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Guest Blog: Closing the Friction Gap in Lending

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Closing the Friction Gap in Lending

  • Don Chapman, Head of Strategic Partnerships, Powerlytics

Twenty years ago, day-to-day experiences such as bill payment and shopping were filled with hurdles and hassles, but consumers accepted these inconveniences because it’s all they knew. Today, smartphones, high-speed internet, and platforms like Amazon make many of these experiences a simple one or two click process. And as technology advances and each previous friction point is eliminated, we become even less tolerant when we are confronted with a complicated user experience or hurdles to completing a transaction.

Zero-friction Remains a Challenge for Banks and Lenders

While some industries have been highly transformed, zero-friction in financial services remains more aspiration than reality. While some financial processes have become a model of zero-friction – think of the ease of paying a friend with Venmo or the simplicity of online bill payment – account opening and loan decisioning are often cumbersome and frustrating for consumers. This is because banks and other lenders must follow strict regulatory requirements and sound credit risk management practices making it much tougher to simplify these experiences. In effect, this creates a “friction gap” for financial services providers. Consumers have moved beyond friction in many parts of their daily lives, so they become even more frustrated when dealing with the complexity that still exists in these financial interactions.

This is a particular challenge for banks and lenders. In fact in a recent webinar, Peter Wannemacher, Senior Analyst at Forrester, said abandon rates for online banking applications were at an all-time high of 97.5%.  While this percentage may be lower if we look only at loan applications, lending is a particular challenge because available data such as bureau scores are often not sufficient to make a fully informed credit decision. As a result, many lenders will ask the applicant to provide paystubs, tax returns, access to their bank accounts directly or through a third party, which results in a portion of these busy and creditworthy individuals choosing to avoid the friction and look for other options.

The Answer – Innovative Data Sources

The good news is that there are new solutions that can help streamline this process. The key for lenders comes down to data strategy and those lenders focused on identifying and integrating innovative new data sources are likely to gain a major competitive edge.

One example of an innovative zero-friction data solution is anonymized tax return information.  By simply using the loan applicant’s 9-digit ZIP Code, these data solutions provide accurate income estimates and confidence scores against an applicant’s stated income, giving any US lender the financial insights needed to enable a quick “yes” decision with zero friction for the loan applicant. For additional fine tuning of the estimate, knowing whether a person owns or rents their home provides an increased measure of accuracy. And because these solutions are based on tax data, they go well beyond the applicant’s W2 and cover all sources of income to provide a truly holistic financial view of the loan applicant.  The Office of the Comptroller of the Currency (OCC) has reviewed these income solutions and allows commercial usage to get to a “yes” in a loan decisioning process as well as other use cases including replacing stated income for proactive credit line increases and prospect targeting. 

Powerlytics provides this type of zero-friction income solution based on anonymized tax return data. Today, a range of banks and other lenders use Powerlytics True Income solutions to streamline loan decisioning and expand proactive credit line increases.  Powerlytics also offers a broad dataset of 5,000 financial variables delivering a comprehensive financial view of the over 200 million adults and 30 million businesses that comprise the American economy. Today, banks and lenders use this broad dataset to improve outcomes in prospect targeting, cross-sell, and portfolio risk analytics. 

While the friction gap remains a challenge to banks and lenders, those who actively explore innovative data solutions can accelerate their path to closing this gap and differentiate themselves in this highly competitive marketplace. Visit www.powerlytics.com for more information.

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Giving Thanks: Fintechs/Finservs Aimed at Solving the Unique Needs of Minorities

Written by Amy Sariego on . Posted in Blog.

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Giving Thanks:
Fintechs/Finservs Aimed at Solving the Unique Needs of Minorities

Ten Organizations Focused on Ensuring Access to Financial Services for Immigrant and Minority Populations

They say the holiday season brings people together – reuniting families and friends and providing an opportunity for joy, gifts and gorging on delicious food (or bickering with siblings, fighting for the best piece of turkey and being forced to wear ugly sweaters). Whatever you celebrate, the holidays are often seen as a good time to give back and consider the people who may be at a disadvantage in some way. To get into the spirit of the season, we’ve been looking at financial services organizations and fintechs that encourage environmental sustainability or aim to serve the underserved – empowering marginalized populations with access to credit, banking and other innovative fintech products.

Minorities and recent immigrants face unique challenges when it comes to accessing financial services products. But encouraging financial inclusion of all individuals “strengthens the availability of economic resources… [and] helps the overall economic development of the underprivileged population.”1 Ensuring everyone has access to financial services and credit products helps to improve overall household income, increases the size of the economy, builds individual/household asset holdings, increases financial and health security, reduces vulnerability and encourages job development.2

Certain Credit Reporting Agencies in various regions won’t recognize credit history from other countries, effectively ensuring the immigrant population remains unbanked/underbanked. Minorities have faced discriminatory banking practices for decades, including the varied pricing of financial products based on region or neighborhood, not having physical bank branches in lower income areas and exorbitant overdraft fees. 28% of American Black and Latinx households have no traditional credit history on file; leaving 43% of Latinx and 47% of Black households in the United States unbanked or underbanked. Yet research suggests that by 2044 the U.S. will be a majority people-of-color nation – not only should financial inclusion for all be a moral obligation and basic human right, it will also be essential for the future health of the American economy. While these examples may speak to North America more specifically, the issues of inclusion are critical in all parts of the globe.

These ten innovative organizations are focused on offering financial products and services geared to the unique needs of these populations:

  • Camino Financial: A family-owned success story, Camino Financial is devoted to helping small Latinx businesses thrive, offering simple, affordable loans to small businesses who may not have access to credit otherwise. Helping these small businesses in low-to-moderate income communities help to ensure sustainable business growth and encourages job development.
  • Greenwood: A digital mobile banking experience, Greenwood is focused on Black and Latinx customers, aimed at helping its customers save money and recirculate wealth throughout the community. With charitable donations including feeding meals to families when an account is created, donations to non-profits, and small business grants to Black and Latinx-owned businesses, the company also focuses on entertaining educational content geared to the specific need of their customers.
  • First Boulevard: This neobank aimed at Black Americans focuses on helping the community build generational wealth and control spending. With no minimum balance required, financial education programs and real-time insights and recommendations based on purchase history, First Boulevard believes that controlling finances is one way to help fight systemic racism.
  • Cheese: Asian immigrants face unique challenges when accessing financial services, particularly around language requirements. Cheese offers customer support in both English and Chinese, customer messaging via WhatsApp, and even cashback on purchases from Asian-owned businesses.
  • Proto: Canada, known for its vast multiculturalism, is also home to Proto, a tech company focused on inclusive chatbots and multi-lingual contact center automation. Focused on emerging financial services markets in Asia and Africa, Proto allows first-time consumers to access support in a variety of languages and ways, including via SMS and other messaging apps.
  • DreamStart Labs: In community savings groups, transactions are often calculated by hand, on paper, with cash stored in informal ways including lockboxes. DreamStart Labs provides mobile apps that enable these unbanked individuals to conduct transactions, build credit history, save money and connect to formal banks. To date, the company has enabled thousands of savings groups across Africa, Asia and Latin America to formalize their banking.
  • Purple: A mobile banking platform, Purple aims to empower individuals with disabilities to achieve financial independence. Often overlooked by traditional financial institutions, people with disabilities are more likely to be unbanked/underbanked than those living without disabilities. With no hidden fees, no minimum balance, and the ability to easily track spending, the company also donates a portion of revenue from each debit card swipe to the Special Olympics.
  • BABB: When BABB founder Rushd Averroes moved from Yemen to the U.K., he found himself unable to open a traditional bank account. With the belief that everyone deserves to have access to basic financial services, BABB was created to address the issue – aiming to decentralize banking and offering peer-to-peer banking services to the global micro-economy, this fintech is bringing financial inclusion to as many individuals as possible.
  • BCIF: The Black Cooperative Investment Fund, founded in 2016, is a community-based organization providing microloans to the Black community while raising awareness about the importance of economic empowerment, equity and wealth building. Focusing specifically on the Southern California region of the United States, BCIF has a long-term vision of providing dedicated, reliable, perpetual sources of capital to help create assets and build generational wealth for the local community.
  • Welcome Tech: Based in the United States, Welcome Tech leverages proprietary data to provide tailored financial services and trusted info to immigrant families. Using machine learning technology, financial education programs and personalized service offerings including debit accounts/cards, a portfolio of monetary award options and consumer credit products, Welcome Tech aims to improve financial inclusion among the millions of underbanked/unbanked immigrants in the U.S.

Our understanding of the world and all of the people and identities living in it continues to evolve. And so must the way we do business and develop products and services. As digital transformation takes the world by storm, financial services organizations have a unique opportunity to shift from a product-focused mindset to one that is more centered on their audience.3 What do most audiences want? To be seen, heard and understood.

For more inspiration on fintechs/finservs doing good in the world, check out the other blogs in our Giving Thanks series:  Fintechs/Finservs Encouraging Environmental Sustainability and Fintechs/Finservs Helping Women Be More Financially Secure.

And for more information on how an all-in-one risk decisioning ecosystem can make innovating in fintech even easier, check out our AI-Powered Risk Decisioning Platform page.

Resources:

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Giving Thanks: Fintechs/Finservs Encouraging Environmental Sustainability

Written by Amy Sariego on . Posted in Blog.

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Giving Thanks:
Fintechs/Finservs Encouraging Environmental Sustainability

Ten Financial Services Organizations Putting the Environment First – And Why It’s Also Good for Business

If you live in or near the United States, everything in the month of November is Thanksgiving themed. But even if you don’t celebrate U.S. Turkey Day, there’s still a lot to be thankful for as the year 2021 slowly winds down. To help celebrate, we’ve been looking at financial services organizations and fintechs that work to help populations that remain underserved by more traditional institutions, as well as innovative organizations that aim to encourage sustainability and help further the goals of environmental activism. As digital transformation continues to evolve rapidly, financial services organizations have a unique opportunity to shift from a product focus to a more audience-centric one.1 And what do customers want these days? They want to engage with companies that truly match their values – not just as lip-service, but those that really walk-the-walk.

The United Nations has released 17 Sustainable Development Goals (SDG) as a way for institutions of all types to ensure they are making both short and long-term investments in products and services that further sustainable projects. These goals include everything from Clean Water and Clean Energy to Responsible Consumption and Climate Action.2 And consumers are readily looking at the products and services they consume to see how they stack up.

Check out these ten organizations focused on offering sustainable financial services/products:

  • Ekko: Based in the UK, this climate-friendly debit card, app and finance platform helps consumers fight climate change, just from using their services. For every five transactions using their debit card, Ekko pays for an ocean-bound plastic bottle to be collected, and at every 50 transactions they pay for a tree to be planted. The app allows you to track the impact your purchases have had on the environment and they’ve even created an entire marketplace of sustainable products and services to further the cause.
  • MasterCard’s Priceless Planet Coalition: As part of MasterCard’s extensive variety of offerings, the Priceless Planet Coalition aims to restore 100 million trees by 2025, focusing on regions that represent the greatest global need of forest regrowth. The program is dedicated to creating visibility around the carbon footprint of producing/consuming certain products and collaborates with both local communities and stakeholders.
  • Stripe Climate: A service launched by Irish-American payment-provider Stripe, Stripe Climate allows businesses to direct a portion of revenue to help scale and grow emerging carbon removal technologies. Available globally, 100% of contributions from participating businesses is directed to carbon removal, with on-hand scientific advisors to help maximize long-term impact.
  • Trine: Swedish company Trine is on a mission to make it easier for people to invest in solar energy in growing markets, enabling participants to earn a profit while making both a social and environmental impact. Once you set up an account, you can choose which solar partner to invest in – if that solar partner/borrower succeeds, you’ll get back your investment with interest, all while helping to further green energy sources.
  • Aspiration: A U.S.-based challenger bank, Aspiration vows to help customers “spend, save and invest with a conscience.” With a promise to never use deposit money or revenue to fund oil or coal projects, the company also plants trees on behalf of consumers by allowing them to round up to the nearest dollar on debit card purchases. They also offer a Planet Protection program, which helps to offset the climate impact from every gallon of gas you purchase for your vehicle.
  • Treelion: This sustainable fintech company has developed a blockchain-based solution enabling a decentralized network that launches and manages green digital projects. Based in Singapore, the company is dedicated to the green economy and helping to ensure the creation and success of large-scale green digital ecosystems. With a mission to “create an inclusive green financial ecosystem to improve the global environment,” the Treelion Foundation aims to create a global sustainable ecological business model.
  • Green Fintech Network: Established in 2020 by the Swiss government, the Green Fintech Network is an action plan containing 16 concrete proposals for digital technology and sustainable finance – including proposals around a platform for sustainability data, the creation of an innovation challenge for green fintech startups, the broad promotion of open finance, and the expansion of funding for green fintechs. Hoping to make Switzerland a global leader in sustainable financial services, the action plan aims to provide incentives for the business community to drive innovative, green solutions.
  • Joro: Powered by smart spending analytics, this fintech provides insights on how purchases contribute towards carbon emissions, enabling consumers to make more informed shopping decisions. This U.S. company allows consumers to “track, reduce and offset” carbon emissions of purchases, and compensate for those unavoidable purchases that result in carbon emissions by supporting a broad portfolio of carbon projects.
  • Ecolytiq: Offering ‘Sustainability-as-a-Service,’ this German fintech provides banks and financial institutions with the digital infrastructure necessary for them to offer consumers ‘green finance,’ including everything from personalized impact offsetting to ESG investments. Ecolytiq offers a comprehensive sustainable banking solution that uses the Open Payment Standard released by the EU, utilizing the latest scientific research and machine learning technology to analyze individual banking transactions and offer personalized environmental footprints.
  • Novus: This UK fintech, in partnership with Visa and Railsbank, provides a mobile banking app that rewards users for sustainable purchases. Consumers earn ‘impact coins’ for purchases made on the card and can then use those coins to help support various green initiatives, including ocean conservation and reforestation. Novus also allows you to track your carbon footprint, enabling you to understand which purchases are the most sustainable and providing ways to offset carbon-emitting consumption by contributing to environmental projects available directly in their app.

As the world continues to sharpen its focus on climate change, carbon emissions, reforestation and other facets of environmental activism, the business opportunity for fintechs who can respond to this need continues to expand. Younger consumers in particular have helped stimulate the growth of green finance and sustainable investment – but it’s not just millennials interested in these options anymore.3

Increasingly, consumers are not tied to traditional financial institutions and will shop around for organizations that help further causes they believe in. As Alex Johnson, Director of Fintech Research at Cornerstone Advisors said, “Consumers… want sustainability built into the products they use on a daily basis. Checking accounts, for example. Are you building a deposit, investment or lending product? You better have a plan for how usage of your product positively impacts the environment.”4

For more inspiration on fintechs/finservs doing good in the world, check out the other blogs in our Giving Thanks series: Fintechs/Finservs Helping Women Be More Financially Secure and Fintechs/Finservs Aimed at Solving the Unique Needs of Minorities.

And for more information on how an all-in-one risk decisioning ecosystem can make innovating in fintech even easier, check out our AI-Powered Risk Decisioning Platform page.

Resources:

  1. https://bbgventures.medium.com/not-another-neobank-why-the-market-is-overcrowded-and-where-bbgv-sees-opportunity-835ebd231154
  2. https://sdgs.un.org/goals  
  3. https://www.cnbc.com/2021/05/21/millennials-spurred-growth-in-esg-investing-now-all-ages-are-on-board.html  
  4. https://newsletter.fintechtakes.com/p/what-do-customers-want-from-fintech

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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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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

Written by Amy Sariego on . Posted in Blog. No Comments on 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?

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

Written by Amy Sariego on . Posted in Blog. No Comments on 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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