The Tokenist recently sat down with John Guerci, co-founder and Director of Strategy for Ocrolus. Throughout the economic downturn spurred by COVID-19, Ocrolus has helped over one million businesses apply for the Paycheck Protection Program (PPP).
John Guerci was kind enough to share his unique insight on the PPP’s overall functionality, Ocrolus’ role in the program, and his view on the advantages offered by FinTech when compared to larger banks.
The Tokenist (TT): What is Ocrolus, and how did the firm come together?
John: Ocrolus is a fintech infrastructure company that is modernizing back-office operations across financial services. Founded in late 2014, the company automates document-driven workflows for high-stakes financial decisions, with a focus on loan originations.
Fintech lenders like Square, OnDeck and SoFi trust Ocrolus to power their digitization and analysis of loan documents. In general, lenders have a lot of money at risk, and have a critical need for extracting accurate data from loan applications so that they can make informed decisions. Legacy Optical Character Recognition (OCR) software is not accurate enough, so most lenders resort to doing tedious manual data entry and cleanup from documents.
When the founders realized that existing software offered an incomplete solution to the problem of data entry, we set out to create a new breed of technology that is accurate enough to fully automate loan determinations – no manual intervention required
From its inception in Sam’s kitchen, Ocrolus has grown its team to 100+ people in New York’s Financial District, and over 1000 worldwide across four offices. The company has raised over $33M in venture capital, most recently a $24M series B in June 2019 from investors like Oak HC/FT, FinTech Collective and QED Investors.
TT: What has Ocrolus’ role been in assisting companies with PPP loans? How many companies have you worked with to date?
John: Ocrolus empowers lenders to process the massive influx of Paycheck Protection Program (PPP) loan applications, so that they can grant struggling businesses the capital they need to remain viable. The PPP was especially challenging for lenders due to the volatility in application volume and the need to process unfamiliar loan documents.
In the first two tranches of the PPP, lenders faced the biggest spike in application volume they had ever seen. Some Ocrolus customers received hundreds of thousands of loan applications in a matter of days. Ocrolus helped these loan originators read the required documents automatically and scale their application throughput without needing to add a large number of workers to enter data from loan documents by hand.
Ocrolus partnered with several lenders processing PPP applications, including Square, Intuit and Cross River Bank. Outside of the PPP, over 100 lenders use Ocrolus to make high-quality decisions in an automated and efficient way, with trusted data. Compared to a manual approach, Ocrolus allows lenders to process loan applications with greater accuracy and speed, and ultimately deliver more capital to businesses in need.
TT: What are the biggest challenges that Ocrolus has faced on the frontline of PPP loan forgiveness?
John: Achieving big gains in AI by applying machine learning in such a short time frame was the biggest challenge for Ocrolus. Ocrolus uses a combination of AI and human quality control workers to read documents with over 99% accuracy.
The company is able to achieve such high accuracy on certain previously unseen loan documents that had been newly mandated for review by the PPP, but doing so required greater levels of human input and thus more time to process documents. To achieve significant improvements through machine learning for faster processing of loan applications, the company pivoted its engineering resources to focus almost entirely on PPP work for a few days.
In doing so, Ocrolus was able to realize gains from machine learning in less than a week – which would take most companies several months. As a result, Ocrolus was able to quickly process over 1.3 million PPP applications on behalf of its clients, getting funds to the small businesses that sorely needed it.
TT: Many FinTech firms were able to assist a surprisingly high number of businesses with PPP loan forgiveness when larger banks couldn’t. Why do you think that is?
John: I think that there are a few reasons that fintechs were able to take advantage of the PPP loan forgiveness. Fintech’s lean and proprietary pipelines for data are a major factor. Generally, fintechs are the first to adopt alternative new sources of data. In the case of PPP forgiveness, fintechs moved quickly to partner with software companies in accounting, payroll provision and data aggregation, yielding a clean stream of data directly from the source.
Agility is another factor, as Fintechs are able to pivot and act quickly in their product development and marketing efforts, more so than banks, to serve businesses for PPP forgiveness. In general, user experience is the most commonly-cited advantage of fintechs over banks. Most fintech companies have sleek and simple user interfaces, which can be attractive when you are dealing with a complex application process that requires pulling data from multiple sources, sometimes more than once.
Reputation, typically an advantage of banks, is less important in these trying times. People and businesses who are struggling financially are more likely to adopt new services than those who are financially secure.
TT: Generally speaking, there’s much anticipation that COVID-19 has significantly boosted the long-term adoption of FinTech. A recent study suggested 40% of Americans won’t use physical banks after COVID-19. Is there any particular area of FinTech that you forecast will have a higher adoption rate than others?
John: I agree that COVID-19 has improved the long-term prospects of fintech companies. Since the vast majority of fintechs operate online without brick-and-mortar stores, they are poised to capitalize on people’s newfound hesitation to conduct business in person. Of course, banks and other traditional financial services companies offer online services, but these are generally secondary to in-branch services. Most fintechs, on the other hand, are 100% focused on optimizing the online experience.
In particular, I think that fintech lending will continue to grow in the wake of COVID-19, unlike in-person loan applications that require real face-to-face contact. With in-branch lending, it’s not like you’re visiting a bank teller behind bulletproof glass. You are sitting at a desk talking to a loan officer who is six feet away, and this brings greater concern for potential infection.
I also think that service providers that drive digital transformation will come out on top. Chasing the success of fintechs, banks are expanding their digital presence through strategic partnerships. Infrastructure like Ocrolus and Plaid (recently acquired by Visa for over $5 billion) improve the flexibility and accuracy of data analysis, and help both fintechs and banks provide fast, seamless online experiences.
TT: This is a bit unrelated, but what are your thoughts on the current millennial day trading surge? How do you see the situation ending?
John: I have always been skeptical about amateur trading, and I don’t trade stocks (or anything else) myself. Simply put, it is hard to beat the experts at their own game. Professional traders do this all day every day and have access to specialized applications.
Working in fintech has taught me that focus is a real advantage in business. Most fintech companies do one or two things really well, whereas most banks do like twenty things fairly well. I think the same idea applies to trading. If you can’t devote a lot of time and energy to trading, then I would caution against it. I do believe that certain individuals, millennials included, have a knack for trading. So it might be worth a try for those who have sufficient risk tolerance.
TT: Can businesses still apply for PPP loan forgiveness? Where can they find more information?
John: Yes. First of all, I want to say that businesses can still apply for PPP loans themselves through August 8th. To learn more, I would recommend starting by seeing if your existing bank is still granting PPP loans. While banks are probably the most familiar way to get a PPP loan, you might have an easier time applying through a fintech lender, like BlueVine, Cross River Bank, Kabbage, Square or Intuit/Quickbooks Capital.
Businesses who have received PPP loans can apply for loan forgiveness by submitting documentation showing they used the loan to fund their rent and payroll expenses. To get the forgiveness process started, you should look to the same lender that granted you the PPP loan in the first place.
This is a unique opportunity for businesses to have their debt pardoned just by submitting proper documentation to their creditor. And for lenders, it is a rare chance to solidify relationships with businesses at little cost, provided that they have the right infrastructure for processing forgiveness applications. Lenders can learn about Ocrolus how technology automates both PPP origination and loan forgiveness by visiting our PPP webpage.