A San Francisco-based fintech focused on making small-dollar loans to borrowers with little to no credit history will use a $10 million investment from Prudential Financial to expand its operations and lending capacity, according to the fintech's CEO.
“We’re working through launching partnerships with banks,” the chief executive, James Gutierrez, said in an interview ahead of Tuesday’s announcement. He pointed to efforts by the Office of the Comptroller of the Currency, the Federal Trade Commission and the National Credit Union Administration "to look at how banks can offer small-dollar loans as an alternative to payday lenders.”
Aura might have a unique advantage in partnering with banks because it is one of the few fintechs to have a community development financial institution designation from the Treasury Department.
Since 2014, Aura has originated some $500 million in loans to more than 350,000 borrowers at over 1,200 partner locations throughout Arizona, California, Illinois and Texas. Those sites are supermarkets, auto parts retailers or any business where the borrower has a sense of familiarity with the establishment, Gutierrez said.
Prospective borrowers electronically apply for loans at these locations and approval is instant, pending confirmation of a consumer’s income. Gutierrez said Aura relies on its proprietary technology to evaluate a potential borrower’s ability to repay a loan. As borrowers pay back their loans, they build a credit score.
Aura provides repayment information to Experian and TransUnion, Gutierrez said. Most Aura borrowers typically raise their credit score by 312 points between their first and second loan, according to the company.
Aura to date has raised some $100 million in equity funding.
“Aura’s accessible, responsible alternative to payday lending is directly aligned with Prudential’s mission to make lives better by solving the financial challenges of a changing world,” Gerald Pambo-Awich, director of strategic initiatives and impact investments at Prudential, said in a press release.
Gutierrez said Aura eventually wants to add more services and envisions working with Prudential to provide borrowers insurance products.
“How do we create real financial security for these customers?” he said. “What are the products that make sense? With Prudential being an insurance business, what are the products we can offer to help build assets, and a life insurance product can help do that.”
