Mike Cagney, the co-founder and former CEO of fintech unicorn Social Finance (SoFi), knows that it is essential to focus on customer experience to build a loyal client base. Today, he is using that knowledge to create a platform aimed at driving mainstream adoption of blockchain technology in the financial sector.
After Mike left SoFi in 2017, he launched Figure as a blockchain company that provides Home Equity Lines of Credit (HELOCs) of up to $150k to applicants in as little as five days. The team at Figure has long believed that HELOCs are underutilized as a financial tool due to burdensome paperwork and red tape that is sometimes akin to applying for a mortgage itself. The end result is that potential recipients of HELOCs have been forced to utilize credit cards or other lending products with significantly higher interest rates to gain control over their finances.
Since the streamlined HELOC formally launched in October last year, business has been booming, with the company lending an average of $85 million a month, on a blockchain.
However, enthusiasts can be forgiven if these figures (pun intended) are surprising, because it is easier to locate the lost city of Atlantis than it is to find the words “blockchain”, “crypto”, or “bitcoin” on any of Figure’s marketing materials.
A Bold Marketing Decision
In direct contrast to the majority of leading blockchain platforms and initiatives today, many of which were recently profiled in the inaugural Forbes Blockchain 50 list, Figure is going out of its way to avoid marketing its HELOC offering as a blockchain-based product.
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This is a deliberate decision, so it naturally begs the question why.
Fortunately , there is a simple explanation. According to Jennifer Mitrenga, Head of Investor Relations and Strategic Initiatives at Figure, the choice was made in order to avoid confusing their customer base, the homeowner, with what they felt was unnecessary and confusing jargon. Taking lessons from Mike’s time at SoFi, she told me that a customer “Doesn’t care whether [a product] is powered by data or blockchain or artificial intelligence. What they care about is that they are going to get a better product in a faster time period and at a cheaper rate.” She went on to say that “We have specifically not integrated words into the Figure brand around data, AI, and blockchain because it is frankly confusing to the consumer and most consumers do not know the difference between blockchain and bitcoin.”
The Tip of the Iceberg
With all of that said, it would be a mistake to interpret the avoidance of blockchain nomenclature in marketing materials as a sign of hesitancy or tepidness when it comes to the technology. In fact in late 2018, Figure built a customized and permissioned Proof of Stake blockchain, called Provenance, which will act as a ledger, registry, and exchange for any asset or market. This new protocol, which originally was based on Hyperledger Fabric, has been augmented and customized to support the diverse needs of the financial sector, and it is designed to be nothing short of the dominant, universal, platform in the industry.
Adding additional context, Ms. Mitrenga noted that Figure’s “Belief long term is that the global financial services ecosystem is not going to be operating on a handful or a number of protocols.” Rather than being built on top of a constellation of blockchains connected by various interoperability protocols, she thinks that “For the large financial service markets there will be a ubiquitous set of ledger registries and exchanges.”
Building an Ecosystem to Drive Adoption
Therefore, upon returning to Figure’s HELOC offering, rather than it being the epicenter of the organizations’ activities, it is really just the first spoke on a wheel, with Provenance being the hub. The hope is that the Figure subsidiary is going to “lead by action” on Provenance. Ms. Mitrenga noted that this was of crucial importance because “The moat in this business isn’t the technology…it’s really the ecosystem component. We have been very intentional about architecting players and networks in the ecosystem today that are reflective of that larger, broader, global enterprise ecosystem that we want to be operating on Provenance.”
As we move into the second half of 2019, Provenance is continuing to moving forward. For instance, the company expects to be securitizing their loans in the third quarter of this year, which will provide additional liquidity and help with scaling. It is also looking into other products and use cases such as on chain assets (commercial paper, bond or debt issuance, and REITs). She also noted that the company has a very robust and engaged community in Asia focused on supply chain finance, and it has been in conversations with well-known firms such as Foxconn looking at to create more efficient financing marketplaces with an eye on small and medium-sized enterprises.
Additionally, following the trend of most major players in the industry, Provenance expects to open-source its technology in the next four weeks, along with an SDK and a sandbox.
Despite all of this progress, like all other major enterprise blockchain players, Provenance faces hurdles to long-term success. For instance, while avoiding blockchain terminology in marketing materials can certainly drive consumer adoption, there is a chance that it could also also minimize the developer base that the platform could attract otherwise. A robust developer community is critical to the long-term success of the project as it looks to put more spokes on the wheel, so this will be an important issue to follow.
Additionally, Figure has plans to have Provenance operate as an independent entity in the future, but today it is an affiliated company of Figure. For instance, Mike serves as interim Executive Director for Provenance Blockchain Inc. (a Delaware non-stock corporation) as well as CEO of Figure. Figure also holds 72% of the native Hash governance tokens that are utilized on Provenance. However, according to Ms. Mitrenga the intent is for the company to "sell down their ownership of Hash to a minority position over the next few years, but continue to play a major role in business development and use case expansion over time."
This process will be of critical importance because the relationship between founding companies and "open-sourced" or "independent" blockchain platforms is not always clear-cut. Furthermore, this ambiguity can sometimes lead to difficult questions from regulators (i.e. Facebook and Libra) and potential private sector partners (i.e. IBM, Maersk, and TradeLens). That said, today, Provenance has 11 globally recognized and trusted financial institutions serving as node stakeholders, which is an auspicious start.
A Welcome Addition to the Blockchain Industry
With all of that said, Figure and Provenance make for an intriguing new player in the blockchain space. Additionally, their focus on consumer experience is a refreshing reminder to the rest of the community about blockchain’s true purpose in the financial sector, which in the words of Ms. Mitrenga are “financial empowerment, financial literacy, and financial access”.