Israel’s Behalf uses algorithms to vet for credit

Fintech startup has provided millions of dollars in loans to US small businesses using predictive analysis

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

Behalf's co-founder Benjy Feinberg (Courtesy: Yossi Dahan)
Behalf's co-founder Benjy Feinberg (Courtesy: Yossi Dahan)

Israeli fintech startup Behalf, which provides cash advance services to small and medium-sized businesses, said it has provided millions of dollars’ worth of loans to users in the US. The company hopes to become a large financial institution in the longer term.

“We provide short-term working capital for business needs,” said Benjy Feinberg, who, together with his brother Shai, co-founded the company in Ra’anana, Israel, in 2011.

Behalf’s software technology enables users to get cash advances ranging from $2,000 to $50,000 on the spot. But instead of giving the borrowers the money, Behalf pays their suppliers directly and then collects the funds from the borrower’s bank account at pre-scheduled dates.

Borrowers log into the Behalf website, answer a few simple questions and within a few seconds, can get approved for a cash advance. The requested funds get paid directly to the person they need to pay, on the same day.

Behalf’s technology, based on big data, predictive analysis and algorithms, enables the company to speedily determine the risks and credit-worthiness of the customer, enabling it to evaluate the amount of loans it can make available to each individual.

“Today’s banking systems are generally geared to give money to bigger customers as the small customers cost them more — you need to meet with the customers, vet each one of them for credit worthiness. All of that is time-consuming and costly,” said Feinberg. “With internet technology, such as ours, the machine can do the small or big transactions for the same cost, thus allowing us to provide funding to these smaller companies whose needs are unmet today.”

Israel’s financial technology scene is still in its infancy but has witnessed sharp growth in the past two years, a report by data firm Meidata for Bank Leumi Le-Israel Ltd. shows.

More than half of the 200 companies operating in the field today employ fewer than 10 workers, and most of them have been set up in the past two years. These companies work in a variety of areas, developing products that range from improving ways to give loans to capital management solutions and the virtual transfer of money. At the end of the third quarter of the 2016, total global funding to fintech companies was $17.8 billion, according to data by New York data firm CB Insights and KPMG.

Competition is high

There is a lot of competition to provide loans to small businesses, said Feinberg, but there is no solution like Behalf’s, in which loans are tailor-made solutions to purchase goods and inventory “in such a seamless and smooth manner, via mobile phones.”

Feinberg, who immigrated to Israel from South Africa after high school, worked as an investment banker in New York before setting up the startup.

“We have to make the right credit decisions. Our automated data and algorithms, as opposed to legacy manual systems, help us quickly determine the quality of the borrowers, and that is why we can underwrite even $2,000 profitably,” Feinberg said.

Victory Park Capital, an investment firm with focus on alternative credit, provides Behalf with the funds it needs to give its customers the credit line. Customers pay Behalf interest of 1%-3% a month for the loans.

“Our interest charges are mainstream. Our rates are similar to what they’d pay for a credit card transaction or a bank loan,” Feinberg said.

To date, Behalf, which employs 70 workers in the US and Israel, has made available to US borrowers thousands of loans worth millions of dollars and the company is in compliance with US requirements, Feinberg said.

Making the right credit decisions is what Behalf’s technology does, he said. And the company has set up a mechanism of provisions to protect the loans they give out. “You need to make wrong decisions, lose money to learn, and thereby improve the model.”

And just as the internet has changed the way we consumers buy books or clothes, so does it now play a part in how we get financing, he said. “We are building a business for the long term,” he said. “Our aim is to become a huge financial institution.”

Behalf has raised $160 million to date from VC funds including Sequoia Capital, Spark Capital, MissionOG, Vintage, Maverick Ventures (Israel) and Viola Growth. In November was recognized as a “Rising Star” in Deloitte Technology’s annual Fast50 awards, posting a growth of 357% in 2014-15.

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