Shiboleth: The Future of Consumer Lending Compliance

What Is Shiboleth and How Did It Start?

Shiboleth is a revolutionary start-up dedicated to automating consumer lending compliance for financial institutions using cutting-edge artificial intelligence (AI) technology. The company was founded in 2023 by Esty Scheiner and Bivu Dhungana and is headquartered in New York. With a small but highly skilled team of two, Shiboleth aims to transform the compliance landscape in the financial sector. By automating audits and drafting regulatory reports, Shiboleth’s innovative solutions save financial institutions significant time and resources.

The inspiration behind Shiboleth stems from the founders' desire to address the inefficiencies and complexities associated with compliance in the consumer lending industry. Esty and Bivu recognized the potential for AI to streamline these processes, allowing institutions to focus more on their core operations and less on the arduous task of regulatory compliance. This vision led to the creation of Shiboleth, a company poised to make a significant impact in one of the most heavily regulated sectors.

How Does Shiboleth Automate Lending Compliance?

Shiboleth utilizes large language models (LLMs) and natural language processing (NLP) to automate a wide array of compliance processes that were previously manual and labor-intensive. The company’s system is designed to automatically flag compliance violations in customer interactions, significantly reducing the need for extensive manual audits. By syncing with an institution's runbooks and parsing relevant regulations, Shiboleth’s technology ensures that compliance standards are met consistently and efficiently.

One of the key features of Shiboleth’s system is its extensive database, which includes public reviews, Consumer Financial Protection Bureau (CFPB) complaints, and enforcement actions. This database allows the system to identify the most critical and enforceable regulations, providing institutions with accurate and actionable insights. By recommending appropriate mitigation actions, Shiboleth not only helps institutions stay compliant but also enhances consumer protection.

Who Are the Active Founders of Shiboleth?

Esty Scheiner, the CEO and co-founder of Shiboleth, has an impressive background in security engineering. Before founding Shiboleth, Esty worked at Invoca, where she developed an LLM tool for automating security compliance. Her journey in the tech industry began when she dropped out of New York University at the age of 19 to join Buggy as a software engineer. Esty quickly rose through the ranks, managing a six-person research and development team within a year. She is also a self-taught Certified Information Systems Security Professional (CISSP) and Offensive Security Certified Professional (OSCP), achieving these top compliance and hacking certifications in just a few months.

Bivu Dhungana, the CTO and co-founder, brings over a decade of experience as a machine learning engineer in various sectors, including logistics, banking, and audio. Prior to Shiboleth, Bivu worked at Pindrop as an AI Engineer, where he led a team focused on interactive voice response (IVR) fraud detection. His team's product was adopted by six of the ten largest banks, generating $10 million in annual recurring revenue. Bivu's extensive expertise in AI and machine learning, particularly in the financial sector, is a significant asset to Shiboleth.

Why Is Compliance Automation Important in Consumer Lending?

Consumer lending is one of the most litigious and heavily regulated industries in the world. Regulatory bodies such as the CFPB, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) impose complex and often ambiguous regulations to protect consumers and ensure fair lending practices. However, these regulations also create significant challenges for financial institutions, which must invest substantial resources into ensuring compliance.

Traditional compliance audits are highly manual and time-consuming, involving large teams of auditors who review only a fraction of customer interactions. This limited scope means that many potential violations can go undetected, posing significant risks to financial institutions. Non-compliance can result in hefty fines, legal battles, and damage to an institution's reputation.

Shiboleth addresses these challenges by automating the compliance process, allowing institutions to perform more comprehensive audits with fewer resources. By leveraging AI and NLP, Shiboleth ensures that compliance standards are consistently met, reducing the risk of non-compliance and enhancing overall operational efficiency.

How Does Shiboleth's Technology Work?

Shiboleth’s technology is designed to streamline compliance processes by automatically flagging potential violations in customer interactions. The system uses advanced LLMs and NLP to understand and apply relevant regulations, syncing seamlessly with the institution's compliance runbooks. This integration allows Shiboleth to provide real-time compliance monitoring and reporting, significantly reducing the time and effort required for manual audits.

The core of Shiboleth’s technology is its extensive database, which includes public reviews, CFPB complaints, and enforcement actions. This database enables the system to identify the most critical regulations and recommend appropriate mitigation actions. By providing institutions with accurate and actionable insights, Shiboleth helps ensure that compliance standards are met consistently and efficiently.

Shiboleth’s technology also offers significant benefits in terms of scalability. As financial institutions grow and their volume of customer interactions increases, Shiboleth’s system can scale accordingly, maintaining high levels of accuracy and efficiency. This scalability is particularly important for smaller institutions, which may lack the resources to manage compliance manually.

Who Can Benefit from Shiboleth's Solutions?

Shiboleth’s technology is designed to benefit a wide range of financial institutions, including banks, fintech companies, and non-bank lenders. Any organization involved in consumer lending and looking to streamline their compliance processes can benefit from Shiboleth’s automated solutions. By reducing the time and resources required for compliance audits, Shiboleth helps institutions operate more efficiently and cost-effectively.

While the primary focus is on lending institutions, Shiboleth is open to exploring adjacent use cases that could benefit from its compliance automation technology. For example, the company’s technology could be adapted to other regulated industries, such as insurance or healthcare, where compliance requirements are similarly complex and demanding.

What Problem Does Shiboleth Aim to Solve?

The primary issue that Shiboleth addresses is the manual and labor-intensive nature of compliance audits in the lending industry. Regulatory requirements are intentionally ambiguous, making it difficult for institutions to ensure full compliance without extensive manual review. Even with large teams of auditors, institutions can only review a small percentage of customer interactions, leaving many potential violations undetected.

This limited scope of manual audits poses significant risks to financial institutions. Non-compliance can result in hefty fines, legal battles, and damage to an institution's reputation. Additionally, the manual nature of traditional audits is highly resource-intensive, requiring significant time and effort from skilled auditors.

What Are Shiboleth's Achievements and Milestones?

Since its inception, Shiboleth has achieved significant milestones that underscore its potential and impact in the financial sector. One of the company’s notable achievements is being selected as one of the top products in a Y Combinator batch based on votes from batch members and Y Combinator alumni. This recognition highlights the innovative nature of Shiboleth’s technology and its potential to transform the compliance landscape.

Shiboleth’s technology has already been adopted by several financial institutions, including Cross River Bank, which uses the system to save months of manual work by automating audits and drafting regulatory reports. The positive reception from early adopters underscores the value and effectiveness of Shiboleth’s solutions.

The company’s founders, Esty and Bivu, bring a wealth of experience and expertise to Shiboleth. Esty’s background in security engineering and rapid career progression, combined with Bivu’s extensive experience in AI and machine learning, position Shiboleth for continued success and growth.

How Is Shiboleth Positioned for Future Growth?

Shiboleth is well-positioned for future growth, given the increasing demand for efficient compliance solutions in the financial sector. As regulations become more complex and the volume of customer interactions grows, the need for automated compliance systems like Shiboleth’s will continue to rise. The company’s innovative technology, combined with the founders’ expertise and industry recognition, sets the stage for continued success and expansion.

Shiboleth’s technology is also highly scalable, allowing it to meet the needs of financial institutions of all sizes. As smaller institutions seek to compete with larger players, Shiboleth’s solutions can help level the playing field by providing affordable and efficient compliance automation.

What Are the Future Plans for Shiboleth?

Looking ahead, Shiboleth plans to expand its reach within the financial sector and explore new applications for its compliance automation technology. The company aims to continue enhancing its system’s capabilities, ensuring it remains at the forefront of regulatory compliance innovation. By doing so, Shiboleth hopes to enable smaller financial institutions to thrive and maintain compliance in an increasingly complex regulatory landscape.

In addition to expanding its customer base, Shiboleth is also exploring potential partnerships with other technology providers and regulatory bodies. These partnerships could help enhance the company’s technology and provide additional value to its customers.

Shiboleth is not just a start-up; it is a transformative force in the financial industry, paving the way for more efficient, accurate, and automated compliance processes. With a strong foundation and a clear vision for the future, Shiboleth is poised to make a lasting impact on the way financial institutions handle regulatory compliance.