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March 14, 2018

Numerated Growth Technologies, the online lending software startup that started life as an incubator within Eastern Bank, announced Monday it has two new clients, Franklin Synergy and MidFirst Bank.

These two additions bring the number of bank clients Numerated Software has landed to seven.

The expansion is notable as online lending software providers have struggled to get banks to commit. Many of the newer providers use artificial intelligence to help calculate creditworthiness, and banks balk at the idea of using a black box for credit decisions, even though the vendors say they can provide transparency, explain ability and clear rationales for granting or denying credit.

Numerated has at least two things going for it: Its software was developed within a bank and it doesn’t use artificial intelligence.

“The market is way, way more traditional than someone trying to sell an AI platform,” said Dan O’Malley, founder and CEO of Numerated.

“When we were building the platform inside Eastern Bank, we spent a lot of time with Dan Sullivan, the bank’s chief credit officer, understanding how he could get comfortable with doing a real-time loan,” said Dan O’Malley, founder and CEO of Numerated. “The market is way, way more traditional than someone trying to sell an AI platform.”

Numerated’s platform is rules-based, and it will enforce rules and policies a bank already has. The company asks the banks to write down every potential edge case or issue that could crop up in a loan and make a decision about it before anybody ever applies.

“That’s pretty hard,” O’Malley acknowledged. “Banks are used to gathering information, sending it to an underwriter and an underwriter will work through the edge cases that come up, applying their own judgment.”

The banks that have implemented the software to date have adopted a policy of zero subjectiveness, in which rules are mandatory and there’s no subjective decisions allowed, O’Malley said. This prevents the possibility of human bias creeping into the decisions.

The software also verifies the name and industry of the small business applying for credit. It can render loan decisions in two minutes and 57 seconds, O’Malley said.

At the banks Numerated works with, loans that are considered high-risk because they’re bigger, more complex or in an iffy industry are routed to a human underwriter for a closer look.

Kevin Herrington, chief operating officer at Franklin Synergy, a $4 billion-asset bank in Franklin, Tenn., said the bank wants to diversify its loan portfolio away from a heavy concentration in real estate.

The bank would also like to be able to build relationships with small businesses and thereby grow deposits. In the past it has found small-business loans take up too much time and effort in underwriting and documentation to be worthwhile.

“With the average loan size being really small, it’s not profitable to do these types of loans using traditional methods,” Herrington said

The Numerated software will let the bank make these smaller loans with minimal human interaction. Loan officers will continue to work on larger loans.

Franklin Synergy plans to do testing of the Numerated software, running it through scenarios and testing scripts to make sure the automated credit decisions are being made correctly within the parameters the bank set. Then it will open the platform up to friends and family, then to existing customers. Ultimately it will be offered to noncustomers.

The bank hopes to go live with the software in June or July.

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