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Creating a more equitable lending environment using machine-learning: Founder Feature with Laura Kornhauser of Stratyfy

May 17, 2024 | Originally published on CAFE Center for Accelerating Financial Equity

Creating an equitable financial ecosystem requires grappling with the realities of the financial system and its existing biases. These biases exist beyond individuals and can find their way into financial institutions’ algorithms.  Factors used in lending decisions like credit scores are reflective of systemic inequalities and past discrimination. “A study on Bankrate from the Federal Reserve Board shows that Black, Hispanic and Native American borrowers generally have lower credit scores today, even when researchers control for other factors like education and income.” This negatively impacts underserved communities’ ability to access credit and loans.

Stratyfy aims to combat biases in the financial ecosystem and combines traditional lending decision-making with cutting-edge machine learning technology to help financial institutions make more equitable lending and fraud prevention decisions.

Stratyfy is part of the Center for Accelerating Financial Equity’s (CAFE) flagship Fintech Accelerator program cohort. CAFE is committed to working with innovative fintechs who are building technology to advance financial wellness for low-to-moderate income (LMI) populations.

We are featuring founders of our participating companies and highlighting their company and its journey with CAFE’s program. This week, we are featuring Laura Kornhauser, Co-Founder of Stratyfy. Laura was also recently named a “Most Influential Woman in Fintech 2024” by American Banker. Here’s a snippet from our chat with her.

Tell us a little bit about yourself and your background.

“Before starting Stratyfy 7 years ago, I worked at JPMorgan Chase in lending and risk roles. One of the challenges we faced in my time there was when we were launching a suite of products, an algorithmic trading strategies platform, which came under the scope of new regulation at the time. We could not get the technology to comply with that regulation, despite it being JPMorgan Chase’s product. That challenge opened my eyes to the intersection of finance, technology, and regulatory spaces. 

I come from a family of entrepreneurs. My parents started a company when I was born and built it into a multi-national company over the course of 30 years. I always had the entrepreneurial bug in me and after that challenge, I thought it was time for me to take the plunge. I resigned from JPMorgan and went back to business school in my mid-30s. In business school, I was lucky enough to meet my co-founder Dmitry through common friends. We started Stratyfy together in 2017.”

Tell us a little bit about Stratyfy and how you started it. Was there a specific experience or moment that sparked the idea for your company?

A huge number of stars aligned for Stratyfy to be possible. Everyone in business school knew my experience in finance because of which I was connected with my co-founder Dmitry. At the time, he had spent days and nights building the core technology that we sell today. The technology brings together traditional decision making from financial institutions and cutting-edge machine learning. It helps financial institutions make decisions more accurate, more efficient, and fairer. 

Our company is focused on accelerating financial inclusion by mitigating risk for financial institutions. We do that by providing tools and technology to make financial institutions make better financial decisions, be more profitable, more efficient, and make equitable credit and lending decisions. We show them who to lend to or who to investigate for fraud. 

We were early in the market when we started the company particularly with the last wave of AI hype in the last year. We believe very strongly in what we’ve built, and we believe that we will unlock the value of machine learning in financial services that was promised but has not yet been achieved.”

Were there any challenges you faced in starting an impact-driven business in particular?

“There were many! I would say that we faced a lot of challenges with raising capital. There are not a lot of underrepresented founders in our space – especially when we were starting the company 7 years ago. There weren’t as many opportunities afforded to us as there were to other companies in our space.

It was frustrating and borderline infuriating as someone who has been in male-dominated environments my entire career and has succeeded in those environments. It was personally challenging to not see that same success in these new male-dominated spaces. Looking back on it now, and this is the case for many underrepresented founders, it forces you to be extra creative, resourceful, and efficient. Beauty springs from tough environments. This situation gave us extra gear and backed us into corners that forced us to be creative. 

Initially, I was criticized for not spending enough money. I was told that I do not believe in our growth. I did not see why spending money is an indicator of success. We now get praise for how we manage our finances and our burn given the environment of the last year.”

What has been the most rewarding aspect of your entrepreneurial journey?

“There are two things that are motivating and rewarding for me. First is our mission. We believe we can have an impact on creating fairer financial opportunities for a wide group of people. There are many pieces to that puzzle, we may not be the only piece, but we are a big piece of that, and we can meaningfully move towards a more equitable financial ecosystem. 

Two – is the people we work with, be it inside Stratyfy, our adjacent collaborators who we call our Stratyfy family, our customers, or our partners. I am motivated by a culture of teamwork and collaboration and the mentality that 1+1=3.”

What prompted you to apply for the CAFE accelerator program? 

“CAFE brings financial institutions in and around the table for a select group of like-minded early-stage companies and that sounded very interesting. When I met Kristen (Managing Director of CAFE), I knew that she is a force in every wonderful way. She has the attitude and mentality to run through brick walls and is here to help and that is the mentality to get things done especially in a fintech company selling to banks like we do.”

Tell us more about your goals on networking and mentorship through the fintech accelerator program.

“Our goals from this program are primarily focused on networking. We wanted to find places to collaborate and partner with folks. We are currently talking to the cohort companies about collaborating. We’ve met a lot of subject matter experts through the sessions that we have stayed in contact with and begun to have relationships with outside the program as well.

The last piece is customers and while we haven’t signed any customers from the program yet, we were fortunate that some of the financial institutions in our pipeline happened to be present in CAFE’s programming and that helped push along the sales discussions. I believe CAFE will have a revenue impact for Stratyfy as well.”

How does your business evaluate the impact you create in underserved communities?

“We’re very focused on tracking incremental opportunities given to underrepresented people through working with us. For example, additional loans that are extended to underrepresented groups because of a bank working with us. Or an existing bias that is present in a way that we can identify and mitigate, leading to better outcomes. This is the primary way our product’s impact is measured.

We are also focused on living those ideals internally as an organization. We bring the company around mission aligned activities and giving back to underserved communities. We also want to make sure we have representation in our team on what we want to see in the world. 

Another thing we’re doing on the impact front, we are technology partners for the Underwriting for Racial Justice Pilot Program which is working with 18 lenders in the US to drive loan access in BIPOC communities.  We will be able to quantify that impact not just by number of loans granted or bias removed, we will be able to look at what is the value of giving a BIPOC person an extra dollar of loan or how does a small business loan impact that business and their community.”