November 27, 2022

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Tactile raises $20 million to help fintech companies test and deploy decision-making models • Eureka News Now

4 min read

The logic behind many fintech companies’ automated decisions — decisions that determine, for example, whether a customer is approved for a line of credit — is hard-coded in the backend of their app. This means that if, for example, a credit manager wants to make a change in the lending criteria, he has to open a ticket with the IT department.

To make changing this type of automated logic a self-service process, Maximilian Eber and Maik Taro Wehmeyer founded Taktile in 2020. The two met while studying at Harvard and were both part of the leadership team at QuantCo, a Company providing AI- powered apps for enterprise customers. There, they found that many automated decisions were poorly designed, rarely ever tested properly, and required a lot of engineering capacity — ultimately leading to guesswork.

“Based on our experience, we decided to build a platform – tactile – to bring together experts, such as E.g. a risk manager, to be able to design, evaluate and deploy decision flows themselves, without the need for developers,” Wehmeyer said in an email interview. “By using tactile, fintechs can adjust their risk selection in a data-driven manner and ensure they only underwrite the risks that fit their strategy.”

When asked about the size of Taktile’s customer base and financial position, Wehmeyer declined to comment on competitive grounds. But investors clearly see potential for growth. Taktile today closed a $20 million Series A round co-led by Index Ventures and Tiger Global, bringing seed capital to $24.7 million. Tiger’s involvement is particularly notable given the VC firm recently scaled back investments and is targeting $6 billion for its next fund — half the size of its previous investment vehicle.

“The round was anticipated by Tiger Global and Index Ventures as they saw strong indications of product suitability for the market and believed the time was right to start scaling the business,” Wehmeyer said. “This round will help us further accelerate our ongoing expansion in the United States, where we have experienced rapid growth and have quadrupled our customer base since late last year.”

Photo credit: Tactile

Tactile provides customers with a no-code interface that allows non-technical staff to create, customize, and evaluate decision flows. Wehmeyer gave an example: Suppose a bank wanted to streamline its lending criteria by raising the minimum age to apply for an account from 25 to 21. Tactile had the head of the bank’s credit department backtest the change and analyze its impact before implementing it.

Users can also leverage Tactile to experiment with off-the-shelf data integrations and monitor the performance of predictive models in their decision flows, Wehmeyer said, running A/B tests to evaluate those flows. He claims that Branch, Moss, Rhino, Novo and Vivid Money are among the fintechs using the platform to make 280,000 decisions a day.

“From the beginning, our technology has been used by advanced lenders who host machine learning models on our platform that process thousands of variables from alternative data sources to assess the creditworthiness of potential borrowers,” Wehmeyer added.

Tactile processes a lot of sensitive data. To allay the fears of privacy advocates, customers and regulators, Wehmeyer says Taktile has developed technology that allows its customers to host decision-making flows in the country of their choice and process data locally — a requirement for many regulators.

That probably won’t solve the other but related problem of algorithmic transparency. As a recent New York Times article detailed, some lenders are increasingly turning to unconventional data sources to assess creditworthiness, offering consumers opportunities that have historically been excluded from certain financial products, but at the same time increasing the risk of perpetuating bias or make wrong predictions.

Tactile requires its fintech clients to communicate the types of data and models they host and provide through the platform.

“The financial industry’s decision needs are evolving rapidly, especially when it comes to making decisions with machine learning and applying data-driven optimization to decision flows,” said Wehmeyer. “These needs are not really met by the established players in the market, so we mainly compete with in-house solutions developed by experienced teams.”

Wehmeyer also sees Noble, a platform that provides a rules-based engine for manipulating and launching credit models, as a competitor. But he claims that tactile, which Y Combinator has gone through, has a “healthy” cost structure and ample capital to hire talent.

“Before the tech slowdown, fintechs were primarily driven by customer growth at any cost. Now, however, investors expect a clear path toward profitability, making sophisticated risk decisions a tough premise,” Wehmeyer said. “Building a complex decision-making system takes years of work and costs millions of dollars. So instead of going down this route, customers are turning to platforms like Taktile to quickly adapt to these new, volatile market dynamics.”

Tactile, which employs a team of 45 people, has offices in New York, London and Berlin. Wehmeyer expects the number of employees to increase to 70 by the end of 2023.

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