LAS VEGAS–An executive with a fast-growing lender has shared a perspective and mission that makes clear credit unions don’t have a monopoly on what they have long considered their traditional turf.
Samantha Ku, COO with Square Financial Services, which is a unit of Block, offered insights into the company and how much of what it does is about serving non-traditional borrowers who are often turned down elsewhere. In fact, Ku said half of the company’s borrowers are women-owned businesses.
Ku’s comments came during the Fintech Meetup event here during a Q&A with Erica Khalili, general counsel and chief risk officer with Lead Bank.
Here is what Ku had to say:
Khalili: Tell us more about your career and Square Financial Services.
Ku: I joined Square eight years ago to start the lending operations. We were making financing available to a very underserved population, a category often not recognized by traditional financial institutions as small business, such as taxicabs and hair salons. What we were doing was very novel and it still is.
They pay us back as a fixed percentage of every transaction and we automatically withhold that for them. Why this is so important for small businesses is because small businesses operate on very thin margins, and so having enough cash every month for a traditional term loan is not an easy thing to do. Having this flexible repayment allows them to just focus on running their business.
To put this into perspective, my parents (operated a Chinese restaurant). If they were operating today, my parents, who are immigrants, couldn't walk into a bank and apply for a traditional loan with very little credit history in this country. English was not their first language. Understanding the loan application is difficult.
A Few Taps
But if they were using Square they could open their smartphone and with a few taps have a proactive offer. If they're approved, they have access to that funding in one to two business days and then they could just focus on running their restaurant. What we've been able to do at Square is really recreate this story at scale. I feel like we've really made an impact on something that needed to be solved.
Khalili: In pivoting to Square Financial Services, what are your thoughts on having a bank within a technology firm?
Ku: At Block, having all of its products under one roof really does make us a faster, more well-oiled machine. If you really think about it, for the bank, our customers and for our colleagues we can all get in a room together with the road mapping. We can whiteboard. We can make sure that what our goals are super aligned. On the flip side, we get feedback a lot faster.
I have colleagues in this room who will Slack me minutes after we ship something to tell me what we could have done better. It's that real-time, transparent feedback that just overall make us a more optimized business.
Khalili: In talking about Block and having the bank charter, obviously top of mind are the story after story after story about the rate environment and issues related to other financial institutions. In your role, how are you thinking about that?
Ku: I think fintech has really been uniquely positioned. We have so much data and it's very, very granular, real time data. We're able to react to that extremely fast and be very nimble, very flexible, in order to provide real value for our customers.
If you take COVID, for example, and how fintech was able to respond to COVID faster than anyone else, we saw that coffee shop that started to take online payments for the first time so that their customers could buy coffee while social distancing.
The Flip Side
And then on the flip side, I see when industries start to shrink or a market starts to shrink and we can make risk-based decisions for that. I think we need to really recognize the new macro-economic environment, the new risk profiles, and make those hard decisions on cost/benefit.
We have to be careful not to get into some cost fallacy. Just because you've been working on something for a year doesn't mean it makes sense in the environment today.
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