Launch HN: Pier (YC W23) – Stripe for Credit
Hey HN! Alex & Jess here, cofounders at Pier (https://www.pier-finance.com). Pier is an API for launching credit products. We enable any company to offer credit by handling origination, underwriting, compliance and servicing with just a few lines of code.
There’s no ‘try it out’ link, primarily because (as most fintech devs know) there are compliance and regulatory thresholds that make it hard for us to give out sandbox keys freely. However, we’ve put together this video to show you the basics of how Pier works: https://www.loom.com/share/04883eb17f394b46a67cce919cb77356.
Alex & I worked together at our last company, a credit tech startup, where we saw how businesses struggle to launch credit products quickly & compliantly, due to fragmented solutions and high compliance hurdles. We’ve talked to many companies looking to launch their own product, and are taking our learnings from before to build a modular, flexible credit stack.
Credit is highly complex and requires a dedicated team -—and few people specialize in this. Unlike social apps where you can launch with a 70% product and iterate over time, credit is heavily regulated and needs to be done 100% right from the beginning. When you factor this in with federal and state regulations across 50 states, the tech stack and compliance hurdles become too time-consuming and expensive for companies to build in-house, especially for fast-moving teams trying to build innovative products. We’re talking 9-12 months of buildout and millions of dollars. This is what most companies struggle with and it’s why we’re valuable to them.
Our credit infrastructure gives developers the freedom of not having to worry about the details of managing a credit program. Using Pier, they can offer credit to their users without ever directing them outside their app. Our API powers it all under the hood (see API docs: https://pier-dev.readme.io)
For example, a business (say "ACME") has a user who comes to their platform & applies for a loan. That user stays on ACME’s platform and is never redirected to a 3rd party. ACME owns the entire UX from presenting loan offer, to signing loan docs, to disbursing funds, sending statements and collecting payments. What ACME doesn’t have to deal with is any of the back end. Each part of this flow is powered by Pier API.
We support the full credit lifecycle from loan origination to loan servicing. Want to generate a loan doc for a specific credit offer & user? We've an endpoint that creates a pdf to present to the user, and ensures it doesn’t violate any laws for the state the user is in. Want to retrieve loan balance, generate loan statement or process loan payment? We've API endpoints for that too.
There're existing products that solve parts of the credit stack, such as KYC & underwriting, but nothing that solves the credit stack end-to-end. Credit is different from payments and banking-—those are 1x activities, while loan terms are for 12 months or more. We see “credit” as a living-and-breathing creature that evolves throughout each loan’s life cycle due to a variety of behaviors, hence requires an end-to-end solution to properly address.
Since launching a few months ago, we’ve onboarded several customers and have live loan traffic on our platform. Our existing customers use Pier to provide a wide variety of credit products to their users, including BNPL for wedding, credit builder, BNPL for clean energy, salary advance loans, portfolio line of credit, etc.
Pricing - Monthly min Saas fee ($7-20k/mth), and a usage fee of 0.2-1.0% of loan volume for origination and servicing. This largely depends on the credit program and loan volume.
We’re building devtools to enable the next-gen of credit products, with our goal to make credit more accessible to everyone! We’re super eager to get your feedback — What’s your experience building in fintech/credit? What can we do to make this better? Anything else that comes to mind? Thank you! Very interesting - I run the software team for a lending company so this is an area I am very familiar with. How extensive is the coverage of your compliance? Do you handle any dollar size loan in every state? Or do you limit to the easy loan types (only allow loans of $3001 or more in GA to avoid GILA, no loans in NC because no physical presence etc)? As a customer of Pier, how does this allow me to get around the licensing laws? The originator of the loan has to be licensed to give the loan so is Pier the licenser? Does Pier have APR caps separate from those in the states themselves or will you allow full utilization of fees to hit those 300-400% APR in states like AL and UT? Do you support all the interest calculations (rule of 78, 365/365, 365/360, Pre computed interest, refundable maintenance fees) I know first hand that this industry is a GRIND and most existing tech solutions are bloated and inefficient legacy systems so I think there is definitely space to disrupt the industry. Best of luck! Licensing is one of our modules. like other modules, our customers have a choice (think picking from a salad bar) of what they want based on their use case. for licensing, you can BYO, leverage Pier's licenses, or we can help you apply for licenses too. Operating as a licensed lender would allow you to have higher APR thresholds. For example in IL, unlicensed caps at 9% (which is not always economical), while licensed allows you to lend at 36% so if it is one of your modules, does that mean that I can say "hey Pier, get me a lending license in NC" and they you handle everything and come back after however long and say "here is your NC lending license"? how do you handle states that require in state offices? If you handle getting the licenses for the company that is super valuable yup totally! we can do most of the heavy lifting there to get you the licenses. we automate a lot of this w templates & also given our prior experiences getting these licenses and building relationships w regulators, so we know how to be fast/efficient here. for in-state offices, there are 3rd party agencies to work with to set those up. also recently, some states like NV have passed laws to remove this bottleneck. not sure if I misunderstood this but do customers use Pier's license as a stand in for their own license? Because that wouldn't work right It could work depending on how they structure the receivables (SPV, 72 hour agreement to buy) from the loan facility. I am also curious on the official answer though! I second all the questions here, having worked in consumer lending alongside Risk teams as well. The big questions alongside these that come to my mind are: 1. Who has the lending licenses? Given the website footer disclaimer says Pier isn't the lender. I would guess it's either a banking partnership or a license arrangement carried over from Stilt/JG Wentworth? 2. How does Pier think of itself in relation to someone like LoanPro (who from my industry conversations has had a lot of positive momentum as the best origination software) and the other origination/servicing platforms? I gather the idea is a bundled "origination + decision + servicing" platform. LoanPro doesn't do the decision engine piece itself, but from what I gathered it was partially due to the precisely the complexity and compliance risks parent commenter noted. Definitely best of luck to the team, as the space can always use better software than what I've seen at older institutions. 1) see response above 2) a lot of existing solutions such as loanpro are good at supporting "vanilla" credit products, but tend to struggle with "chocolate & sprinkles on top" like configurations. we've talked to so many companies who told us that after they purchased these existing solutions, but had to spend another 3-6mths+ of engineer resources to configure it to their use case, and even that is still quite brittle with more manual involvements. these configurations impact the entire loan cycle from origination, APR calcs, state rules and many more. for example, repayment cycles pegged to salary schedules, irregular 1st payment date, balloon payments, min payment for lines of credit, etc. we handle anything from $0 to $50k+. our API bakes in all the nitty gritty of diff APRs, amounts, fees, interest calc methods based on state & fed regulations. For example, KS has cumulative APR calc method with 36% for <=$860, 21% for >$860, while TX is 30% for <$500, 25% for $500-1000, 18% for over $1k. How does that work from an API perspective? Do I just "try" to create a loan and if not compliant with the location it returns back some kind of error. Or do I request some kind of margin value and you calculate how to get that in a given jurisdiction. Or some other flow? Thanks for the great questions! Our credit application API will return an error if you try to approve a set of offer terms for a user that violates their state's limits. We also have a couple utility endpoints that help with coverage and compliance checks: 1) a coverage endpoint that returns the basic limits for each state and 2) an endpoint that allows you to verify if a set of offer terms are compliant for a given state. Congrats @jess-zhang ! Why charge a monthly minimum and not just take a larger % of loan volume to make it more accessible to early stage Fintechs? Those who are funded well enough to cover $10k monthly expenses can likely afford to go straight to some combination of LendFlow, LoanPro, Canopy, Peach, etc. thank you! good callout there -- we've some flexibility w pricing (pay as u go vs more fixed costs) - some of our customers pay fixed AYCE like pricing, while others more variable based. also, most existing solutions like canopy, peach are good for 'vanilla' use cases, but we keep getting demand from folks who wanna to do more flavors to be competitive & offer better user experiences (think chocolate, strawberry with cherries & sprinkles) How would you say you compare to Column's credit products? Do you plug into FedNow for instant funding of borrower deposit accounts (if their FI/bank is on those rails)? (congrats on the launch!) Thanks! Banks/bank sponsors don't specialize in credit, which gives us an edge because it's our core competency. Credit programs are complex, require compliance with a lot of regulations, and can vary greatly from program to program, so we can support a larger surface area of use cases and program configurations. We currently use sameday, nextday and standard-ACH for fund flows. We're keeping a close eye on new payments rails like FedNow to speed up loan funding for borrowers and are looking to add more funding/payment methods soon! How are you going to handle delinquency and collections? I was under the impression that most vendors like having a third party (Klarna comes to mind) handle credit so that when things go bad, ACME doesn’t take the brand hit for associating with the shitty scumbags in the collection industry. We don't do collection. Our customers own the loan receivables and they have the option to decide how they want to handle collections. there's a lot of flexibility and options here, depending on their business model and incentives. Would your service work for this scenario? We charge $20K-$50K for our services after they are completed. (We do contingent recruiting.) Some customers ask if they can pay over time. We don't want to offer that because we're already billing after all the work is done, so it makes our cash flow even worse than it already is. What I want is to be able to say, "Sure, use this service and they will allow you to make payments over time." We get our money up front and they make payments to this service provider. They pay extra to the service provider for the convenience of making payments. I don't want to factor. I want the burden of collection on someone else. Like Affirm for b2b. Could we use your service to build something like this into our platform? Who is responsible for collecting? yup! we can support both consumer & business borrowers. "pay-later" solution is a quite popular application of our product! one callout here - it sounds like you're looking for someone to take on the balance sheet/collection risk, which is not something we do. we're saas only. our customers keep upside from offering credit (additional revenue, interest income, higher LTV, greater GMV etc) and also the balance sheet The main sticking point why trad cashflow factors don't do this is probably a lack of a good company credit score system + mechanisms for enforcement. I've had clients ask whether they can pay large (7 figure!) invoices on credit. Ah... nope. :) Dun and Bradstreet is a very old company that does just that and has an API. Though of course you have to pay for it You probably want something like Lendflow Sounds like you, or someone, could build affirm for b2b, using this platform, and you’d be customer #1. indeed, funny u say that! some of our customers are in fact replacing affirm ;) For this use case, you may want to look at Lendica's (https://golendica.com/partners) "Checkout" product. Leader in "embedded lending" space for B2B. really exciting to see what @Pier is building! Some thoughts for below: Seems you guys are focused on end-to-end software tools and will rely on the business taking credit risk (and getting the balance sheet) instead of providing the loan yourself. Is that correct? If that's the case, one thing to look out for is it's quite challenging to get your customers (paying $10-20k / mo) to trust your underwriting standards/origination tools. First question will be: why can you do it better? One model that worked well is Opyn.eu in Italy that offers the software but has an agreement to buy any "loan" back from the creditor over the course of the payment. Hope that helps and wish you the best of luck! thanks for sharing! yup you're right the balance sheet part. we currently don't offer debt capital/take on the balance sheet. we learned firsthand from our last company that if u start by offering balance sheet, you'd attract the wrong kind of players/customers to partner with. fyi most of our customers have their own balance sheet or debt facility and it's not an issue for them. they prefer this flexibility too bcus every business model is a bit different, so there's not rly an one-size-fits-all like debt setup. I'm always interested in attempts to streamline or automate the credit process as I know it can be a regulatory minefield (certainly in Europe, I assume it's the case in the US as well though maybe to a lesser extent). You mention you have an endpoint that ensures a credit offer is legally compliant - do you guys hire the lawyers to verify that (and more generally are you the ones drafting the template credit agreements) or is that something your customer has to do? Also curious how this works if the original lender wants to syndicate or sell the loan - is this possible on your platform? we've a pretty robust compliance team to verify and make sure that our APIs reflect the latest regulatory requirements and state/fed thresholds. we also always go back to the source, ie read all the applicable state & federal laws to cross check everything. i can talk all day about Michigan's Act of Credit 1942 lol bcus of this, our customers lean on us heavily for compliance - we replace at least 0.5-1 compliance headcount for them, plus all the legal dollars... and to ur 2nd question - yes, we integrate closely with debt providers & SPV setups and are the 'neutral' source of ledger here too. depending on the set up, we can pull funds from lender or debt facility accounts, and put receivables with SPVs, syndicates or whatever the designated entity is Brilliant product! I worked for a startup that got acquired by Experian and I can see how you're going to quickly become an acquisition target for companies that can scale your sales pipeline. Are you looking to stay focused on the credit management + compliance (I can see how that would be a huge job in itself in the US market) or do you think you'll look to become a one stop shop for everything needed to offer credit (like KYC, risk, etc) Since you'll inevitably take over the world, hit me up when you start a London office :) ahhaha thx! for now we're more focused on end-to-end credit stack for the US (it's already a lot to keep us busy for a while!) would def be very open to international expansions down the line! saw some comments around similar pain points in UK, europe, etc This is really cool and (I think) unlocks an idea I've had for a long time: moviepass for restaurants (aka a new spin on groupon). I think you could get consumers to subscribe to discounts/deals at nearby restaurants and I think you could get restaurants to offer discounts one-time or during non-peak days/times. I tried to do this in the past using card issuing services (like Stripe's) but it was clunky with debit cards. The ability to do this via credit would make this a lot easier. It sounds like you want to offer a credit card which I don't believe Pier is doing. It seems like you want something like Ramp for consumer use. I'm not familiar with it, but it seems like Enfuce[0] might be a possible solution. Marqeta would work for this scenario: https://marqeta.com/ —- that’s exactly the kind of scenario they exist to handle. neat idea! curious how you're planning to apply credit to this use case u mentioned here? I watched a five minute Loom video, I still don't understand... can you make an example of how a business would use this? imagine I'm five years old glad u asked for more context! for example, a fertility service provider can use Pier to launch "pay later" & financing for its patients. fertility treatments like IVF, egg freezing are typically $10-25k, not covered by insurance. another example, tiktok can provide working capital to its influencers based on predicted video quality, # of viewers, frequency of postings etc Who takes the default risk and profit from the loan? Is it all the underwriting bank? A very real pain, especially in my experience with commercial lending. Do you cater to more complex credit products like loans to support acquisitions? These often require servicing of multiple companies in a group. This multi-entity requirement is where my frustrations are most acute, the lenders I work with catering to this more niche market. Edit - UK based direct lending, but I’m sure the same is relevant to some extent in the US we're not as familiar with that part & UK operations. what do u mean by "multi-entity" requirement? Lending to a group of companies, one company owning multiple. We see this where owner wants to sell and the acquisition process then includes an additional company for various reasons. Great looking product. Would you be open to developing this in a more generic way for non-US countries? The rules and compliance parts should be configurable by the company with some guardrails for the countries they operate in. Does anyone know if something like this exists for non-US markets? We're actually in the process of building support for a BYO license & compliance model, which would allow you to use our APIs with your own lending licenses. tbh haven't thought about an international use case for this, but it's possible that you could use some of our technology to help with apr calcs, loan ledgering etc in an international market. Feel free to drop me a note, would love to learn more about what you need alex@pier-finance.com How is the underwriting and approval determination done? It might be proprietary, but I've always wondered what was being done behind the scenes to account for unintended biases as it relates to zip code, applicant background, etc. underwriting and offer terms can be configured to each use case, depending on a few key factors:
1) applicant data - kyc, bank balance, credit score etc (pretty generic stuff here)
2) our customer's proprietary data - unique platform driven insights (e.g. revenue bookings, customer loyalty, typical order size, etc.) - this is more the secret sauce that allows our customers to offer better underwriting than traditional banks/lenders ;)
3) our customer's platform incentives - customers can align credit offering with their growth/strategy - e.g. if they wanna promote HVAC for Q3, all orders with HVAC can get more competitive rates, which would help them increase GMV & conversion
4) last but not least - compliance - ie state & fed regs (max APR, fees, etc) Congrats! I might be interested in this, will be in touch. Also, please launch in the UK asap, the market here is just terrible if you're not bank with legacy infrastructure but large volumes :) thx for the feedback!! we'll keep that in mind Interesting product, thanks for the summary. Are the credit models / risk flexible to the risk/return ratios required by the customer? How did you train the credit risk models? yup, it's pretty configurable & flexible to the customer's KPIs. i've got a more detailed explanation above about how we do underwriting & risk. How do you manage onboarding and counter-party risk? We have a rigorous compliance approval process for new customers that includes approving their app UX, marketing collateral, user communications, internal compliance & underwriting policies, etc. For existing customers, we have and are in the process of building monitoring systems to verify customers are sending required communications (ie signed loan agreements, adverse action notices, payment reminders, statements, etc) and that their decisioning aligns with the credit policy we've approved. In the near future, we're going to build tools to automate/handle a lot of the compliance-sensitive processes/ops for teams that don't want to own it themselves. This will include Pier-powered user communications and underwriting, among other things. We'll have more to share on this soon! Congrats - I was in a team in South Africa that digitised a loan origination process for a consumer credit bank. Interesting stuff. thank you!! interesting to hear similar pain points from all diff parts of the world! Hey, looks great! I work at an automotive fintech and would love to chat. I submitted on your website. Awesome! Looking forward to connecting How are you different than a debt SaaS product like Sivo? Also is there a publicly viewable API? Sivo provides the debt, using their underwriting structure. We don't provide debt. we provide an end-to-end credit infra that covers origination, compliance, loan management, credit reporting, etc. one other call out is that we allow our customers' users to always stay on their platform, without being redirected to a 3rd party, so they own the full UX and user experiences. our api docs - https://pier-dev.readme.io Thanks - so more loan origination/servicing/management as opposed to providing balance sheet lending (ala Canopy/Peach but with your own underwriting/compliance). Since customers need to bring their own credit warehouse/lending partner do you facilitate partner matching? randomly curious re: "there are compliance and regulatory thresholds that make it hard for us to give out sandbox keys freely" what kinds of thresholds? (mainly curious since sandbox keys naively seem harmless to hand out) This is a great greenfield project to be acquired by JPMorgan. Best of luck! hahah thank you! funny enough alex & I both have worked for JPM before How do you feel about making it even easier for certain people to frankly ruin their lives through poor financial decisions? BNPL for wedding dresses? This is the high fructose corn syrup of the monetary system. Paternalism is never a good look: Should wedding dress suppliers refuse all forms of credit and only accept proof of savings? What retailers should be allowed to accept credit purchases, friend? What are you suggesting? I don’t even know how I would describe it. A “no holds barred” economy and society? Perhaps you are OK with cigarettes being advertised children and things like that. Is it too paternalistic to stop that? If you live in the US perhaps you also enjoy every other advertisement being for some medication. I’m old enough to remember when that was illegal, and most people would say that was a better situation. I never suggested that people should not be allowed to use credit for things. What I object to is making it easy for people obtain new credit at a POS or in such a nonchalant fashion that people do not think it through before it’s too late. Credit for purchases and new credit are two different things. Looks like you are Consumer oriented (vs Business)? we support both consumer and business! some business use cases include working capital for SMBs, merchant advance, BNPL, trade credit, etc. Does this apply to credit cards as well as loans? yup we can support both use cases! Will you be at M2020? Would be interesting to chat. Is this US only? Yes we are only supporting the US right now. We'd love to expand to other geographies in the future, but the states will keep us busy for a while! Congrats guys! Super excited for this thank you for the support!! isn't there was a startup doing smth similar, I think it was Stilt, onbo.com? This is them.