If you’ve watched what has happened to retailers like Macy’s and Sears over the past five years because of new online marketplace competitors like Amazon, Overstock, Wayfair and the like, then you know that an omni-channel approach is the only way for these retailers to remain relevant in any way.
To believe something similar won’t happen to the banking industry because of businesses like OnDeck, LendingClub, and Prosper would be naive. Fortunately, the banking industry has experience a slower technology adoption curve, which has given them an opportunity to see how markets shake out when tech-driven marketplaces enter the market.
With those learnings, it is now time for banks to adapt and adopt technology where they can to develop competitive omni-channel offerings that will keep them relevant amidst such meaningful change. That is where innovators like Chris Rentner, Founder & CEO of Akouba come into play. He and his team are building an innovative SaaS solution to enable SME banks and credit unions to compete with even the best marketplaces.
This tech-driven approach has major upside potential to help reshape the brick-and-mortar loan markets for the better. Check out our discussion below.
CL: From attending The Merchant Marine Academy, and being a Reserve Lieutenant in the Navy, to being COO of a wedding app and investor / advisor to many startups, you have had a career that is varied but always entrepreneurial. So why Akouba and why now?
CR: I grew up with very conservative parents as it pertains to personal finances. My mom quite literally used to hide envelopes of cash in plastic grocery bags in the bottom desk drawer of her bedroom. My Dad spent 40 years working for the same institution doing the same things over-and-over again, I just knew that lifestyle wasn’t for me.
Attending the Merchant Marine Academy was my firsts step into exploring something new and doing something different from the typical liberal arts degree path. During that time, I had the chance to travel the world, and embrace new view points, cultures, and ideas that really opened me up.
Eventually I found my way into the oil and gas industry and started my own business, which I eventually sold at 26 for a sizeable amount. It was at that point that I realized I could take this capital and start investing in alternative investments because day trading for the next 30 years sounded awful. That is when I started investing in startups even though I had no idea what I was doing.
I looked at it as instead of going to Chicago Booth or Northwestern and spending a couple hundred thousand for an MBA, I will build my network and learn by doing actual deals. Some of my deals worked out well and some did not. One that actually did really well was WedSocial. I got involved with the team and really liked them. They asked me to join the team and run the business development and sales strategy vision for the company. I went through that phase of the business and eventually we exited in December of 2013.
That is when the Akouba vision started to come to life. I think it came from the experience I had early in my life when my dad was a Fireman and an HVAC / Plumbing professional on his days off. He had his own business and I remember growing up and seeing my parents trying to grow the business by taking out a loan from the bank. Getting money out of a bank was hard and there was a lot of back and forth about that idea. That is where my vision to build Akouba started. I had known my two Co-Founders for 5 years, and we were all looking to start a new company or at least a new project so we started talking.
CL: For those that don’t know can you define Akouba as a business?
CR: Akouba provides a white label SaaS solution for financial institutions to engage and onboard with their customers through an interface that sits where their customers are today, which is online and in the mobile realm.
For so long the big banks have had brick-and-mortar branches that have enormous safes in them where they hide your money, which means you have to go to them to get it. However, that is no longer the case as the world of mobile banking has proliferated. Financial institutions are losing ground every day and as of the beginning of 2017, there are less banks in the country than there were in 1970. The banking world is shrinking at a rate of 4% to 5% a year right now and the consumer now has a ton of power.
The Facebook’s, Instagram’s, and SnapChat’s of the world want to engage their users on their mobile phones and computers. If the banks don’t have the ability to engage with customers at the right points of contact they will continue to slide and increasingly become a commoditized utility in my opinion.
Our thought at Akouba, is to give banks the technology infrastructure to empower them to continue to remain relevant and valuable in the banking ecosystem. In our opinion, we want to start out focusing on one of the most important parts of the American economy, which is the world of small business banking.
CL: What was the initial idea for Akouba and how did you get to where Akouba is today?
CR: We decided we wanted to get into the lending space so we did a ton of research on companies like OnDeck and LendingClub, which had both raised a ton of cash to go public, but after 9 months of research, we felt like direct lenders were going to have significant long-term problem. Our concern was that they were going to have an issue with retaining enough capital to run the business as it was structured. The idea of applying technology to help bring efficiency and better pricing to the lending markets was the right idea but the business model was wrong.
Our feeling was that creating a white label SaaS solution to enable SME organizations to compete with alternative lenders by providing an omni-channel consumer experience was the right way to go. So we decided to start building Akouba as it exist today back in February of 2014 and we started officially building the core product later that year.
CL: There seems to be a great juxtaposition in your career path which is A to be a part of the Merchant Marine’s, which is as structured an organization as there is and then B, you’re a startup individual, which has a reputation of being the type of person that is about working fast and breaking things. What is your view on this?
CR: While the Merchant Marine Academy was very good for me, I was a very “go-against-the-grain” type of individual while I was in the program. I was always questioning everything like why do we have to march in a single line all the time?
As much as I challenged things, I also liked the structure. I think it helped me learn to be consistent and patient in my approach to building businesses. Working with banks and trying to sell through the system can at times take two years if you do not have a consistent procedural approach to the process.
In this situation, my experience with the Merchant Marine’s has allowed me to put those procedures in place. While the other side of me has allowed me to question the way banks do things, and has allowed us to find the right team. I have hired some people from the banking world that I know I can question about why certain things are done the way they are. That startup and military combination has actually played very favorably to building Akouba.
I have another friend in the startup world that also continuously hire veterans, and we both feel the same way, which is hiring veterans is a really good idea because of their drive. That continuous drive and focus is important in the startup world. You just need to help train them and they will get it.
CL: There are a couple of trends I think Akouba is well positioned to capitalize on. First, I think there has been a realization and a growing openness from banks and financial institutions to recognize that this is a period of evolution rather than destruction and rebirth? Two, there is finally an openness to partner with startups that can enable them to evolve. Would you agree?
CR: I would absolutely agree that banks have acknowledged that they need to do something to evolve. However, I would not agree that they have figured out what they will do and how they will accomplish it. Banks are traditional organizations that are very conservative. They are not thinking about jumping on the latest trend. We have to guide them there.
CL: Akouba is touted with reducing time from six weeks and thirty hours to underwrite a small business loan to 4 to 6 days and a handful of hours. Can you talk about the cost savings this creates and how that enables banks to be profitable while competing in this space?
CR: The cost savings in this situation is HUGE and varies across a few different channels. First, because of the reduction of time to issue a deal, bankers and back office staff spend significantly less time getting deals done through either automated decisioning or through automating the data collection process. Second, because of the scale Akouba has with data providers we can negotiate deals for those data pools on a large scale and pass that savings along to the bank. Finally, the profitability of a loan through the Akouba system is better because of the potentially higher revenue generation through slightly increased interest rates. Akouba has seen that because banks can offer loans 50-80% faster, banks can increase interest rates slightly due to the convenience and borrowers are happy to pay for the speed.
CL: With the low cost of capital that banks have and the integration of technology similar to online lenders, can SME banks now become the best loan offering on the market?
CR: This is why we built Akouba. Online lenders over the last decade have grown very quickly because of the technology they built and the capabilities of that technology to offer a loan to a business with little friction. The downside with that business model was that the lenders had a high cost of capital and needed to build a brand so their interest rates were VERY high. Now, banks can buy technology to compete directly with the online lenders but already have a trusted brand and very low costs of capital which make their offering the best in market.
CL: Akouba’s focus has been on providing software to help acquire small business loans, do you see an opportunity to expand the reach into mortgages, unsecured consumer lending, etc. or are you going to keep the message focused?
CR: Akouba is laser focused on providing banks with software to help their SMB lending business. However, the long term vision of Akouba would be to help other areas of the bank improve their processes and profitability further.
CL: Recently Akouba launched Akouba Now, which enables banks and credit unions to execute the customer acquisition onboarding application process more efficiently. This is a great example of expanding Akouba’s product reach. What is your vision for this product?
CR: We are really excited about Akouba Now and its potential. What we have heard from working with banks and credit unions is that they need a better way to onboard customers into the digital ecosystem, and are looking for an all-in-one solution that can help them achieve this. That’s where we decided to build Akouba Now, which will enable banks to provide digital execution of customer acquisition onboarding, which is something they have struggled with a lot.
And with the recent endorsement from the American Banker’s Association the banks and credit unions have trust that we can do this securely and with accuracy that they can depend on.
CL: What has customer acquisition looked like both in terms of velocity and strategy?
CR: Selling into banks is very relationship driven. Akouba has a team that has cultivated some of the best relationships in the industry and a product to match those relationships. After building our product for over 2 years, our selling process is in full swing and we are accelerating the growth of our bank onboarding process. One of our most successful partnerships was our endorsement by the ABA in February of 2017 which has added hundreds of banks to our pipeline and significantly improved our conversion rate.
CL: You have raised some funds to date, how are you deploying these funds and how will that accelerate the growth of the business?
CR: We don’t speak publicly about how much capital we have raised, however, we are investing heavily in R&D, customer acquisition and partnerships that will ensure the long term success of the business. We are not looking for short term wins, our company is focused on being the market leader 3-5 years from now.
The Minute Rundown with Chris Rentner of Akouba
CL: If you could provide one tip to someone considering starting up what would it be and why?
CR: Make sure you have a team that has the same vision of the end goal that you have and you 100% trust the people you start the business with.
CL: Since you are a Chicago startup what is your favorite deep dish pizza place?
CR: This is an internal debate continuously happening at the office. I am a big fan of Giordanos, other members of our team have a different opinion.
CL: If you could model yourself after one founder who would it be and why?
CR: I would have to say Steve Jobs, his approach wasn’t always easy on people but he accomplished incredible things through his work. He also had a goal to always provide the best user experience to customers. While I am no Steve Jobs, Akouba has the same mission of providing the best user experience to our customers and therefore the best offering to their customers as well. You have to love what he was able to do and his relentless desire to pursue his vision.
The best description of technology I have ever heard is that technology is not about destroying jobs, but rather about empowering people to do their job better with the assistance of technology. That is why Akouba is special because it is enabling SME banks and credit unions to provide their workers with more efficient tools to compete with the big banks, while cutting out the time and cost of paper-based processes.
Time spent finding, identifying and signing up customers can now be spent servicing customers, helping them find the best products for their financial lives and learning more about how they can help.
I have seen a recent influx of SME banks in my neighborhood in Boston all offering mobile solutions, better rate mortgages and personal loans and I know its driven by having tech-enabled tools like Akouba running in the background to make that possible.
Tech drives down cost and laborious processes. Tech creates a better consumer experience. Akouba is all of this in a powerfully different kind of SaaS offering.