Traditional banks partner with Frode because it's too costly for them to underwrite small loans (avg. $20k). Frode's specialized tech and higher risk appetite turn this unprofitable segment into a new line of business for the banks, allowing them to focus on larger corporate clients.
Frode profitably serves micro-businesses by charging a 16% average APR. This rate is carefully calculated to be a fair alternative for borrowers while covering a projected 3.5% loan loss rate in a segment that traditional banks deem too risky, demonstrating a viable model for high-risk lending.
As a regulated bank that's also a technology company, Frode faces a valuation dilemma. Investors don't apply the high 20-30x revenue multiples of pure SaaS companies, but they also don't use low traditional bank multiples. This 'in-between' valuation reflects its hybrid nature and unique risk profile.
After five years focusing on a direct model in Sweden, Frode pivoted to an embedded, white-label offering. This strategic shift was the key to its rapid growth, enabling expansion into six new countries by leveraging partners' existing customer bases rather than through costly direct acquisition.