Year 1 of 100 — Building the Bank of the Future

I’m excited to share big news today about two huge steps forward for Earnest:

1) We’re launching our student loan refinancing product, which will allow millions of people to build wealth and pay down debt faster.

2) We’re announcing our latest fundraising round, which is enabling this launch — and will fuel future products at Earnest.

We’re thrilled. But before I go any further, let me say a few things about this fundraising round.

What fundraising means for us:

● We’re pursuing our vision to build the modern bank for the next generation and fix the broken credit system.

● We need to work harder and smarter than ever to execute our vision and deliver better financial services to millions of people.

● We’re adding an incredible partner in Dan Levitan and the entire team at Maveron. Maveron is a leader in early stage investing in consumer-focused businesses and has nearly two decades experience working with some of the best entrepreneurs in the world. Dan will also be joining our board at Earnest. We are humbled and excited to be working with such a great team that believes deeply in Earnest and our vision.

● Everyone at Earnest is going to get a lot less sleep. Our work is just getting started. We’re one year into a 100-year vision, so we’re only 1% of the way there so far.

What fundraising does not mean for us:

● That we’ve succeeded in achieving our vision. Raising money is a means — not an end.

The truth is, we’ve only scratched the surface of our vision. We want to build the modern bank for the next generation. That takes time.

I’m incredibly proud of what the team has already accomplished in year one. We launched personal loans, our first product, because financially responsible people deserved something better.

We also built our underwriting platform from scratch, reengineering every aspect of a personal loan — including the application, the decision, and the repayment process. We even redesigned the i’m-not-even-going-to-read-this-its-too-long-and-complicated standard loan agreement, so that every contract at Earnest is easy to read and has detailed explanations.

Since that launch, we’ve received thousands of applications, growing our client base by more than 50% month over month. Our clients love the product and experience, and with barely a year under our belt, we’re ranked as one of the nation’s top rated lenders.

But we still haven’t accomplished our mission—not yet, not even close.

Our team believes that the key to building a sustainable and trustworthy bank is truly knowing our clients, understanding their needs, and comprehensively evaluating risk. We align our interests with our clients’ interests to keep our infrastructure, capital, and risk costs low. We take the time to thoroughly underwrite every single loan because every loan falls to our bottom line. And we are proud to say we have zero defaults to date. We have exceptional clients—and it’s our job to deliver them an equally exceptional experience.

A $1.2 trillion problem

In aspiring to be the bank of the future, we knew our second product needed to address two questions:

1) Where can our technology most substantially improve our clients’ lives?

2) What are the biggest financial barriers facing young people today?

It became glaringly obvious that the generational problem we needed to address was the student debt crisis. Over 40 million Americans carry the burden of $1.2 trillion in student loans—and those numbers are rapidly increasing each year with the rising cost of higher education.

To be honest, this national issue is also my issue. I needed loans for both college and graduate school. And though I worked every part-time job I could find before and during school, I still have nearly $100,000 to pay off. Both of my sisters graduated this past year with close to $50,000 each in student loans. Even though we’re all working full-time jobs, doing our best to save, and paying our bills on time, we’re all young and far from buying homes. We also have short credit histories. So, despite our excellent track record — timely repayments, educational and career stability, and careful savings — our credit scores are just average.

And an average credit score translates to high interest rates and more life milestones out of reach for a young borrower.

We want to help responsible graduates stop putting their lives on hold and get out of debt sooner. That’s why we set out to reengineer student loan refinancing from the ground up.

Building something better

When building our student loan refinancing product, we started by spending time with people who had student debt. It became clear they needed two things:

1) Better pricing: Millions of young Americans are working hard to make the right financial decisions. They’re very low-risk borrowers. However, just because they’re young, and have not built substantial credit histories, they’re paying unnecessarily high interest rates.

2) Repayment flexibility: The current repayment options are ridiculously rigid, often making it unnecessarily hard for borrowers to pay loans off quickly or customize payments over time as their financial situations change.

In year one, we built the technology to reward hardworking, responsible people with lower rates, so extending that to student loans was a natural evolution. Next, we needed to address flexibility. Every borrower has unique needs when it comes to repaying their loan. There are times when people want to pay more, perhaps after a promotion, and times when they need to pay less, maybe when a baby is on the way or when they’ve taken a pay cut to join a startup or nonprofit. At certain times, people prefer fixed rates; at other times they prefer lower, variable rates. Sometimes you can stretch your monthly budget to $475 a month, but $500 is just too far. And every once in a while, there are times when life throws you a curveball and you need to put your next payment on hold.

So we built exactly what people asked for. Student loan refinancing with Earnest will offer our same low, merit-based interest rates. And we’re also introducing radical flexibility—not only at the start of a loan, but throughout its lifespan. These features are not just first of their kind in student loans, they are first of their kind features from any lender… ever.You can read more specifics here.

Our product can save millions of people thousands of dollars each. Even at very modest estimates, this translates into billions of dollars of savings for the American public.

What’s next

The road from here only continues to get both more challenging and more exciting. With financing set, we can double down on the work that will bring our vision to life. In the coming months, we’ll be continuing to:

● Build the most advanced underwriting platform in the world.

● Devise new products and services to meet the financial needs of a new generation.

● Provide better access to credit to thousands — and one day millions — of people, to reach our goal of helping them achieve their hopes and dreams, and save them billions of dollars doing it.

● And of course, continue to grow our team of people who share our passion for this mission. Learn more at meetearnest.com/careers.

It might take another 99 years to accomplish our mission, but it will absolutely be worth it if our technology and ideas help fix the world’s broken credit system. But we can’t just reimagine the financial system — we actually have to reengineer it.

So back to work…