditional credit reporting methodologies like FICO. If you talk to Ally financial, one of the things they will say is most important to being able to assess an applicant’s likelihood of repaying a loan, is payment to income ratio — so the income is absolutely critical. And what we’ve seen historically is FICO is not a great predictor of an applicant’s likelihood of being able to repay their loan.