I first met Ram Ahluwalia, the CEO, and co-founder of PeerIQ, back in 2013 when he was working at a family office focused on alternative investments and structured credit. We shared a love of peer-to-peer lending and we had a lively discussion on the state of the industry. Since then Ram was a regular at LendIt events even before he started PeerIQ in 2015.
It has been exciting to watch him grow PeerIQ into one of the leading data and analytics firms in the fintech lending space serving institutional loan buyers which, more recently, have also included community banks. They have been focused primarily on the consumer loan space.
I caught up with Ram this morning as the news was breaking and the first thing he said was that PeerIQ and Cross River have been partners since 2018. Early that year the two companies announced a new partnership where PeerIQ would combine its risk management platform, data-verification tools as well as its deep borrower data sets with Cross River’s capital, technology, and regulatory compliance tools. Clearly, that partnership has gone well.
Ram said that talks with Cross River actually started pre-covid and really began organically in conversations he had with Cross River CEO Gilles Gade. Ram pointed out that Cross River has a unique place in fintech as “they are often the first stop for a fintech looking to offer lending or payments access.” He also said that “PeerIQ will be able to augment Cross River’s already impressive banking-as-a-service toolkit.”
PeerIQ has built up a roster of community bank clients in recent years and when I asked Ram about those relationships he was quick to point out that all their data firewalls will remain in place allowing them to service their customers and safeguard borrowers data as before. Also, all their clients received a heads up on this news before it hit today.
The deal actually closed in Q1 but they had to wait for regulatory approval from the Federal Reserve before it could be fully consummated. Officially, PeerIQ will be wholly owned by CRB Group, Inc., the parent company of Cross River, and thus will be a sister company, or affiliate, of the bank. Ram would not disclose terms of the deal other than to say it involved cash and stock.
Here is a statement from Gilles Gade from the press release:
Cross River is constantly adapting to the evolving landscape of financial services with an insatiable thirst to innovate. PeerIQ has established itself as a leader in capital markets innovation and our newly expanded offerings will make us even more compelling.
My Take
So the consolidation in the fintech space continues. While we don’t know whether this was a good deal for PeerIQ investors we do know that Cross River is becoming a fintech rocket ship these days and hitching your company to the leading fintech bank in the country is likely a smart move. As Gilles said in one of the articles I read this morning, this is just the beginning for them, there will be more acquisitions to come. And probably an IPO is not too far off although there was no mention of that with this news.
From PeerIQ’s perspective, they will now potentially get in the door with new lending originators that inevitably find their way to Cross River. This will also help Cross River in their risk management of these new originators as well as with their long list of existing lending clients.
The movement towards banking-as-a-service or embedded finance is a secular trend that will dominate finance this decade. The combined companies now have more tools to help them lead the industry as this trend accelerates. Personal loans as an asset class will continue to grow as more banks see the wisdom in adding this high-yield asset to their portfolios.
Congratulations to all involved. It is going to be fun to see how this unfolds.
