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Another Online Lending Upstart Wants to Take on Wells Fargo

A slew of new Silicon Valley upstarts are trying to reinvent the modern bank under the theory that younger consumers and millennials are increasingly dissatisfied with established financial institutions.

The latest startup to draw attention and cash from venture capitalists is Earnest, a company that offers to refinance student and personal loans. On Tuesday, the company announced $75 million in new funding led by Battery Ventures, with participation from Maveron, the venture firm founded by Starbucks CEO Howard Schulz, and Adams Street.

This brings Earnest’s total equity funding to $100 million.

Earnest’s ambitions for becoming a better consumer bank starts with lending. The company lets college graduates refinance their student loans, potentially giving them better rates than they would get with traditional sources. To do so, Earnest says it tries to get a deeper understanding of the borrowers beyond just a credit score. The company takes into account how much an applicant has saved in a retirement account or 401K, for example.

“We are trying to use additional data to approve people faster and at lower rates,” explained Earnest founder and CEO Louis Beryl.

The company also makes personal loans from $2,000 to $500,000, with an average of around $70,000. Interest rates on its loans, which range from one to 20 years, average nearly 5%, according to the company.

Earnest said it lends $5 million daily. The company declined to comment about its revenue or growth.

The latest funding will be used to add staff and to expand into new areas. Beryl says eventually Earnest will offer all types of consumer financial services, with ambitions of becoming an actual bank. “We want to be the destination for all financially responsible people,” he said.

In addition to its fund raising on Tuesday, Earnest said it took in another $200 million in from New York Life Insurance Company.

Of course, Earnest competes with the giants like Wells Fargo (WFC), Bank of America (BAC), and Citibank., but also peer-to-peering lender Lending Club. San Francisco-based SoFi, another rival that is trying to attract customers seeking mortgages and student loans, just raised $1 billion.

There’s plenty of opportunity to go around as more consumers flock to alternative lenders. Venture capital firm Foundation Capital, which has invested in fin tech companies Lending Club and OnDeck, estimates that alternative lending will be a $1 trillion market in the next few years. The study also reported that three-quarters of millennials surveyed in a recent report would be more excited about a new financial services offering from a tech company than from their own national bank

Beryl isn’t worried about the growing numbers of rival lenders. “We are better, faster and cheaper than all of our competitors,” he claimed.

For more on how companies are disrupting financial institutions, watch this video: