Since it was founded in 2012, Blend has signed up some of the biggest banks in the country — including the likes of Wells Fargo and U.S. Bank — as well as a bevy of smaller, more traditional financial institutions across the U.S..
Now, it’s setting its sights on the startup and fintech market, hoping to power the lending and banking services of some smaller, but fast-growing digital lenders.
Blend, which went public just a few months ago, started off selling software designed to simplify and digitize the mortgage lending process for both borrowers and lenders.
But as time passed, the company has expanded its product set in two important ways: First, it has gone deeper into the broader homeownership journey, offering up ways for applicants to find homeowners insurance, title insurance and even be matched up with a real estate agent as part of its mortgage application flow.
The second big expansion comes from a new suite of services that moves it beyond mortgage by offering deposit accounts, credit cards, and support for other lending products like personal, home equity, and auto loans. By doing so, the company seeks to provide a single platform for its customers, according to Blend founder Nima Ghamsari.
“A lot of the DNA for how those products work is the same, but typically at these institutions, these product lines have completely disparate and siloed organizational structures, as well as technology stacks,” Ghamsari said. “What we’ve done the last four years is take our platform and make it a single place for a consumer to work with a financial institution across all these products. So you could show up and get four or five products on Blend now that you couldn’t historically get within one system.”
By reusing a lot of the same components necessary for mortgage origination, including know your customer (KYC) and anti-money laundering (AML) verifications, as well as identity, income and employment verification, the Blend consumer banking suite can speed up the onboarding and application process for banking, credit card and loan products. It also rolled out a “Blend Builder” tool that lets customers customize the components they wish to use with a drag-and-drop interface.
Unlocking a new customer base
For banks, the new offerings can connect the mortgage origination system into core banking services and other systems of record to enable a simplified management structure on the back end and a seamless user experience on the front end.
But for fintechs, the Blend platform can be used to quickly spin up new products and services, reduce dev cycles and speed up time to market. Without explicitly marketing its mortgage and banking suite to fintechs, Blend has already seen traction with some early-stage startups as well as some more established fintech challengers.
“These components are obviously very useful to existing incumbent financial services firms,” Ghamsari said. “But we’ve met more and more fintechs who are trying to get up and running very quickly and want a really flexible platform versus having to build everything themselves.”
OpenDoor and Zillow, both public, are among its proptech customers, but the list also includes a number of fast-growing startups that have raised large sums over just the past year. Those customers include Homeward ($371 million), Reali ($250 million), Accept ($90 million), Bilt ($60 million) and UpEquity ($50 million).
Given Blend’s background, it’s probably not a surprise that most of those companies are focused on mortgage loan origination. UpEquity, for instance, makes cash offers for homes on a borrower’s behalf while also speeding up the time it takes to close a mortgage, and it relies on Blend for both the front-end application process as well as back-end data collection.
“Blend provides a seamless user experience and a front end we can deploy out of the box to our customers,” UpEquity CEO Tim Herman said. He added that Blend has done a great job of building the asset and income verification tools it relies on to power UpEquity’s decision-making process and underwriting engine.
That said, fintechs don’t necessarily have to be in the mortgage space to take advantage of Blend’s technology — particularly its consumer banking and credit card products. As one example, Bilt, which has created a loyalty program for renters to earn rewards by using its credit card to pay rent, adopted Blend initially to power its card application process.
Bilt founder Ankur Jain explained that his startup had to develop its loyalty program and also build a payment platform processor for handling rent payments for millions of apartments across the country.
“To then have to reinvent integrations into the credit bureaus for credit screening or doing ID verification — it’s just a lot of work,” Jain said. “That’s not core to our business, so partnering with somebody like Blend on the card side was really great for fast-tracking that process, and get up and running.”
Blend doesn’t compare itself to the banking-as-a-service startup category, but given the breadth of its product offering, it at least has the pieces in place to capture some of that business, particularly among mortgage- or lending-focused startups.
The pros of serving the fintech market
Over its lifetime, Blend has had a fair amount of success signing up banks and mortgage lenders for its products. In its second-quarter earnings report, the company claims 32 of the top 100 U.S. financial services firms by assets under management and 28 of the top 100 U.S. non-bank mortgage lenders as customers.
So why go after startups?
Well, for one thing, it’s a huge, and growing, market. CB Insights reported that investors poured $31.3 billion into fintech startups in the third quarter alone, and fintech funding in 2021 is already double the amount invested last year. There doesn’t appear to be any signs of investor pullback in the private markets anytime soon.
More importantly, the fintech market is where a lot of future growth in financial services will come from. Getting in on the ground floor of a fintech startup is one way to scale Blend’s business over time. Ghamsari notes that even if 90% of the fintechs it serves today fail, the 10% that survive will probably represent a huge part of its business.
“There are certainly fintechs that will go out of business,” Ghamsari said. But, he added, “I think it would be unwise to not invest in a segment and not offer our product to a segment because it might hurt our metrics around churn.”
Finally, as banking, lending and payments increasingly become digital, we’re going to see more consolidation — and convergence — between the types of services that are offered across different service providers. A neobank might offer banking and debit cards today, but over time will likely expand to include credit and lending products. Conversely, an online mortgage provider may someday add a banking or digital wallet component to its business.
“Our aim is to be a platform for the entire industry,” Ghamsari said. “And the industry is going to look different and have a different makeup 10 years from now.”
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