Pepper searching for ‘next big thing’ in financial services

The group has committed US$1.25 million in equity funding to 1776, a US-based company that fosters start-ups seeking to disrupt regulated sectors including education, energy and sustainability, healthcare, transportation and city planning.

Pepper was the lead investor in a US$7.2 million round of funding, and said the funds will be used to broaden 1776’s reach “beyond its existing geographic borders and industry verticals”, with a financial vertical to be added in 2016.

Mike Culhane, Pepper’s co-group CEO, will join 1776’s board in return for helping to fund the company.

Mr Culhane said the investment in 1776 will give Pepper access to new and innovative ideas from a range of industries, “not just financial services”.

“The idea that the next big thing in financial services will come only from another financial services player deserves to be challenged,” he said.

In 2015, Pepper established an in-house innovation team that focuses on improving customer experience across the group’s suite of lending and finance products.

As part of a five-year agreement, Pepper said its innovation team will have access to the business opportunities generated by 1776’s start-up network, as well as mentoring services provided by the company. 

Pepper co-group CEO Patrick Tuttle said the company has always embraced innovation and digital technology.

“Our business was founded on the idea of satisfying an unmet need through innovation,” he said.

“In 2001, we realised mortgages did not have to come from banks or other traditional lenders. Pepper secured wholesale funding from Australian banks, applied our own proprietary credit skills and offered home loans to a broad range of customers underserved by traditional lenders.”

[Related: Pepper receives top ratings for RMBS]