Helping Banks Into The 21st Century With Dynamic Digital Infrastructure
Blend Builder is a brilliant banking product, ready for greater challenges than mortgages alone
Banking will look radically different in a decade. Today, most bank customers are sold various products from separate business lines, with disconnected application processes and user experiences, originating in outdated, siloed legacy systems. This will not be true for long. Soon, individualized products and services, backed by common yet highly adaptable infrastructure, will be the norm.
Blend, meanwhile, has been driving innovation in banking for more than a decade. Over a third of the top 100 financial institutions by AUM are already Blend customers, including Wells Fargo and U.S. Bank. Now, following two years of internal use, the Blend Builder platform allows banks to easily create their own highly personalized financial products, while automating the complex, tedious processes behind them - no code required.
Fintech has made great strides over the past decade, but the core functions of consumer banking have been largely left behind. Banks waste billions maintaining cumbersome legacy systems that are obsolete but too intimidating to rebuild. It’s effectively debt service, not CapEx. It’s also a problem we encountered often in the early days of Palantir, with the US government’s traditional approach to technology. Blend’s founding team, all key early Palantir contributors, built on their learnings and shared DNA to create a new company, with similarly aggressive ambitions.
Blend is one of the most misunderstood and underestimated assets in fintech. I led their seed round at $10mm post, largely on the strength of the team, and have supported them to IPO and beyond. They went public in headier times with a peak valuation of ~$5 billion. Today, after earlier lack of discipline on burn, the tech valuation downturn, and with their biggest current revenue line, mortgage issuance, slowed by higher interest rates, they are trading at under 1x their SaaS revenue. Yet their technology platform is more exciting and necessary than ever.
How Blend got here, and where they are going
2012 was an inflection point for the mortgage industry. Five years of bleeding in the housing market finally came to a stop, and by the end of the year, US homes had gained $1.3 trillion in value, marking the first cumulative annual gain since 2006. When Blend launched in the spring of 2012, however, the industry remained clouded in uncertainty.
Blend’s founding team was well suited for tenuous times. At Palantir, they earned their product chops helping to clean up some of the most stubborn messes left over from the 2008 crisis. Palantir’s Home Lending platform was created to address the breathtaking complexity of integrating home lending data, in order to help JP Morgan and Bank of America pursue the best foreclosure alternatives for hundreds of thousands of distressed homeowners. Having seen his immigrant parents navigate the confusing, opaque home lending process as first-time buyers, Blend’s founder and CEO Nima Ghamsari understood that the mortgage industry, despite its recovery, remained in urgent need of modernization.
Modern technology stacks and a digitized banking process could help banks and investors avoid a repeat of the subprime crisis, discard primitive models that lumped mortgages into enormous buckets, and understand each loan on its own merits. In turn, this infrastructure would enable banks to model risk accurately, reduce cost per transaction, and offer consumers services and experiences tailored to their goals. As the biggest financial decision in most consumers’ lifetimes, mortgages were the most challenging place to start, and by the same token the right one - as evidenced by Blend’s success in mortgage lending, and their ability to serially transform other key banking workflows.
Blend launched with the immediate goal of fixing the mortgage lending process, and a broader commitment to offer a fair shot at a mortgage to anyone qualified. Their first flagship product powered white-label mortgage applications for banks, streamlining data processing for the originator while providing an intuitive consumer experience. Today, Blend is the premiere mortgage platform, helping 330+ financial institutions to process $1.7 trillion in loan applications in 2022.
Following the launch of their mortgage product, Blend’s offerings expanded on two main fronts. First, they deepened their support for the home buying process, launching adjacent services including title insurance, homeowners insurance, and realty. Second, they built a comprehensive next-generation consumer banking suite, from deposit accounts, home equity, and auto loans to credit cards, personal loans, and specialty vehicle loans.
This second set of products hints at a greater challenge. As Blend’s offerings multiplied, it became clear that to truly modernize banking, they would need to automate the numerous back office processes required to originate new accounts, and productize the ability to build rich application experiences. Financial services share many common elements - the problem, in most financial institutions, is that different product lines remain siloed, with different business units, technology stacks and systems of record. Eventually, Blend had to raise the stakes from introducing discrete products to creating infrastructure for the entire banking industry.
Blend Builder: powering banking for the next decade
Nima is exceptional as both a great client-facing CEO, who lives and breathes customer problems, and a great build-side CEO, who attracts great talent and preserves the intense technical culture required to solve those problems. (He's working to overcome and learn from other challenges; it's less clear how good he is at talking to Wall Street!). Under Nima’s leadership, Blend has continued innovating with a focus rarely found in public companies, culminating in the release of Blend Builder. Nima has been more focused on developing Blend Builder than on advertising it - but I have rarely been as excited about a new platform.
The excitement is spreading. Navy Federal, the world's largest credit union, recently selected Blend’s Deposit Account solution (created in Blend Builder) to streamline account openings. From verification to decisioning to funding, consumers will be able to open new accounts in just minutes. This represents the sixth Blend product used by Navy Federal since they became mortgage lending customers several years ago.
Blend Builder automates or abstracts virtually all of the technical complexity and manual work needed to introduce a new financial product, replacing them with easy, drag-and-drop configuration. By neatly packaging every step of product development, Blend Builder enables customer product teams to fearlessly iterate, A/B test, and pivot - while serving the needs of user personas spanning designers, product managers, enterprise architects, and engineers.
At the heart of the application-building flow are Blend Blocks, instantly deployable, prepackaged versions of essential services, processing tasks, and forms and documents - the same services, tasks, and documents that make getting a loan a 50-day ordeal:
These blocks comprise the UI and everything beneath it, enfolding many layers of complexity that tech teams, loan officers, and end users never have to touch. In effect, they are chromosomes for creating financial products.
Instant Home Equity is Blend’s first flagship offering to be created in Blend Builder. In a handful of clicks, consumers can complete an application without having to manually enter their financial information, and get a proactive offer, facilitated by instant decisioning and verification, with a fast, all-digital close (using Blend’s mobile notary solution). Everything short of funds transfer is completed in a few minutes. Amazingly, it takes only a few minutes longer for any bank to create its own white-label version of this product.
From start to finish, Instant Home Equity is dramatically more efficient than the conventional origination process. Applications leveraging Blend’s solution are 3x faster, fulfillment reviews are instant rather than 1-2 days, approvals take one day instead of 25+, and closing takes as little as three days, versus 10+.
Blend’s Builder elegantly addresses the burden of originating accounts, and the scarcity of good consumer experiences in banking. Part of its genius is solving both without needing to replace existing systems or hire for new skill sets. It gives banks a rich application ecosystem for their service offerings, while freeing them of most aspects of design, engineering, implementation, and maintenance. While Blend Builder was only opened up to customers this year, they are already creating products that, according to Nima, “we haven’t even contemplated.”
In finance, efficiency and opportunity go hand in hand, and this is as true of lending as it is of investing. Credit is a cornerstone of a healthy economy, and making fundamentally sound lending easier speeds economic mobility as well as productivity. The goal, as ever, is to create win-win exchanges. With Blend, consumers get rapid approval and access to credit and services, while banks can absorb swings in the mortgage market and identify new cross-sells and revenue opportunities, consolidating customer activities and maximizing their lifetime value.
More broadly, Blend offers a model for how a mature company can continue to evolve. Eleven years since their founding, they are poised, once again, to fundamentally modernize an entire industry - not by hiring consultants or acquiring more innovative companies, but through constant iteration with customers, immersion in hard problems, relentless value orientation, and unwavering focus. Concurrently, they have streamlined the company around their platform ambitions, and are now operating with a clear path to profitability. With Blend Builder, they have raised the stakes again - from creating much-needed digital financial infrastructure to becoming part of the fabric of modern banking.