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Sunday, Feb 25, 2024

PointPredictive Helps Lenders Learn the Risks the Easy Way

The founders of Carlsbad-based startup PointPredictive Inc. are hoping the world’s lenders will beat a path to their better way of assessing borrowers’ credit worthiness. The newly launched company aims to build software systems that are a vast improvement over those used to help determine whether borrowers are a good risk or not.

PointPredictive founders Tim Grace and Frank McKenna seek to leverage predictive science technology to solve problems faster and more efficiently within the consumer lending, auto finance, mortgage, real estate and payment cards spaces.

For example in the auto lending industry, while there’s well-known data available to assess car buyers’ credit worthiness, there’s a lack of data to do the same for auto dealers, Grace said. The new company’s software will help larger lenders understand the risk of extending credit to dealers by compiling and evaluating data about the rates of fraudulent loans they’ve made and the rates of those loans going bad, he said.

Entrepreneurial Pedigree

Grace and McKenna, who have long track records in predictive analytics, met each other while working at one of the more successful software enterprises created here — HNC Software.

HNC was acquired by Fair Isaac Inc. in 2002, an event that prompted the exit of several employees who started software enterprises. Among the companies spawned from HNC are ID Analytics Inc., BasePoint Analytics, SEM Director Inc., Mitek Systems, Global Analytics, Edgeware Analytics and Certona Corp.

After leaving HNC, Grace and McKenna launched BasePoint Analytics in 2004. The business made predictive analytic software that helped mortgage companies detect fraud. Five years later, they sold the business to First American CoreLogic for an undisclosed price.

Grace stayed at CoreLogic for a few years after the sale and took an early retirement. But like most serial entrepreneurs, he wasn’t thrilled with the arrangement.

“l found out that I really enjoy working, and this is an industry I have a lot of experience in,” Grace said.

Grace and McKenna teamed with Joe Jackson, who was familiar with the partners from using their BasePoint systems while he headed now-defunct Wells Fargo Ventures, formerly a subsidiary of Wells Fargo & Co. Jackson, based in Kansas City, is a partner in PointPredictive and has investments in other software

and financial services businesses, he said.

Tom Clancy, chairman of regional trade group Software San Diego, said Grace and McKenna’s activity fits the mold of many serial entrepreneurs: creating businesses, growing them to a certain size, selling for a good profit and then creating another business.

The analytic software community in San Diego is deep and has connections to a wide variety of industries beyond financial services, including life sciences, defense, telecommunications and retail, Clancy said.

“There are so many knowledge-intensive industries here,” Clancy said. “You have all these people that are creating new, fundamental technology.”

Predicting Risk Beyond Lending

Another task that PointPredictive will focus on is helping vacation property owners determine the riskiness of renting to tenants. There are several services aimed at finding tenants for vacation rentals, but such services don’t vet prospective tenants’ financial capacity, Grace said. While an owner can check a prospective tenant’s credit scores, those scores don’t say anything about their past rental history, he said.

Likewise, in auto lending, while there are some software products focused on consumers’ credit worthiness, there aren’t programs to detect fraudulent applications or verify a borrower’s income, Grace said.

Banks, insurance companies and other large financial corporations are continuously updating, improving and creating automated programs to help them mitigate their lending risks, and given the expertise at PointPredictive, the company will have plenty of customers out the gate, though Grace declined to reveal names.

He said by the end of this year the company’s revenue should range from about $10 million to $20 million. Staffing, which stands at fewer than 10 people at its Carlsbad office, should reach 30 to 50, Grace said.


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