ZestFinance, an artificial intelligence-based underwriting company, plans to make its foray into powersports with the addition of two potential lender partners, Chief of Staff Kareem Saleh told Powersports Finance.
“We have had two powersports companies came to talk to us, and we haven’t signed deals with them yet, but we are still negotiating,” Saleh said, adding that one is a captive and the other is a non-captive lender. Saleh declined to offer a timeline for the partnerships or the company’s names.
ZestFinance applies big data and machine learning — a type of artificial intelligence that allows the technology to learn on its own without manual input — to credit underwriting. While ZestFinance works with lenders in the auto space and has yet to make an official debut in the powersports sector, the company sees value for machine learning in powersports largely due to the industry’s higher default rates.
“It’s a perfect problem for machine learning because the default rates are high, these assets are often the first ones to be defaulted in the case of some kind of economic shock to a borrower, and it’s hard to tell the guys who really can afford the powersports apart from the ones who are just kind of thrill seeking,” Saleh said.
ZestFinance found the powersports space a bit “weird,” because of missing data and some customers that have more complicated credit, Douglas Merrill, co-founder and chief executive of ZestFinane, told Powersports Finance last November.
However, “it ‘ought to be a really great place to increase approval rate while reducing risk by underwriting more effectively,” he added.
The fintech company, which launched in 2009, is also seeking growth in the expanding Chinese auto market. China is the largest new-car sales market, but has a relatively low auto finance rate, which ZestFinance believes makes for “lot of opportunities for financing,” Merrill told sister publication Auto Finance News.