Overall, the fintech space has had a rocky ride since its inception more than 20 years ago. In recent history, companies like OnDeck and Lending Club have performed horribly, with their stocks both down around 85 percent over the last few years. It would seem, then, that any investor looking to take advantage of potential fintech IPOs should exercise extreme caution at a minimum and stay out of the game altogether at a maximum.
But there’s one fintech company that has done well enough to restore the reputation of the entire sector. GreenSky Credit, founded in 2006 by former child prodigy David Zalik, has enjoyed tremendous success by essentially rejecting the entire philosophy of most companies in the fintech industry. Zalik first had the idea for the GreenSky Credit business model while working on an e-consulting company that had many accounts with major retailers, such as Home Depot and Benjamin Moore, that operated in the home-remodeling space.
Zalik saw that there was a need for medium-term and short-term bridge financing — not for professional contractors and real estate developers, who often have access to sophisticated credit facilities, but for average Americans who simply want to add a sunroom or remodel their kitchens. The problem that Zalik saw again and again was that customers with no experience in contracting or remodeling were going on line or into stores and trying to estimate what a remodeling job would cost. Too often, it turned out, they would wildly underestimate what the true costs of completing a job would be. This sticker shock would then cause the deal to fall through.
With GreenSky Credit Zalik was able to create a loan-underwriting interface that matches merchants in the field with some of the largest lenders in the country. In doing this, the merchants are able to offer promotional financing to customers on incredibly good terms. Common loans involve no payments or interest for an entire year. Because the majority of the GreenSky Credit customers taking the loans have excellent FICO scores, they almost uniformly pay back the loan before the higher rates kick in. And the lenders rarely have to deal with delinquencies or defaults.