How LendKey created a different kind of loan business – with a cloud ERP engine

SUMMARY:

How do you escape the chaotic tyranny of spreadsheets? If you’re LendKey Technologies, you challenge three cloud ERP vendors to a functionality bake-off. At the recent Acumatica Summit, LendKey’s Stacey Rohrbaugh told me about their Acumatica project, the results, and where this online lending firm is headed next.

acumatica keynote panel
Acumatica panel – Rohrbaugh on right

Two years ago, Stacey Rohrbaugh and her team at Lendkey Technologies were in their own version of spreadsheet hell – a predicament many can relate to. LendKey’s homegrown system had served them pretty well, but growing pains exposed the problem. Rohrbaugh:

In 2014, it just became so clunky with everything being in spreadsheets Download this, export this, marry it all here. But it was more of, “Where do we want the vision to be? Do we want to focus on enhancing lender reporting?”

LendKey’s investors were raising questions that spreadsheets struggled to answer:

We needed metrics to be more proactive about these loan conversion rates, getting ahead of them. We started getting investors who were asking for economic loan information. “What is your acquisition cost? What is your profitability on this asset class?” We simply couldn’t do that just by tracking everything in Excel.

Getting out in front of those questions involved a move to cloud ERP. Rohrbaugh’s story also stands out due to a rigorous ERP evaluation process they put their short list through.

LendKey is a cloud-based platform which helps 13,000+ community financial institutions to get involved with online lending. They match those institutions with the right consumers, with a focus on low-cost borrowing options. Example: their student loan re-financing program helps students get better interest rates via community banks and credit unions.

The test drive – conducting an ERP bake-off

LendKey’s ninety employees might imply a basic ERP system. But their transactions are intense in volume and complexity. LendKey has a unique loan model that includes the option of LendKey participating as a kind of co-lender with a 10 percent stake. Each loan origination is also divided ten times to reduce client risk.

That means each loan is replicated ten times. If that’s giving you a popsicle headache, the bottom line is that LendKey needed an ERP solution with the capabilities to handle high volume transactions with complex allocations – all of which requires reporting back to the loan participants.

LendKey’s evaluation process came down to a short list: NetSuite, Microsoft Dynamics, and Acumatica. To help them narrow, LendKey organized an ERP bake-off – but with their data. They compiled a daunting list of essential transactions they needed the system to do. Their lucky implementation partner, Martin & Associates, got to do the demos. All three vendors stepped up:

To their credit, Martin & Associates did a fantastic job, because Acumatica was new to them as well. They didn’t necessarily have a bias, but of course they had more experience with other systems… It didn’t hurt that our internal project manager has been through hundreds of ERP implementations.

For LendKey, Acumatica proved the best fit. But why? Ease of use stood out. LendKey also liked the deployment options. They went live on Acumatica’s public cloud version; future plans could include bringing the system in-house if/when they pursue some new projects with sensitive data. Flexibility of configuration another standout:

Acumatica has a sub-account function where you can design the segments of the sub-account, and say, “This segment is for student loans; this segment is for the student marketing channel – whatever you want to define it on, this department.” You can set everything that way, and then report it on the back end. But it doesn’t clunk your GL down with 50,000 GL accounts. It’s all one main GL account that everything rolls up into. Dynamics wasn’t that way. You had to have a chart of accounts; it would end up being infinite.

There was one more constituent who needed to be won over: the CEO. LendKey’s CEO wanted to know: were they simply paying for a fancy accounting system? What else could Acumatica do for them? That prompted a talk with Acumatica’s own CEO Jon Roskill:

Our CEO spoke directly to Jon and said, “Do what my clients do to me. Why? Why should I pick you? Why should I buy you?” And they had a very candid conversations. Jon was very transparent with, “This is our strategy. This is where we’re going. This is how we’ve grown.”

Adoption and results

The implementation began with data conversion in October 2016; LendKey went live on Acumatica on January 1, 2016. Did users resist the new workflow? Not in this case:

It’s made workflow simple. Approving APN invoices, cutting checks, everything else is very seamless. Document management – it’s made for a paperless work environment. So I think everyone’s pretty pleased with it.

As for go-live results, the staffing gains some customers cite don’t apply here:

We always still need more bodies rather than taking bodies away. So I don’t know if we can quantify it from that aspect.

Rohrbaugh sees a bigger win:

I think what it has allowed us to do is gain larger clients. This year we signed four financial institutions that are over $1 billion in assets. Which makes a huge change in our revenue stream.

And what role did Acumatica play?

The reason we’re able to do that is we now have fancy robust reporting, and we can tell [clients] their return on acquisition. We now have all the metrics with their portfolio performance, their borrower information. I think it’s helped us in the sales process of getting future clients.

Rohrbaugh says they use that reporting as show-and -tell during sales calls. Oh, and add reduced audit stress to the benefits list:

For our SSAE 16 and SOC 1 and 2 audits, it helps with the financial control – all those questions that they’re asking you. We now have a much better documentation trail of securities, and access to financial information.

The wrap – in pursuit of a single source of truth

LendKey still has challenges to conquer. One of those will be made easier by Acumatica’s deeper Salesforce integration, announced at this year’s Summit:

It takes a long time to design and setup Salesforce. You don’t want to just scrap it, and if you already have it, then you want all your systems to talk to each other.

That fits into the next project: taking analytics to the next level across systems. Companies in the SME space have increasingly sophisticated systems; deriving trend data across those systems is the hard part. Rohrbaugh:

This goes back to our talk last night about “What is our single source of truth? Is it coming to this warehouse? What system is feeding what, and where’s the ultimate record?

Moving systems to cloud doesn’t make this issue go away:

We have several different cloud based systems, between our loan servicing, our loan origination system, and Salesforce.

Acumatica is pushing toward more robust analytics, but this issue goes beyond the data within Acumatica. I talked to several Acumatica analytics partners about this problem. I was particularly intrigued by DataSelf, which connects data from multiple sources – including Acumatica – into Tableau (and Microsoft BI) for data visualization and more.

Whether this or other solutions will help LendKey remains to be seen. For now, Rohrbaugh knows that integrating data sources into one analytics environment would raise their predictive game. They are also interviewing data architects, weighing the option of building their own warehouse.

For Rohrbaugh, this is a good problem to have. Getting live on Acumatica was a big step, and they were able to do it with a small team of determined folks who managed to continue their own full-time roles while taking Acumatica live.

Business pushes ahead – next up for LendKey: the launch of an all-new, unsecured personal loan service. That fits into their revamped web site, which serves their institutional and personal consumers via one mobile-friendly UX. Rohrbaugh made her first appearance an Acumatica keynote panel this year. I suspect it won’t be the last if LendKey keeps this pace.

Image credit - Photo of Stacey Rohrbaugh at Acumatica Summit by Jon Reed. Photo of Acumatica customer keynote panel by Jon Reed.

Disclosure - Acumatica paid the bulk of my travel expenses to attend the Acumatica Summit. Acumatica is a diginomica partner. NetSuite is a digniomica premier partner.

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