( Interview taken at LEND360 on October 6th 2016)
Enova International was founded in 2004 by Al Goldstein and is headquartered in Chicago. Enova is now a public company. Al Goldstein, who is also the founder of Avant, was an investment banker with Deutsche Bank. He founded the company under the name of CashNet USA and grew it to $200 million in revenue. It was bought by Cash America for $250 million in 2006 and was renamed Enova International. In 2014, Cash America decided to spin off Enova via an IPO.
Balance Sheet Lender
Enova has been a balance sheet lender ever since its inception, but now in its effort to diversify and grow it has struck a deal worth $175 million with Jefferies LLC. The deal will provide financing facility for its NetCredit installment loan portfolio. This is Enova’s first asset- backed securitization and is a big milestone for the lender. It has its foothold in 6 different countries and provides services via 11 different brands. Most of the products and services are directed towards consumers but it also has 2 brands that focus on SME and 1 is focussed on analytics side of the business. Numbers posted by the company is a testimony of its growing stature in the fintech industry. It lent $500 million in the second quarter alone across all the brands and generated $700 million in revenues and $150 million in EBITDA in 2015.
35% APR +
Enova offers a wide range of products, ranging from 35% APR loans to high-interest rate payday loans and that’s what give Enova a competitive advantage over its rivals. Al Goldstein after selling his first venture has started Avant, another fintech company that offers some products which are in direct competition with Enova International. But its real competitor is Elevate which offers many products in the 35% -400% APR bracket.
Selling analytics models
Joe DeCosmo is Enova’s Chief Analytics Officer. Joe supervised and led the creation of Colossus and heads Enova Decisions (their AaaS brand). Under his supervision, the company has launched an analytics brand late last year, which provides analytics service for the lender and its verticals. It will also help in decision management, prediction analytics, business rules, and optimization. Direct competition for this brand is GDS link, a decision management solution provider. Enova’s bouquet of services is much more comprehensive than GDS which is a niche player in verification and fraud services.
The company’s services platform division is supported by the fact that the parent company has lent $2 billion on the same infrastructure. Enova does not charge any minimum for its platform services, it charges per transaction or based on business KPI or stats performance indicator of the model. This helps young companies and corporate to try out its services before committing to a huge fixed cost. Each model is built according to the needs of the customer, no two models are similar. It is essential that the company avoid any conflict of interest and so doesn’t offer its services to close competitors.
Marketplace lending has been hobbled by regulators in markets like Canada. CFPB regulations will surely have a huge impact on Enova and the entire industry ecosystem. The company was fully prepared when FCA(the UK regulator) released its rules. All of its 3 brands in the UK have FCA authorization and result is those individual brands have dominated their category in the UK market. In its pursuit to diversify and expand, it has launched new products in Brazil, has acquired an SME lender in Cincinnati. It already had one SME brand and now it has launched another one, it is expecting big things from all the brands as all of them are out of the pilot stage. Enova Decision is looking to be a big player in decision management space. Decision management solution is still at nascent stage across all the industries and that includes fintech as well. Being a pioneer in Fintech and online lending, the platform offered by Enova should be a unique value proposition for its clients.
A group of companies and brands
The marketplace lending ecosystem has evolved to include multiple start-ups in sub-segments like analytics, platform-as-a-service, securitization, marketing, verification, fraud detection and other allied verticals. Enova has also metamorphosed from a vanilla balance sheet lender to a group of firms focussing on different regions and myriad services. Its continuous growth in non-legacy businesses indicates that it has been able to overcome the inherent conflicts of interest to become a partner of choice for start-ups and corporate. The company has invested in and launched new verticals which can be future unicorns on their own. It’s listed status and balance sheet size give it a massive opportunity to dominate the fintech category for years to come.
Author: Heena Dhir and George Popescu