Microcredit made easy: 4Told FinTech founder brings AI to digital lending for small businesses
As a surfer, Albert Scarasso learned to ride the ocean’s swells using his instincts — a skill set that has also benefited his 30-year career as a tech entrepreneur: “I’ve focused on how you can scale and change, which is difficult because if you’re too early, no one follows you and you lose the wave.”
The CEO and founder of 4Told FinTech, an AI-enabled technology platform for microlenders, has spent decades developing automated solutions to solve financial problems. For many years, he helped insurance companies catch hospital billing errors before they knew there was even a problem. Hence the name of his company: “The word ‘foretold’ is from ‘I told you so.’”
In 2016, Scarasso turned to social impact after reading about how people seeking tiny loans to launch businesses, from mom-and-pop corner stores to auto mechanic shops, were getting buried in debt because lending fees were so high. “Financial institutions can be highly exclusive and expensive,” he says, pointing out that this is particularly true for new businesses, often unknown entities with no guarantors. “I started looking at how to measure risk when most of these borrowers don’t have enough information for a credit score.”
Scarasso, who has a background in electrical engineering, developed an intelligent digital lending platform to help underserved consumers find banks offering microloans within minutes. The platform, called 4ToldFin, uses an intuitive conversational approach to ask the would-be borrower a number of demographic questions, gathering documents such as driver’s license and utility bills and other financial information; it then analyzes their income and credit risk in real time. Based on what the algorithms determine, the borrower is matched with a lender and backed (or denied) for a low-rate loan. The technology makes the approval process faster and less expensive, therefore reducing lending fees. “It also reduces risks to lenders because the AI doesn’t make mistakes,” Scarasso says.
Now, 4Told FinTech is working with Start Path, Mastercard’s startup engagement program, to give borrowers a special credit card to help control the risk of the loan in the value chain ecosystem. The money earned on the project is directly deposited onto this card and a certain amount is assured to the lender while the rest goes to the borrower. “We can make sure that the money the entrepreneur receives from their project goes directly to that loan payment,” he says.
A card like this will mitigate the risk concerns and hopefully help even more people — especially those who don’t have previous credit scores — secure much-needed loans for their small businesses. Once the business makes some money, they can repay their loan and start building credit thanks to this card.