Ballerine's Flexible Open Source Risk Management Platform

Applying for a loan has become a vastly universal step businesses take. Whether to kick off your startup or expand your existing business, loans are one of the ways business owners grow their companies.

According to Forbes, most businesses seek financial services from banks, with approximately 43% of small businesses applying for a loan in 2019. The number dropped to 34% in 2021, however, indicating that financing options like crowdfunding and fintech platforms have started becoming the preferred alternatives.

Though important to businesses, loans are equally important to financial services since loan interest rates often act as their primary source of revenue. They are thus pushed to pursue loans, which involve resource-intensive risk and identity verification processes.

Ballerine, a YC-backed startup founded by Nitzan Gelbard, Noam Izhaki, and Alon Peretz, aims to streamline identity and risk management with its open-source infrastructure.

Risk Management Platforms

The processes of risk management are expensive but are undoubtedly more critical than their price, as they are required to prevent any business from performing fraudulent activities, such as money laundering or illegal financing.

Risk management often involves “know your customer (KYC)” and “know your business (KYB)” obligations, which are the reviews of your customers or the businesses your company is dealing with. These reviews need to be carried out in order to establish the customer’s identity and authenticity.

Most financial services perform risk management manually with their internal team. This method, however, can be arduous and unprofitable, as it not only wastes time and manpower but also the resources required to do data checking.

Financial services are also utilizing external risk management vendors. Most firms providing fraud detection or operational risk analytics services, like IBM or PwC, become alternatives over time-consuming manual labor. These aren’t the most ideal solutions yet, though.

Most existing vendors aren’t open to customizability. They either provide too many tools and become financial burdens or provide too few to cover the whole range of a company’s needs. This causes financial services to spend more money on other vendors as well.

Some open-source vendors, like OpenGamma or Backtrader, can provide risk management flexibility to financial services. Most, however, provide assistance to their limited fields, the former in treasury management and the latter in trading.

With every bank or fintech company having different audiences, services, regulations, and risk tolerance, Ballerine offers a solution that opens them to customization with as much flexibility as possible.

Flexible Open Source Infrastructure

Ballerine’s infrastructure consists of open-source building blocks like KYC/KYB UI flows, a rule engine and workflow engine for automation, a headless and client SDK, as well as a back office that companies can use separately or together, all easily set up by Ballerine.

The blocks can be integrated as a back-end product with existing company systems to help perform any risk and identity processes, like customer onboarding, underwriting, and transaction investigation.

In a use case presentation, it is shown that once the required information on a company is acquired, Ballerine runs them through various databases like social networks and company registries to check that those asking for loans are qualified to do so.

Ballerine automates the risk management process based on the answers that came back from the data sources, which can show whether an individual is on any government watch list or if their behavior shows patterns of fraudulence.

The platform helps decide whether the loan is accepted or rejected, or whether applicants need to provide more information for further verification. None of these automated decisions depend on Ballerine’s default coding but instead depend on how the bank sets its risk regulations, and companies’ internal teams can manually check the data before any decisions are made. Once a business is onboarded, Ballerine monitors the business and informs companies of any potential risks.

Ballerine’s open-source nature ensures that internal risk management and development teams still have complete authorization. The flexibility for adjustments needed in their system in the future may prove handy when companies suddenly have specific use cases to solve. It is apparent that Ballerine is a one-stop solution for risk management processes, which can significantly save a company’s time and money.

Ballerine raised a small venture round in YC’s 2022 summer program and recently raised a $5M seed investment led by Team8. YC, Vera Equity, and a few angel investors participated in the round.

Ballerine launched a SaaS product that requires minimal configuration but is ensuring that the product is ready and reliable before large productions and showcases.

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