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113 Million US Adults Have Non-Prime Credit Scores – What Are We Doing About It?

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113 Million US Adults Have Non-Prime Credit Scores –
What Are We Doing About It?

The World Bank estimates that two billion adults don’t have an account at a bank or other financial institution. They are the unbanked; outside the financial system. PwC puts the unmet deposit demand of the un(der)banked at $360 billion. How can forward-thinking companies help close the big gap that exists between the banked and underbanked? We sat down to ask Greg Rable, CEO of FactorTrust, which helps lenders manage the credit lifecycle of underbanked consumers.

Greg, tell us about FactorTrust. What’s the vision?

Alternative financial services has always been our business at FactorTrust but we used to focus on identity verification. We turned our expertise towards credit risk because the companies we talked to were saying, “please help us with this.” The rise in alternative credit for ‘non-prime’ borrowers has been significant and is indicative of the situation that many people from many different walks of life find themselves in – nearly 113 million US adults have non-prime credit scores, which is an astonishing number.

Alternative finance has been around for some time, but the advent of digital services caused a significant shift in the industry to online. And this created additional challenges for risk management, not only the need to return credit risk assessment results at speed – as expected from a digital channel – but also to confirm identity with the customer not present. The three big credit bureaus historically hadn’t tracked data in this area so we set out to help lenders more accurately predict consumer borrowing behaviour in the growing, often neglected, underbanked segment.

Who are the underbanked and what trends are you seeing in this market segment?

They can be anyone and everyone; people facing a range of everyday circumstances that have placed them outside regular criteria for many traditional lenders.

The thing is, there’s a lot of misinformation about the underbanked – about levels of education, employment and so on. Our data spans upwards of 22 million consumers, with around half a million added each month, so we consider ourselves well-placed to address misconceptions. To help with this we launched the FactorTrust Underbanked Index three years ago. It tells the story of the underbanked and delves into particular aspects of the market segment in more detail.

For example, the typical underbanked consumer we see is employed and has a primary banking relationship. The top three employers of these consumers are fast food restaurants, government agencies and – perhaps surprisingly – big banks.

Each person’s situation is different. Sure, some are unable to get credit because of a poor previous credit performance but there are also those who are new entrants into the credit market and simply lack a history, as well as divorcees who haven’t previously had credit in their own name. Then there are those who use alternative finance simply because they like the speed and convenience of the service.

How does FactorTrust help lenders serve the underbanked?

It’s all about data. We have a real-time database of more than 200 million loan transactions from alternative lenders which provides lenders with a holistic view of the creditworthiness of underbanked consumers and their ability to repay loans. ‘Real-time’ is important – we capture data from the time a consumer’s application reaches a lender; we also then capture it throughout the process of advancing the loan and repayments being made against that loan. That’s what generates the value, it’s unique alternative credit information – proprietary data – augmented through third-party sources to meet, for example, anti-money laundering criteria.

And what role does technology play in what you do?

An essential role. Technology is central to our entire operation. You have to remember that our ten-year-old business grew up in the online world. It’s what we know; it’s what we’ve always done. Everything is about speed and convenience. And accuracy. Our response times to lenders requesting credit score information on an applicant is around a second to a second and a half.

Integration into the systems that lenders use is essential, and that comes down to technology too. The method of integration needs to be flexible, as there’s such a range of systems in use out there, and convenient to set up. This is where strategic partnering with key solutions providers that lenders use – like Provenir – is important.

Risk analytics is so important in this industry. What trends are you seeing and what influence are they having?

I would say three things – flexibility, data, and collaboration. Flexibility, because companies are realising that the traditional ways of doing things don’t work in every situation – 113 million is a lot of unserved customers; it’s hard to think of an industry to compare that level of unmet need to. When we take alternative credit data into account we see that this population deserves credit options and that it is possible to offer them.

Data, because that’s where the value is. So much data is generated about and by individuals every day. And the right technology can capture it and work it to provide something of real value.

And collaboration because there are so many specialisms now that couldn’t have been envisaged ten, fifteen, twenty years ago. They might not exist within the four company walls of many traditional lenders but companies like FactorTrust, and like Provenir, have found their niche and become expert in what they do. Our clients and our partners, embrace the value that specialised risk analytic services bring to their brand, to their portfolio and, ultimately to their customers.

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A New Bank and Not a Ball Chain Pen in Sight

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A New Bank and Not a Ball Chain Pen in Sight

What does it take to launch a bank these days?

If you’re Atom bank, it takes a mobile app and face and voice biometrics. What it doesn’t take is bank branches, paperwork or those pens distrustfully tethered to counters via ball chains.

Atom completed its UK launch back in 2016. Entirely app-based, customers do all their banking through their smart phone.

In fact, on Atom’s website, the answer to the question “where’s my nearest branch?” begins, “on your nearest tree.” Fair enough. Atom does go on to add that they, “don’t have high street branches because they’re unnecessary, no one wants to visit them and no one likes queuing.”

In true technology leapfrogging style, there isn’t even a plan to release a website version.

It’s all a far cry from the founding of Lloyds Bank 250 years ago. The fascinating Anniversary eBook ‘Helping Britain Prosper’ gives us an insight into the bank’s early days.

Such is the bank’s heritage, it was nearly 130 years before the first typewriter. Pre-computerisation, operations were manual. When it came to customer statements for example, staff copied out ledger entries, initially by hand and later by typewriter until 1960 and the arrival of the Post Tronic accounting machine.

It’s a rich and wonderful history of the progression of customer experience as much as it is one of computerisation. Compare how the customer wishing to write a cheque had to go into the bank in person to request a form, with today’s customer convenience. Not only is Atom 24/7 banking anytime, anywhere, but it’s also customised to the individual, right down to their own logo and choice of colours that drive their visual experience.

Banking has certainly come a long way. For challengers and traditional banks alike, it is now undoubtedly the era of the customer.

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Guest Blog: Financial Services in 2021 and Beyond

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GUEST BLOG

Financial Services in 2021 and Beyond

  • Allison Van Rooijen, Vice President, Consumer Credit at Meridian Credit Union

Allison Van Rooijen, Vice President, Consumer Credit at Meridian Credit Union, shares her perspective on providing the instant digital experience customers now expect

Q: What do you see as the main drivers for channels to achieve this digitization of the banks?

There is the obvious profitability and cost containment exercise, but we’ve seen the rapid consumer adoption of not just digital transactions but also digital experiences. Things we thought we never could/would do online are being accepted rapidly by consumers, conducting transactions in a non-face- to-face way.

As a result, there is a new expectation and a perhaps comparison mindset in the consumer’s eyes. Why can’t I do this online? Why can’t I sign that form electronically instead of going to a branch? If I can buy a car online, groceries online, why can’t I do XYZ in the financial services space.

There is no excuse now – you can do anything online if you find a way to adapt your business model to it. Consumers will find a way to seek out those opportunities and not necessarily wait for us to make those changes. The industry is already moving this way perhaps in bits and pieces and balancing profitability and automation opportunities but not at the pace consumers are willing to adopt. The bar is now higher. The user group or pool of prospects that were willing to transact digitally before has exponentially expanded. The speed at which they transact is even faster – they are used to same day/next day Amazon delivery so expect credit decisions instantly – why should I have to wait. As a consumer, I would start comparing you outside of the financial services space and the digital experiences to other consumer companies. It becomes more transactional and then transactional becomes experiential. We must focus on improving that experience. There can be no excuse. This is the new normal. Lenders who embrace this opportunity to challenge every bit of every process and embrace the momentum at which this challenge is facing us will flourish. It’s hard but it is happening. Now is the time to embrace that digital transformation – adapt or die.

Q: When you’re looking at how do we continue to evolve at the rate at which consumers and customers want us to, do we build, buy, partner? How do we stay on course with this?

There absolutely is a place for each one of these models. It comes back to taking a step back and determining where do you want to own the experience and where are you comfortable partnering with someone who may be working with your competitors and the bureaus. Sourcing data is one perspective. Where do you want to differentiate that experience and using that in the evaluation to build, buy or partner?

The other side is looking at your company culture and capabilities. Is this something that is core to who you are? Do you have the people who can drive you forward enough, especially with this entrepreneurial lens? Can they challenge the status quo enough and do you have the time to give them to really think outside the box of perhaps what you need for this transformation?

Also, it’s important to spend time with your fintech partners to understand the roadmap for their solution. Are they going to take you as one client and build it to five to six other clients? Spend time to understand the companies you are partnering with and what their vision is. Do our visions align? You need to have those tough conversations upfront.

Then focus on governance program or regulatory perspective. Are we seeing the same thing when it comes to principles-based regulations? Are we interpreting them the same way? Do my regulatory requirements get satisfied by the practices of that partner? When you take a step back and look at full end to end spectrum, being strategic about where to partner, where to build and where to buy, can lead to great partnerships to accelerate that journey but you need to spend that extra time up front to understand where you are and where you want to be.

Q: When Meridian is looking its approach and the role you can play in advancing all this forward as a credit union, what is your perspective?

We’ve taken a step back and looked at whole end to end consumer lending journey from prospect shopping to loan servicing and recovery. It is a lot of take in because there are so many large components of it. Like many lenders, we have legacy pieces and bolt-ons. We had to look at where do we want to be, how can we start fresh and how big is that. When talking about architecture, it becomes a much broad conversation than just system architecture. It has really proven to us that the data team, the analytics team and the users of that data at every component of the organization – if they are going to use that data to drive models, AI, ML, they are just as invested a stakeholder in the end-to-end design as the treasury group that is going to use that data in managing the portfolio, in the credit risk group. It really doesn’t become a discussion between credit, sales and the architecture group – it becomes a fully integrated approach to architecting what the new end to end system is to ensure it is robust and scalable.

I know I speak for my partners in IT – if every time I come to them every time and say I have this great API – you just need to plug it in and it should be easy. Yes, the integration is easy but what do you do with that data? How does it sit in your data lake? Where does it integrate into your models? What is the governance of that data? Having all those stakeholders integrated that whole end to end process has been to key to our success in reimagining that process.

In Closing

Fantastic time to be in lending. We’re on the brink of some pretty exciting transformation. No two deals are the same. No two borrowers are the same. Coming out of this pandemic, we have consumer adoption of digital at an all time high. We have great tools. We have a fintech sector that is thriving with innovation. Grab your running shoes because it is moving fast.

Excerpted from “Financial Services in 2021 and Beyond” webinar hosted by Kathy Stares, Executive Vice President, Americas, Provenir.

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Spreading the joy (and payments): How POS lending is heating up this winter

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Spreading the joy (and payments):
How POS lending is heating up this winter

The seasonal TV adverts have been launched, the countdown to Christmas has begun and many consumers are kicking into high-gear shopping mode! With Black Friday and Cyber Monday complete and the festive season almost upon us, online shopping volumes are set to continue to rocket. Initial figures show that spending in the UK hit over £4bn during the discount week; sales volumes are up 7% compared with last year, while sales value rose 16%.

It’s a time for tradition and gift-giving, yet there’s nothing traditional about how many consumers are choosing to pay.

The end of cash?

In the UK, the volume of debit card transactions overtook cash for the first time in 2017. The gap is set to widen, and it’s predicted that cash will be overtaken by credit cards by 2026 and only makeup 9% of all payments. But it’s the rise in popularity of installment payment methods that are creating waves, with customers looking for a way to spread out online purchase payments without using a credit card.

Younger consumers, wary of credit cards and seeking a more convenient, one-click checkout experience with less friction, are fuelling an increase in installment transactions, preferring to ‘Klarna’ it, over other traditional methods. In fact, Klarna has been so successful in its expansion across Europe that it now holds a 10% e-commerce market share in the region, and processes over 1 million transactions a day globally via 190,000 merchants and 60 million end-users.

Growing e-commerce market attracting new players to the payments industry

It’s not just the opportunity to jump on the growing demand for alternative financing options that’s attracting new firms to the payments industry, it’s also the potential offered by the rapidly growing e-commerce market. Online shopping spending across Europe is forecast to hit 621 billion euros by the end of this year; that’s a 13% uplift from 2018.

As a result, there’s an increasing list of ‘buy now pay later’ firms expanding their coverage of the market. Alongside Klarna, this now includes Afterpay, Laybuy, Laterpay, as well as Clearpay who already have 200,000 UK customers following their launch in June.

The concept is also gaining popularity across Asia Pacific, with Australia, Singapore, and China being the early adopters. Afterpay and Laybuy in Australia are offering convenient credit financing options for a large proportion of online shoppers. Hoolah from Singapore is offering such services by partnering with more than 50 merchants across furniture stores and high-end electronics, whilst Ant Financial offers a similar service on online purchases made via its Alibaba website.

A growing middle-class population, widespread smartphone adoption, and rising internet penetration are all set to drive the Asia Pacific e-commerce market to over USD 2tn by 2020. However, ASEAN with over 630 million inhabitants, more than 50% of the population remains unbanked, with no access to credit cards. Up to 70% of e-commerce consumers would abandon their carts after adding items to it, this poses a massive missed opportunity for retailers.

Credit cards still holding their own

But, don’t expect credit cards to disappear any time soon, in the UK alone, there were 3.2 billion payments made using credit cards in 2018, an increase of 4% over the previous year that reflects a more general growth in unsecured lending. Some of this growth can be attributed to the bounty of rewards available to card users that typically use their cards and pay off in full each month. But with more retailers adopting the buy now pay later and installment model, credit card issuers may need to get more creative and offer more than rate reductions, rewards or purchasing promotional periods to stay relevant in a world where consumers have more choice than ever before.

Taking the risk out of payments for merchants

One of the major benefits POS firms like Klarna offer to merchants is a simple payment option with zero risks. Platforms like Klarna and Clearpay assume all financial risk when lending to a customer, making them even more attractive to retailers. With the volume of applications and transactions set to increase across POS credit and card products, accurate, robust and fast risk decisioning remains crucial. So, what technology do POS lenders looking to grow in an increasingly competitive market need to have in place?

The technology to power instant decisions

To facilitate an exponential increase in e-commerce transactions, new entrants and existing players looking to expand their global reach need to deploy country-specific processes that deliver speed, credit risk accuracy, and a frictionless mobile-first customer-experience.

As POS firms grow, their risk technology and modeling rules need to be future-proofed and configurable to allow for fast customer and merchant onboarding and instant credit decisioning, allowing wide data access and integration to internal systems. Having the technology in place that delivers on functionality, flexibility and agility are paramount to enable the processing of hundreds of transactions per second, coping with periods of spiked activity such as Black Friday and converting previously abandoned cart purchases.

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3 Incomplete Assumptions that Credit Unions Make About Millennials

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3 Incomplete Assumptions
that Credit Unions Make About Millennials

“Millennials” say they’d rather go to the dentist than listen to what their banks are saying. Finetchs like Venmo, Mint, Yapstone, and Addepar are quickly moving in to fill that demographic’s demand for convenient financial services. Where does that leave the Credit Union?

Let me start this article by admitting, if there is something to presume, analyze or write about the millennial generation it has been done. If no other generalizations are true, we can certainly dub those born between 1977-1995 (depending on your source) as the most scrutinized generation in history. However, articles are still being written, and it’s not because we need more content. If you’re like me, you’d rather not hear the term “millennials” ever again – yet here it is. Articles like this exist because it’s an easy way to say, “How to stay relevant to your upcoming customer base.”

Let me also clarify that this is not a new discussion. Businesses are forever working to stay relevant as times change. In 1966 Time Magazine named “the generation twenty-five and under” its Person of the Year. Imagine the fun we would have had with Baby Boomers had Twitter been around in the 60’s.

For Credit Unions, however, this discussion remains particularly critical. Research shows that the average age of credit union members is in the mid to late forties. Couple that with the overall distaste that millennials have toward banking in general (71% would rather go to the dentist than listen to what their banks are saying), and it becomes obvious that there’s a very real, very challenging task ahead.

That’s why we gathered this list of three assumptions that Credit Unions make with regards to Millennials that might be hampering the effort from the get-go.

1. Sincerity and Good Customer Service Always Win

Honesty, fairness, customer service. These are all values that the traditional credit union prides, even attempts to differentiate itself, on. While customer service can be a great differentiator, it’s not exclusive to the Credit Union. All it takes is an honest bank with great customer service and better pricing to open shop on the corner, and it’s game over.

The Opportunity: You’re on the right track. If that customer service can be extended to empathy, then to personalization, you’re a hit with younger members who have grown up getting personalized recommendations everywhere – from the friends they should follow on Facebook to the products they’d like on Amazon. (This is where technology can be your best friend – find a solution that gives you strong customer profiling and segmentation so you can make personalized offers to your members.)

2. Millennials Aren’t Ready for Our Services

We’ve spent so much time talking about the idea that millennials are the future, that we didn’t even notice when they started having kids, buying houses, and saving for retirement. While millennials certainly face unique economic challenges (higher student loan debt, coming into the workplace during or after the Great Recession, massive cynicism around Social Security and retirement),  According to research from Goldman Sachs, about half of the millennial generation is already in its peak home buying years. Another survey showed that 70% of millennials are saving for retirement. So, while millennials on average are low on the net-worth scale because they’re “just starting out”, they are in prime position to decide where they’re going to grow their wealth.

The Opportunity: Let’s go back to the personalization idea for a second. Comparatively speaking, those under the age of 35 have accumulated less wealth than their older counterparts (again, not a new thing). However, millennials have unprecedented access to information and an estimated 61% use that access to actively seek advice about investing and personal finance. Be the advisor.

3. We Have to be Mobile-friendly

You’re reading this article on the internet, so I’m going to assume that I don’t have to tell you that the internet exists, or why it’s kind of a big deal. And, if averages hold true, more than half of you are reading it on a mobile device. So, to say you have to be “mobile-friendly” is a drastic understatement. Where many Credit Unions miss is the extent to which the member experience should be “mobile-friendly” and what that actually means.

The Opportunity: The need for mobile access is representative of two necessities: speed and convenience. Your new millennial members want to apply for mortgages on their iPhones, not because they like reading legal fine print on a small screen but because they want things immediately. So, when you’re whiteboarding your new mobile loan origination strategy take everything back to “quick” and “convenient”. If it’s not quick and convenient, it’s a waste of good app space. In the same way, blend that focus into your in-person or even “desktop” digital experiences for a consistent experience.

The amount of information that’s proliferated around millennials has propelled the generation to an almost mythical status. Conflicting statistics and reports prompted one writer to throw his hands up and say “It is hard not to come to the conclusion that no one really has a finger on the pulse of millennials.”

In reality, millennials are simply early adopters of many technologies and expectations that you’ll see widespread in the future (remember when Facebook was for 25 year-olds?), so it will pay to get this one right. If all else fails, try asking a millennial what they think. I’ve read that they love to talk about themselves.

Wonder what millennials want out of the mortgage experience?

Think digital.

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How Novuna’s new approach to invoice finance will reduce customer onboarding time to less than 24 hours

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How Novuna’s new approach to invoice finance
will reduce customer onboarding time to less than 24 hours

Novuna Business Cash Flow isn’t a new player in the UK invoice finance space, but its new technology-forward approach to invoice financing is about to make waves in the industry by reducing customer onboarding time to less than 24 hours. Novuna Business Cash Flow has a 25-year history of providing affordable invoice finance solutions to businesses throughout the UK, but when Andy Dodd joined Novuna Business Cash Flow as Managing Director back in 2016 he immediately had a vision for their future.

“From day one when I walked into the office I knew we could take a more fintech approach to handling finance applications.”

Andy is a huge advocate of using a digital forward approach to not just improve efficiency, but to also underpin and empower a customer centric focus. His vision for the future of Novuna Business Cash Flow involves the adoption of numerous technology solutions to create an incredible user experience through every step of the process and drive big changes within the business.

Driving change within the industry and the organization

The invoice finance industry is renowned for its manual, paper intensive nature, but these methods wouldn’t work with Andy’s vision for the future. For many businesses, especially those with a 25-year history, transforming to a digital forward organization would be extremely slow and difficult. However, Novuna Business Cash Flow is already adopting technology that will position them as digital leaders in the industry.

Andy credits the team’s successful transition to a digital-forward approach to two key things: honest conversations and open communication. “We had open conversations with our people about what we wanted to change and what we could achieve if we took a more fintech approach.” While many employees were keen to dig into the details, Andy was quick to point out that employees have different needs when it comes to understanding the steps the business is taking. It’s about, “Keeping people informed to the level that they want to be informed.”

With the help of strong leadership, and a clear roadmap for the future the Invoice Finance team are excited about what digitization can bring to the business and how automation will empower growth. In fact, his team have set some big goals for the upcoming year, which include doubling the amount of clients onboarded each month and providing financing for larger businesses. At the heart of this is Andy’s belief that business success is reliant on putting client needs at the forefront of everything they do and creating the infrastructure that can support this.

It isn’t enough to claim that you are customer centric

“Saying you’re customer centric is an easy statement to make, in fact every business around the globe will say their customers are the most important thing to them.” But, too often the customer experience is sacrificed for one reason or another, this is especially true in the invoice finance market where the paper heavy nature of processing the application can make issuing finance a cumbersome process. Andy is a firm believer that the right technology can help a business become truly customer centric, even in invoice finance, and he and his team are 24 months into a 3-year transformation roadmap that relies on various SaaS solutions to empower their customer experience.

“Right at the start of the customer journey it’s about making their interaction with us as simple as possible.” But the software solutions the team are implementing won’t just improve the user experience, they’re designed to supercharge the process, “Our key customer need is getting funding and they need that funding quickly. We need to be able to provide that funding in 24 hours.”

Using technology to reduce customer onboarding to 24 hours

This speed improvement is just one of the impressive goals incorporated into Andy and his team’s vision for Novuna’s future, with the aim to reduce the time it takes to onboard a new client to less than 24 hours. Just to be clear, that’s 24 hours from the moment a new client first contacts the team to giving the business access to its funding. So, how exactly is Novuna going to achieve this?

“We’re very aware of what’s happening in the fintech industries that have sprung up and the disruption that has brought, but equally the opportunity that it has brought to do things more effectively, more customer centric. Adopting some of these tech methods has been a key driver as we’ve approached this project.”

With the help of Aimee Raseta, Sales Excellence Manager, the team have created a digitization roadmap that will help automate the majority of internal application processes, allow employees to focus on the most important tasks, and drastically reduce the amount of paperwork that’s completed manually.

To do this Novuna chose Provenir’s robust decisioning engine, integrated with Salesforce, to process applications and push them through a sophisticated decisioning process before passing the results to the underwriting team. “The flexibility of Provenir allows us to create our own risk decisioning workflows that can easily connect with any data source.” This application processing method is going to make underwriting much easier, as the risk decisioning process will already have checked the application against information from 13 data sources and highlighted any areas of concern that the risk team need to look at. This ability to show the team what to focus on with each application is a crucial part of the new 24-hour target, with the decision engine able to help reduce underwriting time from 3 days to one hour. A step that is essential in giving clients access to funds when they need it.

Up next for the Novuna’s Finance team

With the full implementation of their digital changes complete, Novuna Business Cash Flow look set to create an outstanding client experience—approving an application while a Novuna  representative completes an onsite visit with a new client. That’s just 24 hours from contact to approval, with all legal documents completed online and funds available instantly. With this level of customer focus they’re sure to become the first choice for many businesses and make waves in an industry that’s as yet to fully embrace digitization.

If You Can’t Onboard your Merchants in Minutes, Your Competitors Can

Here’s some advice on catching up.

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How Provenir Empowers Innovation — Our Clients Say It Best

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How Provenir Empowers Innovation
Our Clients Say It Best

Remember when you were in school and show and tell time came around? It was always super exciting. One of your classmates would stand at the front of the room and talk about something they thought was cool,

“On Saturday, when we went to the beach I found this giant diamond and my daddy says I’ll probably be rich and famous when everyone finds out.”

Then the kid, with their floppy hair covering their eyes, would open their hand to show the class…a small lump of quartz sat in their sweaty palm.

When I’m dealing with businesses in everyday life I’m often reminded of show and tell at school. This business has the best cell coverage, that business offers the most advanced technology, this solution will change your life etc. etc. but when it actually comes down to using their services the reality doesn’t match your expectations.

This can happen a lot in the business to business world too, that’s why when we talk about Provenir empowering a business to innovate I know that we need to back up our claims not just with a tiny lump of quartz but with a diamond level product. So, I could tell you that Provenir can decision credit applications in under a second or that it can deploy risk models in minutes, but instead I want to show you some of the incredible ways our clients are using the Provenir Platform to make innovative changes within their industries.

Rent-A-Center—Reducing risk to power growth

Rent-A-Center has an aggressive growth plan, which is driven not just by their goal to increase sales and improve the customer experience, but also by extending their ability to analyze the risk a new customer poses. The Provenir Platform allows them to do all three of these things. Rent-A-Center doesn’t just supply consumers through their stores, they also process online sales and provide funding options to customers in other shops through their AcceptanceNOW kiosks. Rent-A Center has implemented a number of improvements to their financing application process that are designed to make the consumer experience simple, fast, and easy. In-store purchasing has typically been a paper-heavy, manual process, but Rent-A-Center, through their kiosks and online store has eliminated this issue. The AcceptanceNow kiosks are a great example of how Provenir can empower a business to grow through more sophisticated risk decisioning:

“We are very focused on providing a positive customer experience, so speed is top of mind. Shoppers don’t have to wait minutes to get a decision; they are consistently receiving responses in less than ten seconds. In AcceptanceNOW, we have seen an increase in volume. More specifically, we have seen an increase in the number of customers that we can approve. At the same time, we feel that we are making better decisions about how much we can approve for each customer. Provenir has contributed to that by allowing us to implement much more sophisticated decisioning than our previous solution enabled us to do.” Jonathan Klingler, Director of Risk and Decision Analytics for Rent-A-Center

Learn more about Rent-A-Center’s plans for the future and how Provenir is helping them drive growth through smarter decisioning.

Elevate Credit—using data to bank the underbanked

Elevate Credit, an alternative lender providing loan products to underbanked individuals, is an industry leader when it comes to using data to create accurate risk predictions. Elevate has created a dedicated data science center in San Diego to analyze data and develop sophisticated risk models. These models are then used to originate $4.9 billion in loans to over 1.8 million non-prime customers in both the US and UK. The team uses the Provenir Platform, integrated with both traditional and alternative data sources, to power their decisioning process. The integration of alternative data has helped them to significantly expand their product offering to individuals who lack tradition credit histories or have non-prime credit scores by creating a fuller picture of the applicant:

“The better that our models are able to explain and predict consumer behavior, the more of the alternative credit market we’re able to address.” John Bartley, Lead Data Scientist at Elevate UK

Read more about how Elevate uses Provenir and alternative data to decision loans for the underbanked here.

Instabank—meeting customers at the checkout

Farzad Jalily, CTO of Instabank, had a vision of creating a streamlined, cloud-based architecture that enabled Instabank to instantly decision loan applications and in-store payments, and that’s exactly what he and his team created. Instabank is a digital-only Norwegian challenger bank that’s leading the way in in-store payment innovation throughout Norway. One of their most impressive creations is their payment app Upgrade, which powers phone upgrade financing at Eplehuset stores, Norway’s leading Apple retailer. To complete their phone upgrade financing customers simply need to answer four questions, the app then calculates the value of their current phone and determines a financing cost in just a few seconds. The whole process can be completed at the checkout using a mobile phone. Their goal to provide financing to customers, wherever they are, also extends to online loans and in-store payment solutions at other leading retailers throughout Norway. In just two years of operation Instabank has already originated $370 million in loans. Instabank uses the Provenir Platform to provide rapid decisioning for all of their loan applications:

“All the banks small or big, have problems with their legacy solutions, which we don’t have. We use a micro integration platform instead of having a heavy, established API that you have to use a lot of money to build, so time to market and costs are really low because we use this kind of technology.”

– Farzad Jalily, CTO for Instabank

Read more about Instabank’s impressive growth and how Farzad and his team use Provenir to decision innovative loan products.

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Guest Blog: Future-proofing Your Business with Alternative Data Analytics

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GUEST BLOG

Future-proofing Your Business
with Alternative Data Analytics

  • Ralitsa Boyadzhieva, Marketing Manager at FinScore

Despite the gradual recovery of society from the COVID-19 pandemic thanks to vaccinations, the digital means to make lending transactions are here to stay.  It is safe, efficient, and convenient for both your customers and your lending business. The pandemic has acted as a catalyst for lenders to rapidly adopt digital technologies and stay competitive in this changing environment. Upgrading digital infrastructure introduces fundamental changes that can create more economic opportunities.

However, more digital technologies not only reel in more opportunities but also disadvantages. When it comes to future-proofing your financial services company, aim to grow by expanding your market reach while ensuring profitability by detecting fraudulent individuals who are more likely to default on their loans.

To achieve both, you can rely on alternative data credit scoring.

What is Alternative Credit Scoring?

Alternative data credit scoring is the umbrella term for credit scoring using non-traditional data sources and methods.

In traditional credit scoring, lenders manage their risk and reduction of bad loans by relying on credit bureaus that provide credit information on the consumers. They can learn if the loan applicant has been paying off loans on time, has ongoing loans, or has been blacklisted for not paying at all. But this only works for those who have a loan history. Besides this, they assess the socio-demographic profile of the borrower which can be found on the loan application form either in pen-and-paper or digital form. The lender may also use a credit scorecard, a type of credit model, that outputs a score predicting the probability that the borrower can repay the loan on time. With Alternative Credit Scoring, alternative data sources such as mobile usage, digital wallet usage, bill payment history, social media behavior, geolocation, and more can be aggregated to produce a credit score.

Boosting Your Market Reach by Serving the Unbanked Using a Telco Data Credit Score

The mobile phone has become a physical extension of a 21st-century human. Whatever model, size, or function it may have, each mobile phone owner has a SIM card so he or she can connect with the rest of the world. They use it to make phone calls, send messages, access a wide array of mobile applications — from social media to digital banking. As time passes, a user creates his or her mobile footprint such as, but not limited to, texting usage, data usage, voice usage, top-up patterns, SIM age, and more. These are telco data that is unique to each user. 

Alternative data credit scoring, specifically telco data, can help verify, analyze, and assess the creditworthiness of the credit-invisible applicant. The credit-invisible market, also called the unbanked market, is a portion of the population who does not have any financial history they can leverage if they need to apply for a loan.

In the Philippines, in which our company is headquartered, 70% of the population remains unbanked. Telco data credit scoring can be the solution for banks and financial institutions in the Philippines to finally make the invisible market, visible. Not only visible but also reachable and possibly viable for future financially inclusive loan products.

Preventing Fraudulent Accounts by Using Social Media Data Analytics

Now that you have the confidence to serve larger volumes of customers, it is also important to add a fast and powerful way to extend credit to real customers. Fraudulent activities do not sleep. In fact, synthetic identities, bot attacks, and fraud attacks are more present in digital channels.

This is where Social Media Presence Data, which is another type of alternative data analytics, comes in.

Social media presence data is derived from public databases, which are near-real-time data. You can confirm an applicant’s identity with an e-mail address and/or mobile number. FindSocial, a fraud prevention tool, for example, can check more than 20 social media platforms, showing a user avatar and profile information in a simple interface. FindSocial also produces a Social Presence Score that can help you determine whether the customer’s social presence can be trusted or not.

The Future of Lending

Banks and financial institutions of any size are increasingly having positive perceptions towards Alternative Data Credit Scoring because not only can it increase their profitability but also reduce costs due to its speed and efficiency.

The COVID-19 pandemic has further pushed such businesses to transform the way they assess borrowers’ creditworthiness. Besides making their digital banking and/or lending mobile application available to the masses, the lending process, especially loan underwriting and disbursement needs to be fast, easy, and secure to keep up with the demand of the market and to stay ahead of their competitors.

Alternative data scoring provides borrowers with better, easier access to credit. If they apply for a loan from a lender that uses this particular type of credit scoring method, there is a higher probability they will qualify for credit applying for a loan with an establishment relying on traditional methods alone.

Summary

  • Going digital can help financial institutions reach larger markets to serve. However, it can also attract fraudulent individuals.
  • By leveraging alternative data in your analytics efforts, you can reach the large group of unbanked and underbanked individuals and prevent fake accounts from exploiting digital loopholes.
  • Telco data is a type of alternative data that can determine the financial power and creditworthiness of a borrower using data variables such as SMS and call usage, top-up amounts and patterns, SIM age, and more.
  • Social media presence data is a type of alternative data that enables fraud prevention and faster identity reviews.
  • By using an advanced analytics platform, you can instantly confirm if an applicant’s declared e-mail address and mobile number are registered on more than 20 social media platforms.

Learn more on the Marketplace.

Ten Companies Using Alternative Data for the Greater Good

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How Instabank is using technology to meet clients wherever they are

Written by Amy Sariego on . Posted in Blog. No Comments on How Instabank is using technology to meet clients wherever they are

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How Instabank is Using Technology
to Meet Clients Wherever They Are

While many businesses have goals, few are moving towards them as successfully as Instabank. In its two years of operation, it has already issued loans totaling over $370 million in Norway and expanded into Finland. Like many other challenger banks, Instabank offers lending products through its website, but the bank has taken their goal of accessible lending one step further with the development of in-store payment solutions.

Their digital-forward approach to lending takes into account that not all purchases are planned and traditional payment methods, such as cash, debit, or credit, are not always the best option for customers.

So, what does this mean for the consumer who’s fallen in love with the couch in the shop window, but wasn’t expecting to make a large purchase?

Instabank provides a simple lending solution that’s available at the point of sale to provide shop customers with instant loan approval. To power the growth of this payment solution Instabank has partnered with a number of key businesses including Eplehuset (a leading retailer for Apple products in Norway) and Power (leading electronics chain across the Nordics), and in-store lending now accounts for a major portion of Instabank’s loan approvals.

It’s difficult to pinpoint exactly why instant loans have yet to become widely accessible, but managing risk and creating the tech solutions needed to provide instant access have played significant roles in the delay. However, these problems didn’t stop Instabank from creating a banking solution that is easy to use, is accessible where and when it’s needed, and enables the smooth flow of payments and services between consumers and businesses.

Building a Digital Bank? – Only with the right talent

So, how do you build a challenger bank that is both ready to handle the complicated risk analytics that has traditionally slowed banks down, while creating banking products that are instantly accessible to consumers?

You hire innovative people to drive the business ahead, such as Instabank’s forward-thinking CTO Farzad Jalily. Farzad and his team are responsible for creating the technology solutions that not only provide a streamlined consumer experience, but are also scalable and adaptable. When asked about creating the architecture that can support Instabank’s business now and grow with them in the future Farzad said,

“I’ve been an architect and an enterprise architect, and you build up a dream architecture. I had all these wishes based on past mistakes and successes. At Instabank I could live out my dream, I could draw out the architecture and cherry-pick solutions and put them together using APIs.”

As a challenger bank, Instabank isn’t weighed down by the legacy systems that often prohibit big banks from innovating and Farzad sees his distributed architecture as a huge advantage over competitors, “All the banks small or big, have problems with their legacy solutions, which we don’t have. We use a micro integration platform instead of having a heavy, established API that you have to use a lot of money to build, so time to market and costs are really low because we use this kind of technology.” Farzad’s idea of using third-party services, which is a unique solution to banking technology needs, can be easily scaled to meet the changing needs of the business as it expands.

Developing a lending solution that greets you at the checkout

Like all other parts of the business, developing lending apps for in-store partner solutions is a fast and easily scalable process for the Instabank team. Their focus is on providing an easy and discrete application experience for customers. To do this they create simple solutions that use Provenir’s sophisticated analytics solution to manage the loan application processes.

Instabank’s partnership with a large furniture retailer in Norway is a great example of this. Instabank has replaced their existing payment solution to create a seamless financing option that can be completed at the point of purchase. Traditional financing options used to pay for large purchases are far from consumer friendly. In many shops, you fall in love with a couch or other big-ticket item that catches your eye, and then fill out pages and pages of paperwork to secure credit. This isn’t just a slow process, it’s cumbersome, archaic, and enough to put many customers off making a purchase.

Have you ever wished that applying for a small loan was as simple as sending a text message to your bank?

Instabank has created that option for the store’s customers.

Shoppers simply have to send a text message, and then answer a few follow up questions to apply for a loan in store. No paperwork, no wasted time, and best of all the application process takes under two minutes. The agreement can even be signed on your mobile phone. It’s an easy, simple, and efficient payment option for consumers. Once approved customers receive a barcode attached to their loan account that can be scanned in-store and topped up for future purchases.

Perhaps the most impressive development created by Farzad’s team is Upgrade—the app that’s powering early phone upgrades and Mac purchases at Norway’s leading retailer of Apple products. Incredibly the team created and launched the app used in store, to calculate the cost of upgrading and finance the purchase, in just 7 weeks.

To complete the valuation of the existing phone and apply for a loan to upgrade, customers simply need to complete a four-question application online. Their identity can be verified using Bank ID, which can then be used to automatically sign the agreement. Again, this easy financing solution takes care of the entire process from valuing the consumer’s current phone to calculating their loan rate.

This focus on meeting customers where they need them shows just how committed Instabank is to their motto ‘we don’t think like a bank we think like you’. Consumers value options and don’t always plan purchases ahead of time, getting an instant loan as part of the checkout process is a simple way of planning for a customer’s needs before they even develop!

Faster decisioning and expanding accessibility—Instabank’s plans for the future

If you’re wondering how Instabank manages to decision an application in just a few minutes, it’s not down to magic or lack of thorough decisioning processes. The decisioning speed is the result of sophisticated risk models combined with a fully automated risk decisioning system that eliminates delays and provides reliable risk answers. However, Instabank still thinks they can be faster!

For many businesses, completing a loan application in under two-minutes is a dream, but not for Instabank, who are currently planning to speed up their decisioning process through the use of microservices. Farzad told us, “If you want to score an applicant you need to run through the whole process, that is old-fashioned. If you can use microservices you can just use the part of the model that you need. In that way, you get an answer even faster.” Switching to this microservices approach will allow Instabank to run an application only through the parts of the process that are necessary to analyze that specific loan application.

Innovation is something that guides and drives Instabank, with future plans including expansion into new products and markets, and an ongoing mission to create the fastest and smartest risk decisioning process possible. And of course, continue to take banking to consumers, wherever they need it!

Considering a microservices architecture for your loan origination app?

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Top FinTech TED Talks That Inspire Us

Written by Amy Sariego on . Posted in Blog. No Comments on Top FinTech TED Talks That Inspire Us

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Top FinTech TED Talks That Inspire Us

TED Talks are thought provoking, inspirational, and arguably one of the best ways to make your daily commute entertaining. One of the most amazing things about TED Talks is the diversity of topics that speakers discuss, and how their talks are frequently at the forefront of emerging technology.

In our last TED Talks blog post we selected a number of inspiring TED Talks that address the subject of Lending, and how machine learning, alternative data, and technology are changing the way lenders operate and offer their services. This time we’ve binge watched our way through talks that explore the topic of FinTechs and how technology is advancing the world of finances.

When it comes to FinTech, banking, and well, financial services in general it’s easy to get lost in the numbers (pun intended), and forget about the potential impact a business can have on their industry or even the world. Fortunately, TED Talks are available to inspire you to look at the big picture and use technology to create positive change in both financial service accessibility and the impact banking availability can have on an individual.

The following TED Talks focus on the subject of FinTech and cover a range of topics including the influence FinTech is having on the world of financial services, how its improving the payments industry, the ways its improving access to financial services, and perhaps most inspiringly, the positive ways it can change the world.

Here is our recommended viewing list of top TED and TEDx talks to inspire you to innovate and explore the potential of FinTech:

Kids Creating the Future Bank

In the financial services industry, technology has gone from pinch hitter to MVP, but it hasn’t stopped there. In this fascinating TED Talk, author and industry expert Chris Skinner delves into the world of fintechs and why many of the most successful fintechs are founded by ‘kids’—also known as the under-40s—including Revolut, Stripe, and PayTM. Chris explores the cultural and environmental role fintechs will play in the future and how fintech can be used for the greater good to provide protection, improve inclusion, and increase education.

A Revolution in Banking is Coming

When it comes to making life easier for consumers, FinTech is far ahead of many of the traditional banking institutions, but Tom Blomfeld, CEO of UK challenger bank Monzo, thinks the real banking revolution is still to come. In this short, but thought provoking TEDx talk Tom discusses what the future of banking could look like when financial institutions are required to provide easy access to data.

How FinTech Can Positively Impact the World

Spiros Margaris is a world renowned FinTech thought leader, advisor, and venture capitalist. In his TEDx Talk Spiros discusses how FinTech is providing not just a positive influence on the banking industry, but also in the world. For many of us, banking is something that we take for granted, but there are a huge number of individuals who are underbanked or unbanked, such as refugees, recent immigrants, those with poor credit histories, and individuals with thin credit files. Spiros explores how FinTechs can improve the lives of the unbanked and underbanked by providing innovative banking solutions that are accessible and offer a human approach to banking services.

A Vision for Truly Secure and Seamless Transactions

FinTech is evolving the future of payments! Carey Kolaja, who was Vice President of Global Consumer Products at PayPal when she recorded this inspirational TED talk, looks at our current relationship with payment transactions and how technology will drive change in the payments industry. Carey discusses the innovative ways that businesses are using technology to make payments more secure, accessible, and reliable. She also explores the potential uses of this technology in the future, from helping in emergency situations to providing economic opportunities to individuals.

How FinTech is Shaping the Future of Banking

Author, teacher, and Chairman of the FinTech Association of Hong Kong, Henri Arslanian explores how FinTech is revolutionizing the banking industry to create new user friendly financial services. With a digital first approach, FinTech has created new and innovative ways of interacting with existing and potential customers to extend banking services, such as investment advice typically reserved for the wealthy, to everyone. His talk doesn’t just look at the ways finTech will change how consumers access banking, it also explores how it will extend who has access to services. With so much change happening in the banking industry, are the new generation of bankers ready for a digital first banking industry?

Provenir is a risk decisioning platform that puts the power of the decisioning process in the hands of the business. It gives financial services organizations the ability to quickly integrate to data sources through APIs, deploy new risk models, and make risk decisions in seconds. Explore Provenir’s platform to learn how you can use more sophisticated decisioning models to get deeper insights into your consumers and generate decisions in microseconds.

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