Why are there not more tech startups in the lending industry?
The lending industry is heavily entrenched in traditional practices, making it challenging for tech startups to break through. It’s fragmented by an overwhelming number of brokers, small lenders, and regional players, all operating under vastly different rules. The lack of standardization and the constant fluctuations in interest rates make it difficult to build scalable tech solutions.
Startups thrive on automation, AI, or other cutting-edge tech have a hard time navigating this fragmented system. Furthermore, constant regulatory oversight leaves little room for innovation, especially for new entrants without deep pockets to navigate the complex legal landscape.
How does Capital Ton plan to change that?
At Capital Ton, we’ve recognized that we cannot fight the structural issues of the industry head on, so we’re taking a different approach. Instead of trying to reinvent the entire lending process through tech, we focus on simplifying processes for existing brokers and lenders, helping them adapt to technology incrementally.
Our tools are designed to make small but significant improvements, think streamlined documentation and faster loan approval, without attempting to change the system entirely. By focusing on what’s realistically possible within current regulations, we’re finding ways to empower investors without disrupting their entire workflow.
What states do you specialize in?
We help investors get fix and flip financing in Tennessee, Florida, Georgia, Texas, Alabama, Ohio, Oklahoma, and about 15 other states.
Why do you say there is over-regulation in the lending industry?
Over-regulation stifles innovation. In lending, there are countless compliance checks, reporting requirements, and data security standards that make it difficult to introduce new technologies quickly or efficiently. Lenders must adhere to a wide variety of state and federal regulations that differ from region to region.
So, even if a company develops a new software that promises to streamline lending, they might spend years getting approval from regulators across different jurisdictions. Every piece of technology introduced must pass regulatory scrutiny, and that alone slows the adoption of anything remotely innovative.
What are some technology regulation requirements for lenders?
Lenders face an array of technology-related regulations, from data encryption standards to ensure borrower privacy, to stringent anti-money laundering (AML) and know-your-customer (KYC) protocols. Additionally, lending software must comply with the Consumer Financial Protection Bureau (CFPB) regulations, which often change based on economic conditions.
Data storage, access control, and reporting also need to adhere to national and state-level guidelines, making it nearly impossible for lean, innovative tech companies to introduce anything new quickly.
Who is pioneering the lending scene using technology?
While some larger players like Kiavi, Quicken Loans or Rocket Mortgage are leveraging technology, it’s worth noting that these companies are still bound by the same regulatory environment as everyone else. The difference is they have the financial resources to invest heavily in compliance while also developing new tech.
Even then, their innovations tend to focus more on customer experience, like improving application interfaces, rather than fundamental shifts in how lending is done. The reality is, no one is truly pioneering in this space because of how constrained it is by existing frameworks.
How will AI change the lending industry?
AI has the potential to revolutionize some aspects of lending, particularly in data analysis, underwriting, and fraud detection. However, it’s also limited by regulation. Even the most advanced AI systems will need to comply with the same rules that have hampered other technologies.
There’s also a level of distrust from both regulators and lenders about fully handing over complex decision-making to AI, which further slows adoption. In the near term, AI will be used more for streamlining back-office processes rather than making any groundbreaking changes to the industry.
How will LLMs like ChatGPT change the lending industry?
Language models like ChatGPT could help streamline communication between borrowers and lenders, automating some customer service functions. However, it won’t dramatically alter the fundamental structure of lending.
ChatGPT, for instance, can provide basic information or help with simple queries, but it still won’t replace the compliance-heavy human processes required by regulators. At best, it will serve as a supplemental tool for lenders, helping them handle repetitive tasks while freeing up human staff for more complex issues.
Is SEO saturated in the lending space?
Absolutely. The lending space is one of the most competitive when it comes to SEO. Every broker, lender, and even real estate agents are vying for the same top keywords, making it incredibly difficult to stand out.
Saturation is a major issue, and newer entrants will find it challenging to rank without a massive budget. Add to that the fact that search engine algorithm updates continue to emphasize authority and credibility, which tends to favor older, established players in the market.
What is the average CPC on search engines for 5 main keywords?
The average CPC (cost-per-click) for competitive keywords in the lending space can range anywhere from $20 to $60 depending on the keyword and region. For instance, terms like “mortgage broker” or “personal loan” are highly sought after and can be on the higher end of that spectrum.
Other related keywords like “refinancing” or “home equity loan” might be slightly lower but still expensive. It’s a clear indication of how saturated and costly digital marketing has become in this space.
