Decimal Factor

Idea

Introduction

At Decimal Factor, we are aiming to converge payment and lending to connect small and medium sized businesses with responsible funding.

When talking to merchants and channel partners, it became apparent that the number of rejections they’d had to endure in trying to secure the funds required to grow their business was a major pain point. It got us thinking; why can’t an entrepreneur simply press a button and obtain funding to grow their business? Why can’t Fintech deliver a daily package of services to the business owner so that they know exactly how much capital is available to invest in the business?

We believe we have come up with a way to bring together the great technologies already in existence: capital sources, financial services, payment services and business services, and we aim to deliver converged solutions in real-time to our clients.

Intended impact

We came into being in 2008 when banks weren’t lending enough to small businesses and there weren’t enough alternative finance lenders. Today a problem is there are too many lenders and merchants don’t know where best to go for their funding needs. Each lender has its unique underwriting style and requirements for funding.

Our digital credit brokerage platform provides real-time comparisons and funding decisions from lenders to help business owners secure funding when they need it, not when a bank or lender gets around to it.

We are working on open-banking-enabled data capture and submissions to lenders to create a digital journey through portals, apps, API’s and POS devices and via merchant management tools.

We also have a Decimal Factor Readiness Score that matches the entrepreneurs’ patterns with the lenders’ products and criteria to produce an instant match. This reduces the risk of rejection and offers a truly seamless and painless lending solution for merchants.

Substantial accomplishments to date

There are 4 phases to our evolution.

Conventional (2008-2016): In the first instance, we used conventional telesales and direct sales methods. In that time, we have spoken to and helped fund over 1,000 businesses and we were able to gain a deeper understanding of their needs.

Hybrid (2016-2019): At this point, we have switched to a digital journey to simplify the process and reduce the pain of rejection by digitally comparing different lenders. Clients can now easily submit their documents to lenders to secure the funding they need.

Our total loan origination has been £50m to date, with an average loan size of £20,000 in the UK and $19,000 in the US.

Digital (2019 -2022): We plan to develop APIs that will use open banking enabled payments and data capture to provide an integrated point of sales devices and smart terminals to source lending offers for business owners. In-app and SDK tools will integrate merchant apps to enable a fully digital journey.

Seamless (2022 onwards): Ultimately, our ambition is to use cloud-based technology to make payments and lending fully integrated. We want to provide a seamless and painless funding solution to merchants which would include analytics on cash flow and predict future funding requirements.

Other Company Metrics.
Average Platform Transaction Yield: 6.6%.
Generating profitable growth.
Presence in five countries supporting 10 languages.

Monetisation strategy

The business has been profitable since 2010 and is revenue generating*.

It has three revenue generating avenues:

Digital Brokerage Platform: this generates a yield of 6.6% on the origination.

Payments Platform: this generates revenue for selling digital content such as mobile top-ups, pre-paid vouchers, and other value-added digital services.

Decimal Factor Scores: this is not generating revenue yet but we believe it has the potential to do so. It does, however, help increase profits as it reduces the cost of customer acquisition through improved targeting.

We hope to maintain momentum for loan originations and grow the business. Our plan is to eventually exit the business through an IPO.

*Based on unaudited management accounts.

Use of proceeds

We intend to use the funds raised in the following way:

40% to be spent on Marketing:
- This should help us grow and achieve our target loan origination amount.

40% to be spent on Technology:
We intend for this to help reduce cost of customer acquisition and increase our customer base.
Technology spend will also help create a bespoke AI-based brokerage and scoring engine.

Customer digital journey enhancement & integration with aggregators and partners:
- 35% of the technology budget.
The Decimal Factor CRM will be enhanced to deliver self-service digital experience.
Building and delivering the Lending Score.
- 40% of the technology budget.
Build the Merchants Master Database (MMD).
Key enabling technologies for Artificial Intelligence.

Building and delivering the Readiness Score.
25% of the technology budget.
This functionality will map key characteristics of a lender’s product against a database of target customers.