Making it Work: Luna Connect looks to bigger markets to move smaller lenders into the digital age

Luna Connect, a digital lending platform aimed at smaller Irish financial institutions, is targeting a British expansion in the next 12 months after raising €800,000 in seed funding during the pandemic.

The Galway-headquartered firm, founded by Brian D’Arcy in 2017, counts a number of credit unions and asset financing firms among its customers. It has developed software which allows them to grow their loan books and make faster lending decisions.

D’Arcy, a graduate of IT Sligo, worked at Hewlett-Packard for 15 years before identifying a gap in the market for a better digital offering for financial institutions.

“While I was working at HP, I was kind of going: ‘There’s a gap in the market here. There’s the stuff I’ve done for big tech companies that these financial services firms just aren’t doing yet,’” he said.

As lending shifted from branch to broadband, credit unions and other firms would need a quick, easy solution to get themselves on the web, D’Arcy realised.

“That was where the gap was, in those small and medium-sized financial institutions – credit unions, asset finance companies, local financial providers. They have a really strong customer base already, but they don’t have the budgets or the capability to build all the systems they need,” he said.

Less than four years later, D’Arcy has proven that his theory holds up, having established a company that now employs eight people and plans to more than double its headcount by 2022.

Luna Connect works in a “collaborative process” with its clients to help them get set up, running a series of workshops to help them move from a “face-to-face, branch-based business to an online digital business”.

The firm, backed by Enterprise Ireland, might seem like a disruptor in a crowded lending market, but D’Arcy said Luna Connect quickly realised its software could harmonise with existing solutions being used by credit unions.

“There’s always an incumbent tech provider in these institutions, but what we’re starting to find is that our product is actually complementary to what they’re offering,” he said.

“They’ll often have a tech system in place that looks after the internal processes within the organisation, but they don’t have anything that will do digital engagement with the customer. So we’ve managed to carve out a niche for ourselves, and the incumbents who could be perceived as competitors actually end up being partners.”

The specialised nature of the service provided by Luna Connect – which not only speeds up transactions, but gives institutions clearer data on their customers and allows them to make better lending decisions – meant it was able to raise a significant amount of capital even as the pandemic spooked many investors.

“That was probably unique,” D’Arcy said. “We were able to use that time in the pandemic to raise our seed round.”

The company is planning a move into Britain within 12 months, and also aims to open up its software to other types of financial providers such as life and pensions providers. In the long term, the US market is a key target for Luna Connect.

“If you look at Ireland, and the types of financial institutions we work with, you’re talking about maybe 300 customers. If you go to the UK, that’s 3,000, but if you go to the US, that’s 20,000,” D’Arcy said.

“For us, that’s the path – going to those bigger markets and trying to capture more of those small and medium-sized financial institutions.”