FinTech: Banking on Arkansas Startups

by Caleb Talley | Photography by David Yerby and Meredith Mashburn

Arkansas is rife with opportunities for startups looking to shake up any number of industries, be it health care, home services, supply chain or even culinary arts. Organizations exist throughout the state to help accelerate young companies through collaboration, turning bright ideas into useful realities.

One such industry thriving in Arkansas’ pro-business climate is the ever-evolving FinTech industry. FinTech, short for financial technology, is driven by innovations that aim to compete with traditional financial methods in the delivery of financial services. FinTech startups also benefit from access to organizations designed to expedite positive results.

One such organizations is the Venture Center, located in downtown Little Rock, which has in recent years aided a number of budding financial technology companies through its VC FinTech Accelerator. In collaboration with FIS, the Arkansas Economic Development Commission, Bear State Bank and a number of participating financial institutions like First Arkansas Bank & Trust, the Venture Center has unleashed upon the FinTech industry dozens of innovative young companies designed to develop financial solutions and enhance the use of existing institutions.

Not all of Arkansas’ leading FinTech companies are products of the VC FinTech Accelerator, but the three-year-old cohort has expanded the horizons for some exciting startups to watch.

Mortgage Peer
Network
North Little Rock

Mortgage Peer Network was among the Venture Center’s first cohort of financial technology startups in 2016. The Argenta-based company offers a software platform that enables the analysis of a bank’s mortgage lending process by providing peer-based scores and real-time customer feedback. By doing so, Mortgage Peer Network has improved the mortgage process and increased customer retention.

“I spent the first 10 years of my career in mortgage banking and transitioned to the technology side in 1999 when I started Precision Risk Management Systems,” says Greg Ellis, founding member of Mortgage Peer Network. “PRMS provides pipeline hedging and business intelligence software for the mortgage industry. In 2016, I decided to start Mortgage Peer Network in conjunction with the Venture Center’s FinTech Accelerator.

“Personally, my background is a mixture of finance and technology, but I also play banjo for a local bluegrass band,” he adds with a laugh.

According to Ellis, Mortgage Peer Network works with lenders to protect and enhance their online reputation and respond to new compliance requirements regarding consumer complaints as it related to fair lending. The company’s hosted service uses milestone based borrower communication throughout the entire lending process which allows lenders to set proper expectations and receive consumer feedback along the way.
“Our solution directs happy consumers to various social media channels to promote the lender, while unhappy consumer responses are routed to management for immediate intervention,” he says. “Our solution detects potential problems on loans and sends text message alerts to management in an effort to head-off issues. In some cases, our customers have seen consumer complaints decrease by over 90 percent.”

What makes Mortgage Peer Network unique is its ability to combine several solutions together to help lenders provide the best experience possible for every customer, including customer feedback, peer data comparison, performance metrics and automated alerts.

In the two years his company has been in business, Ellis says he’s seen both major accomplishments and some setbacks.

“One of our key performance metrics is the number of consumer communications we send out each month. Just last month, we processed over 4,500 consumer communications on behalf of our clients,” he says of their successes.

“After the VC FinTech Accelerator, we were extremely excited about the prospect of raising seed capital in Arkansas,” he adds when asked about setbacks. “However, we were unable to raise the capital we needed to hire a veteran sales staff. That has left us operating on a very small budget and made it difficult to grow sales.”

According to Ellis, Mortgage Peer Network continues to grow as a result of his willingness to reach out to those in the industry and adjust plans on the fly.

“Seek out mentors in the area that can help you vet your idea,” he says. “There are many resources in the state to help aspiring entrepreneurs so take advantage of all you can. Learn to accept ‘No’ as your favorite answer because that is the one you will hear the most. Always be ready to pivot your idea and adjust plans on short notice.”

LumoXchange
Little Rock

LumoXchange is a remittance marketplace created to compare exchange rates in countries across the globe, enabling users to send currency online using local FX rates at lower costs.

The company, a 2016 cohort of the VC FinTech Accelerator, was founded by Maf Sonko, a Gambian immigrant who came to the United States as a 15-year-old exchange student.

“LumoXchange is one-stop shop exchange rate comparison and international money transfer company,” says Sonko. “Its platform enables you to easily search, compare and send money online with the best exchange rates available just like you would when booking a hotel online with Hotels.com.

“Unlike other money transfer companies,” he adds, “LumoXchange doesn’t hide the great exchange rates the banks get and then apply a margin or additional fee. Our transparent platform reveals those same exchange rates and gives you the power to pick your own rate and how your beneficiary will be paid, whether by cash pick-up or via bank deposit.”

The idea for LumoXchange came to Sonko after working in his uncle’s money transfer shop while in high school. According to Sonko, before wide access to the internet, users would call to check the rate to find the cheapest way to send money to Gambia. And that is still true today, except individuals are using Google to find the best exchange rates among the existing platforms.

“I observed the complexity, cost and inefficiency of the money transfer business, and I wondered: ‘Why is there not a service that allows customers to find the best rates and send money on the same platform?’,” he says. “Millions of families across the world live and work abroad and send their money and their love back home. I created the LumoXchange platform to solve the age-old problem of sending money across borders.”

“Lumo,” according to Sonko, means market in his native language of Wollof.

“I always say, ‘It is not just money you are sending home. It’s love,’” he says. “LumoXchange’s mission is to find you the best exchange rates, so you can share more of your love.”

LumoXchange is the first and only platform that allows users to find the best exchange rates and send money on a single, easy-to-use platform. The company was originally based in Atlanta but was soon moved to Little Rock as a result of the VC FinTech Accelerator and a welcoming Arkansas business community.

“After spending time with Arkansas’ business leaders, we thought Little Rock would be the ideal city to relocate the business,” says Sonko. “We love that Little Rock is a city with a small town feel, where we have access to key decision makers in the areas of banking and finance. The business leaders and elected officials of Little Rock have been tremendously welcoming and supportive of our company and its technology.”

As a financial services company, Sonko and his team overcame the hurdle of regulatory approvals in order to enter the market. Having raised enough capital, LumoXchange launched its platform and is working to create solutions for its users.

“Seeing the support for such a new technology from local investors and stakeholders has been an encouragement and validation that our platform will be a game-changer in the money transfer industry.”

Bucket
Bentonville

Bucket, one of this year’s VC FinTech Accelerator cohorts provides a software and blockchain-based solution that facilitates coinless cash transactions at the point-of-sale.

“Bucket is your digital piggy bank,” says founder and CEO Francis Hwang. “When paying with cash, customers can ask the cashier to ‘Bucket the Change’ and receive paper currency like normal, but now without coins.

“For example,” he adds, “if you’re due back $1.29, you would get the $1 bill and a Bucket receipt with a QR code for the $0.29. Scan the QR code at your leisure and the $0.29 is loaded into your Bucket account. Once your account reaches $50, you can cash out to a gift card, prepaid card or donate to one of the great charities we have partnered with, such as The Boys and Girls Club.”

The idea for Bucket came to Hwang in 2003, when he was working on a research project in conjunction with the San Francisco branch of the Federal Reserve. The goal, he says, was to attempt to quantify the amount of energy required to maintain the fiat currency instrument within the United States. “I was surprised at my findings that, despite their inferior value, coins represented the dominant cost in the cash instrument,” he says.

But at the time, the technology to follow through with the idea had not yet evolved enough to bring feasibility to the concept.

“There were too many limitations, including cash registers not even being connected to the internet and smartphone ubiquity not having reached a critical mass. By 2016, I felt that digital POS systems and consumer behavior had evolved and matured to a point where the idea would be doable,” says Hwang. “I partnered up with Daniel Kam, an established entrepreneur who had built several businesses of his own, and in August of 2016, we started the journey of Bucket.”

While Bucket was conceived in Southern California, it now calls Arkansas home.

“Arkansas is a hub of innovation, and we’re lucky that we can be a part of the fun,” says Hwang. “Northwest Arkansas, where I am based and where we are launching Bucket’s pilot, represents a community that is educated, eager for new technologies and welcoming to new people and ideas. It’s a state where startups are welcomed by both the public and private sectors.”

While Bucket has been hit with the same setbacks many FinTech companies face, such as finding efficient ways to build their technology, the company has succeeded in raising more $2.5 million through “the vision of incredible investors and the drive and execution of the Bucket team.”

“We have created a product with the potential to really push a cashless society forward, and I am surrounded by people who are motivated to be part of a solution,” says Hwang. “If you are passionate about your idea, do the research and try to make it happen.”

3E Software, Inc.
Springdale

Founded before the 2014 formation of the Venture Center, 3E Software is the only FinTech company on our list not tied to the VC FinTech Accelerator. It did, however, complete Conductor’s 10x Accelerator this summer, and is poised for precipitated growth.
The Springdale-based technology company focuses on creating solutions to help financial institutions navigate a complex software environment. The company was founded by Fayetteville-native Joe Ehrhardt in 2008, in the wake of the banking crisis.

“We create highly efficient banks through our SaaS solution Teslar,” says Ehrhardt, the founder of 3E who cut his teeth as a bank teller in high school before earning his bachelor’s degree in computer engineering and a master’s degree in information systems from the University of Arkansas.

“We do this by empowering the bankers, helping the bank design and use streamlined processes, integrate any and every system we can with the bank and by making sure our solution scales with the bank as they grow…. We do these four main things with a focus on functional areas such as workflow, exceptions management, portfolio management, loan review, special assets, construction management, pipeline and more.”

According to Ehrhardt, Teslar by 3E enables financial institutions to streamline their daily tasks with an intuitive SaaS-based solution designed to improve efficiency by making information more available through its 20 different modules.

“It’s the real-world efficiency and empowerment it brings that makes our company unique,” says Ehrhardt. “We’re also keeping to best practices and regulations. In short, being able to not do ‘X’ ever again, and doing ‘Y’ in 10 percent of the time can make a huge difference and allows banks to compete with more agile and leaner FinTech startups or competitors.”

Ehrhardt, who cut thistles in Pea Ridge before his first bank job as a teller, says he hears the skepticism on the other end of the phone when he tells prospective clients that his banking technology company is based in Arkansas. “Even though,” he says, “Arkansas is literally one of the birth places of bank technology – with Systematics – and currently has the FIS VC FinTech Accelerator… I was born and raised here. I want nothing more than to make Arkansas a tech power and grow our economy.”

And 3E Software is doing just that. “Starting as a 2K, boot-strapped company and growing into a company that serves banks coast-to-coast before we raised capital,” he says. “But I do believe our biggest accomplishments are to come.”

Ehrhardt says his biggest challenge to date was convincing banks to trust a financial technology company with no clients. “By far the hardest thing to do as a software vendor for banks is convincing a bank to work with you when you have no customers,” he says. “It’s much easier now, but at the start, it was extremely hard.”

There were times he wanted to quit, when he regretted starting his own business. But he didn’t.

“Don’t give up,” Ehrhardt says. “I know everyone says that, but there were and still are some days, where working for someone else would seem to be easier. Don’t give up.”