Silicon Valley is the world's most developed fintech center and also the centre of business model innovation. In July this year, we went to Silicon Valley to conduct field research on more than a dozen fintech startups founded during 2015 and 2016, and brought back special reports for you to analyze the latest developments in the global fintech industry.
Company Details
Company Name: Branch
Founded: 2015
Headquarters: San Francisco, California
Founders: Daniel Jung, Random Bares, Random Bares, Matt Flannery
Funding Round: A
Funding Amount: $9.2 Million
Business Scope: Provision of cash loans based on mobile information evaluation in emerging markets
Branch is a new small loan company for people in financially undeveloped regions like Africa Indonesia, and other countries. Matt Flannery, the founder of Branch, graduated from Stanford and majored in Computer Science and Philosophy. Matt founded Kiva, a P2P platform that provides loans to women and small business owners in emerging markets, with a minimum borrowing limit of $ 25. During his entrepreneurial journey, he also sought a business model that assess personal credit using more data in a more intelligent way. During his journey to Africa, Matt discovered the growing financial needs of people in Africa made possible by the access to the high-speed information era and smart phones. He started Branch to provide lending services for people without information of their credit history.
Branch received US$1.6 million funding from Khosla Impact and Formation 8 founded by Joe Lonsdale, co-founder of Palantir. Matt Flannery has always believed that banks only lend to wealthy people and that only micro financing companies can successfully lend to low-income people in developing countries.
Business Model
After the user downloads the software, it takes less than 30 seconds to fill out the form and authorize relevant data. The platform then reviews the data and makes a credit decision within a few minutes, and the loan will directly go into the user's account. After establishing a stable repayment history, users can get higher borrowing limits and lower borrowing rates.
Data types that the user authorizes include: detailed phone information, GPS data, SMS logs, call records, social data and phone book. Branch doesn't ask the user any questions — all the information is analyzed and processed by an artificial intelligence system.
Branch does not charge late fees or transfer fees, nor does it require users to deposit in advance. For the areas which lack credit data, Branch uses its own mechanism to learn the personal credit prospects of users. In general, users will get short-term loans with a small amount (US$2) and an annual interest rate of about 150% for the first time. After the users complete the repayment, the system authorizes loans to the users with a slightly larger amount and a slightly lower interest rate. After several repayment activities and the establishment of a stable repayment history, interest rates for users can be reduced to 12% for a single loan.
The loan details are as follows:
| Loan Limit |
US$2.50 - US$500 |
| Loan Period |
2 Weeks - 1 Year |
| Overdue / Transfer Fee |
None |
| Interest Rate |
6% - 23% |
| Equivalent Monthly Interest Rate |
1% - 14% |
| Annual Equivalent Rate |
15% - 180% |
Innovative Features
With the spread of smart phones across Africa, very rich data has emerged which can be mined and used. Branch's app can get a lot of information just from an Android smartphone. Through the GPS platform, Branch can get the user's location, through the user's location behavior Branch can see where the user works and lives. In addition, Branch can also get other information including the user's friend data from Facebook, communication information, cellphone number, birthday, the phone type and even SMS messages. All this information mentioned can be read from the phone. It should be noted that all the information is machine read. None of the staff have access to this data.
Q&A
Below is our interview with Matt Flannery, Co-founder of Branch:
Q: Branch provides African local currency to the locals, then where do local currency funds come from?
A: We get dollar equity capital from angel investment. At the same time, we also raise bonds from local institutional investors. Local institutional investors usually have a good relationship with banks and can get local currency from banks.
Q: Do you need a license to conduct business in related areas?
A: As with China, we also need to get a micro credit license in each country, and we are the lender on the balance sheet.
Q: How are the loan interest rates of Branch?
A: At the very beginning, due to the lack of credit records, we give each user a relatively low default credit score and provide small loans with loan amount of US$2 and an interest rate of 30 cents per 30 days for them. We use loans with small amounts to test the borrower's credit status. If a default occurs, the company will no longer provide loans to the user.
Q: How many users does Branch have at present?
A: We have accumulated 300,000 users within one year. There are about 2,000 new users per month.
