How Varo is revolutionizing consumer lending
Interview with Varo Chief Lending Officer, Raktim Mitra
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Welcome to the Varo lab, where our thought leaders come together to discuss Varo’s innovations within the fintech space. Today we discuss our latest breakthrough, Supernova. Supernova redefines banking speed and customization, allowing us to deliver high-quality products to our customers quickly. Supernova is our home-grown decision platform/engine that leverages robust and efficient customer testing to create customized financial experiences.
We sat down with Varo’s Chief Lending Officer, Raktim Mitra to hear about the process of creating this decision platform. Raktim reveals how this powerful engine enables faster development and roll out of new product offerings, such as Varo Advance $500 (our small dollar line of credit up to $500)1.
Supernova Overview & Objectives
Why did Varo develop the Supernova platform, and what financial gaps does it aim to bridge for customers?
We developed Supernova to quickly deliver highly-responsive financial solutions for customers, without compromising the quality of our product.
At Varo, we’re always looking for ways to improve the financial experience of our customers and to adjust in real-time to their dynamic needs — Supernova was a major step toward that goal.
Can you explain how Supernova improves Varo's decision-making and customer interactions?
Sure, think of Supernova as a hyper-intelligent system that provides immediate recommendations for a customer’s financial needs. Supernova runs behind-the-scenes, processing information and personalizing the customer’s banking experience.
With Supernova we can:
Swiftly implement updates or introduce new underwriting rules, wielding machine learning and A/B testing with minimal engineering input needed.
Conduct large-scale testing effortlessly and simulate potential changes, avoiding customer impact until we know the solution is just right.
Stay flexible and adapt in areas such as credit assessment and fraud prevention, keeping our customers’ finances secure.
Seamlessly integrate features and services, ensuring every interaction with Varo feels like it's made specifically for each individual customer.
With Supernova, we're setting a whole new standard for personalization and security.
Supernova Results & Benefits
How has Supernova improved Varo Advance and your lending capabilities?
Supernova has been central to scaling up Varo Advance (our lending product with amounts up to $500). We have seen a three-fold increase in our cash advance revenue from last year1, and more importantly, are better able to provide financial services for thousands of Americans who have been overlooked by traditional banking systems.
Supernova allows Varo to experiment safely, so we can continue down a strong growth path. As we look towards 2024, we're not just expecting to grow — we're prepared for it.
How does Supernova enhance the testing process for Varo's financial products?
Supernova revolutionizes how we test our financial tools, with two cutting-edge testing processes:
Analytical Environment Testing: Analysts can now write and test code directly in Supernova using familiar tools like SQL, Python, and Spark. This flexibility enables them to conduct extensive batch and retrospective analyses on large datasets, capturing those critical edge cases before going live.
Shadow Mode Testing: After code promotion, Supernova runs 'behind the scenes,' scoring real-time transactions and recording results without impacting the customer. Analysts can then verify these outcomes and ensure they align with our predictions and quality standards before the code engages with our customers.
What Supernova does is not just common testing; it's precise fine-tuning to make sure we deliver financial tools that hit the mark every time.
Can you describe how Supernova has made Varo's product development more efficient?
Supernova has greatly sharpened our development process. For example, it once took 108 days to update a small section of our lending policy, with processes that spanned various teams and took 94 story points. Supernova allowed us to rewrite an entire eligibility policy in just 22 days.
It's not just about the speed; we're talking about added complexity — including deploying a sophisticated machine learning model. Plus, our shadow testing protocol means we're rolling out features only when we're certain they're up to snuff—cutting down story points to only 4.
With Supernova, much of this can be done without heavy engineering work, since the credit and product analysts are equipped to deploy business intent (code) to the market.
Supernova Product Development Process
How did customer feedback and market research guide the development of Supernova at Varo?
Our customers' voices steered the Supernova project. They directly told us they wanted fast, nearly real-time access to funds for immediate needs—think expenses like gas or emergency bills. But it wasn’t just about speed; they also sought an intuitive system that empathized with their financial situation and reduced friction in collecting important finance info.
Supernova was built in response to these needs. By aligning our customers’ feedback with their actual banking behaviors, this platform allows for quick and intelligent financial decisions. The outcome is a system that meets their immediate cash advance needs while reacting to their broader financial health.
How did the scope and goals for Supernova evolve during Varo's project development?
Our ambitions for Supernova shifted slightly during its rollout at Varo, but not in the way you might expect. The original goal remained intact — to transform how swiftly and effectively we could respond to customer needs. But as we dug deeper into the project, we saw the true scope of Supernova.
Recognizing better-than-expected progress, the team reintroduced A/B testing into the initial scope. While this step pushed back delivery by a week, it unlocked key capabilities for the business which was promptly implemented into our first round of lending experiments in March of 2023.
What were the major hurdles in creating Supernova, and how were they addressed?
Crafting Supernova called for some heavy lifting. The aim was to develop a framework that could push past limitations of our prior systems and establish an environment ripe for rigorous testing. At the same time, we couldn't take our eye off the ball in terms of delivering consistent service to our existing customer-base.
The true test came with explaining to internal stakeholders the technical details of how Supernova’s intricate tech was going to work. We crafted an in-depth roadmap, coupled with thorough testing methodologies. What sealed the deal though was live demos; nothing tells a story better than seeing technology work in real-time. These demos were pivotal in illustrating what Supernova could achieve and played a significant role in mitigating challenges.
Varo Advance $500 as a Supernova Use Case
Can you explain how Supernova improved the product development of Varo Advance $500?
Absolutely. Supernova allowed us to significantly accelerate the development and time-to-market of Varo Advance $5002.
We first identified a need for larger cash advance amounts and a more nuanced understanding of our customers' ability to repay. This is where Supernova stepped in, enabling us to execute a comprehensive A/B test rapidly. Within just a few days, the test was up and running. Over the subsequent two months, we collected statistically significant insights, allowing us to go to market with Varo Advance $500
Thanks to quick code integration and extensive testing features of Supernova, we can dynamically adjust our decision-making algorithms. The business now has the flexibility to iterate and deploy well-tested changes on a daily basis if necessary (and doesn’t need to rely on 2-week sprint cycles). It's a testament to the impact Supernova’s made on the pace and precision of Varo's future product launches.
How did Supernova help you measure performance of Varo Advance $500 during the testing phase?
During the testing phase of Varo Advance $500, Supernova enabled us to track and monitor foundational metrics—data that provided clear insights into customer behavior and product performance.
Some of the pivotal metrics we focused on include:
Demand/Adoption Rates: To assess how keen our customers were to utilize Varo Advance $500, a reflection on the product's appeal and necessity.
Repayment Rates: To understand the financial behavior of our customers and the product's sustainability.
Second Order Impacts: To gauge Varo Advance’s impact on customer behavior (including repayment rates) as borrowed amounts increased.
Reflections on Supernova and Varo Advance $500
What is one major learning your team had from the Supernova project?
The development of Supernova solidified our commitment to fostering constant innovation in the financial space. While risky, shifting away from the established, reliable systems everyone’s grown to know was a necessity in creating meaningful advancements for our customers.
With hindsight, would Varo have taken a different approach to developing Supernova?
Looking back, there’s a shared sentiment at Varo that we should have initiated the Supernova project sooner. Supernova has added significant value and understanding to our lending offerings. This experience has highlighted that in the fintech industry, being ahead of the curve introducing an innovation is almost as crucial as the innovation itself.
What has been the customer impact of Varo Advance $500 that stands out most to the Varo team?
We take great pride in the tangible differences Supernova has made in our customers’ financial lives. Seeing Varo Advance improve their financial wellbeing has been extremely rewarding for both our team and me. This offering ranks as a top-tier, clear-cut financial solution for managing short-term cash flow challenges, and is relied upon by many of our customers. Thanks to Supernova, we've been able to expand borrowing to more Americans every day.
Learn more now about how Varo Advance is helping everyday Americans.
1.Based on internal Varo Research in December 2023.
2.Varo Advance is a small dollar line of credit. Qualifications apply, including direct deposits to your Varo Bank Account. Amounts are assigned based on your account balances and activity. Visit our website for more information.
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