Westpac has made a significant investment in a fintech start-up using artificial intelligence (AI) to make decisions about lending to small businesses, marking its largest venture capital initiative this year, according to a report in the Australian Financial Review.
Rich Data Co, based in Sydney, has secured A$28 million in its Series B funding round, which was spearheaded by Westpac and nCino, a cloud banking provider from the US.
Additionally, the fund-raising saw continued support from local fund management company BMYG and new investor Octava Fund in Singapore.
Recent trend
This development aligns with the trend of major banks, including Australia's big four – Commonwealth Bank, National Australia Bank, ANZ and Westpac – in embracing real-time loan assessments.
These banks utilise data from cloud accounting platforms and customer transactions to inform models for profiling potential business loan clients.
Notably, Westpac's funding for Rich Data Co comes directly from its balance sheet rather than through its venture arm, Reinventure.
Transparency rules
Rich Data Co chief executive officer Ada Guan said despite an explosion in interest in AI, challenges remained.
She emphasised the importance of transparency alongside accuracy in machine learning models, saying, “accuracy is super important, but so is transparency".
“If I can predict whether you’re going to repay or not, but I can’t explain why I think you’re going to repay or not, then the bank can’t use that model.”
The company's software, which includes a human verification layer, has been integral to its partnerships with major banks like Westpac and National Australia Bank, and its global resale agreement with Nasdaq-listed nCino.
Keeping it small
Guan said the majority of the Series B funding would be directed towards expanding the company's team, particularly in North America, a lucrative market for Australian start-ups.
Despite the global tech salary downturn, the eight-year-old Rich Data Co currently employs around 60 individuals and plans to maintain a lean team structure, as Guan believes in the efficiency and accountability of smaller teams.
“In a large business, you have a protective layer of people. It’s okay if one or two people aren’t reliable,” she said.
“If you have a small team, there’s nowhere to hide. We’d like to keep that philosophy.”