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Elevate: Reinventing Non Prime Lending

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Elevate: Reinventing Non Prime Lending

The first slide of the May 2017 Elevate Investor Presentation is the type of thing to make investors’ ears tingle. President and CEO of Elevate, Ken Rees boasts over 15 years in the financial services industry and has a big exit to GE Financial under his belt. To his right is displayed Chris Lutes, Elevate CFO whose career path journeyed through PWC and the CFO role at Silicon Valley Bank. With the vision of a strong leadership team and a fresh IPO, Elevate is determinately reinventing non-prime credit with online products that provide financial relief today, and help people build a brighter financial future.

The vision statement is emotive, and the numbers are unavoidable. The Elevate portfolio of lending products – Rise and Elastic in the U.S., Sunny in the UK – have originated over $4 Billion in non prime loans. The company’s revenue CAGR stands a tall 100% over the past three years, they’re reliably increasing margins, and they’ve done it all with an 85%+ customer satisfaction rating.

Tech-forward and Customer Focused

Elevate has succeeded in a tough segment, many say, because it has identified its purpose and it works with focus to serve what Elevate has termed “The New Middle Class” — the roughly 170 million residents of the U.S. and U.K. with low or no credit scores who would otherwise turn to short term lenders in the event of a significant, unforeseen expense. Elevate is serving the group that’s sitting between prime and sub-prime, but it is not doing so as a traditional lender – it’s a self-proclaimed fintech that hails “Datascience as the vanguard” of its efforts.

A recent NYSE.com article pointed out that “Elevate’s speed is one of its key advantages,” touting the ability “to approve most loans within seconds while staying on the right side of compliance” (a process which is ~95% fully automated).  To which Eric VonDohlen, SVP Chief Analytics Officer, added: “If we start to see things in data we don’t like, we can react in days, not months, and still conform to all the governance requirements.” Elevate’s goal in its data refinement is to shrink charge-off rates, a challenge for many in the non-prime space.

Overall, Elevate is positioned as a growing, tech-forward, and responsible alternative to subprime lenders and has established for itself a significant competitive advantage through its data and analytics stack. Elevate has only “touched about one percent” of its target market, and is not stopping now.

In June 2017, Elevate announced the launch of Elevate Labs. “Given the state of consumer credit in America today, the need for innovation in credit scoring has never been greater: approximately two-thirds of Americans are non-prime according to the Corporation for Enterprise Development and FICO and need better credit options,” said Ken Rees, CEO of Elevate. “Our new innovation lab in San Diego gives the best and brightest technology and analytics talent the space to experiment, collaborate and create something that has the potential to change Americans’ financial lives.”

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On Becoming the Most Wanted Data and Analytics Firm in Europe

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On Becoming the Most Wanted Data and Analytics Firm in Europe

It’s a tall order. To become the most wanted data and analytics firm across an entire continent, that is. But, Magnus Silfverberg, CEO of Dun & Bradstreet talks about the vision with a humility and certainty that makes the aspirational seem so accessible. For some context, Dun & Bradstreet is made up of 2,100 employees and over 150,000 customers. It traces its complex roots past more than 70 acquisitions to the 1800’s and, by some accounts, the beginning of credit data. Recently, Silfverberg’s path to the top of data mountain has traversed through an organization-wide effort, combining those many companies and technologies that historically comprised Dun & Bradstreet into one standardized technology stack with a common platform and common data platforms. That’s the offering that’s on its way to the top in Dun & Bradstreet’s market.

We wanted to find out what drives a company like Dun & Bradstreet to transform the way people use and interact with data, so we sat down with CEO Magnus Silfverberg to understand his approach:

Adi: Thank you, Magnus. To start, we all want to hear about the trends you see in financial services. Tell us how those are driving your vision at Dun & Bradstreet.

Magnus: Well, there are three big trends we are seeing.

The first trend that we see is around digitalisation in general, which quite often leads to automatization. Many companies are digitizing the processes they have, which are quite manual today. With those, they can then apply things like decisioning tools. So, there’s a base case where it becomes more efficient to automate decisioning regarding cost. Then, of course, we have the real-time aspect of automation as well which simply makes it better than having to conduct a slow, manual process. So, digitalization and automation are very clear trends that we want to serve, and we are doing that by adding decisioning and more predictive analytics services on top of the data management services to digitalize their businesses.

Another trend we see is growth. Companies want to grow. From a risk and credit perspective, they can take on more business if we can help them be more accurate in their credit decisioning. So, it becomes apparently critical to have consistent credit decisioning and excellent tools and processes for this. Then, there’s the marketing perspective. We talk about the “holy grail,” which is found when we can add our structured data, combining that with the client’s transaction data and also web browsing or behavioral data. That’s something we do that very few others can provide, and it gives a very sharp profile of the end customer. Thereby, if it’s a consumer, our clients can target that person with very accurate and relevant information. We can help them with data to predict who wants to buy their services and target those specific customers, to become more relevant for those specific customers. So, all of these play into the growth trend that we see.

The third big trend that we see is compliance. Of course, you have KYC, AML, and those kinds of regulations. The banking and financial sector can become more compliant with our compliance solutions to, for instance, screen customers. Now, of course, we also have the GDPR [General Data Protection Regulation] which will be enforced starting May 2018. Companies in Europe are transitioning from facing very minimal consequences if they do not comply with data privacy regulations to an environment where non-compliance has massive implications. Companies can be fined up to 4% of total global revenue, so it’s a big thing for business. To give an example of how that’s driving our vision: GDPR requires updated customer databases. So, you cannot have a person who is deceased, for instance, in your CRM system. With data management services, we can help our clients remain compliance. We can also help them prepare for and tackle these regulations by providing consulting services, etc.

A: What direction have you taken based on your evaluation of these trends?

The idea behind Dun & Bradstreet from the beginning is that we collect data from public sources, and also private sources. We have around 500 different data sources that we have in our structured databases. And that’s information on companies, on individuals, on properties, and vehicles. Then we build different types of use cases on those data sets. Today, there are three main types of use cases or product areas. One offers credit information and credit decisioning, with risk management including compliance. The second focuses on data for marketing – helping clients target new companies and grow their existing customers. The third is a general business information use case where we have different portals where customers can look-up data on those types of data sets on an ad hoc basis.

Our mission is to help companies find and manage their customers. That means we are focused on using our data to help our clients throughout their customer lifecycle: Finding new business through targeting, onboarding their customers – so risk management and credit decisioning, etc. – and then upsell, cross-sell, and churn prevention.

Our vision from there is to become the most wanted partner for data and analytics in Europe. It’s the combination of these significant trends we discussed, and we can play a key role there. To increase our capabilities, we’ve moved from just providing a credit report into providing real time monitoring and automated decisioning support. We are already doing that to some degree in some markets – offering decisioning support – but the next step is to be more advanced and to configure the solutions for different clients’ needs. To make it available across the 18 markets we serve – The Nordics, Belgium, Germany, Austria, Switzerland, and Eastern Europe from Poland down to the former Yugoslav Republics – we needed a leading tool to support this vision. There, we’re working with a company called Provenir which has been key for us to achieve our vision of moving up the ladder to help our clients with automated, targeted decisioning rather than just selling credit reports.

When it comes to data for marketing, we are providing analyzed data or smart data to help our clients with targeting or cross-sell and upsell. We are developing more solutions that use predictive analytics and big data analytics to accomplish that and to meet the growth trend of our clients.

A: Finally, we have to know what the CEO of Dun & Bradstreet spends his time reading.

M: Ah, people are always sending good stuff to read – excerpts from reports and websites. Aside from those, and the Business News in Sweden, I’m hooked on Artificial Intelligence (AI) and reading quite a lot on that right now. I suppose it plays into Dun & Bradstreet, but it’s also a personal interest.

A: Thank you, Magnus! Is there anything we’ve forgotten?

M: Hah. Probably! One more holistic perspective: Dun & Bradstreet is going through a significant transformation. We are changing this company from the ground up, and Provenir plays a very crucial role in that transformation — let’s call it going from a basic data supplier to a company that delivers big data analytics and decisioning. That transformation is a big change, indeed.

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On the Fine Line Between Cross-Selling and Advising

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On the Fine Line
Between Cross-Selling and Advising

Empowering Your People with Data

In a recent Salesforce webinar, Frank Perkins, RVP, Enterprise Sales, Global Run Rate, with Salesforce impactfully stated: “All of your data is relatively useless unless you can get it to the people who sell in the context they need it.” In a lending institution, that means putting the customer’s data (from a CRM like Salesforce) and credit data (from varied data sources such as FICO, FactorTrust, Twitter, etc.) in front of the people who are serving customers on a daily basis. It means empowering them to help that customer find the right product when they need it.

Cross-selling is Knowing Your Customer

Now, we’re all aware of the fine line that exists between “cross-selling” and “advising” in a financial institution. In many instances, the Personal Banker or Loan Officer wears both hats and should act as an advisor to the customer while making them aware of products and services that could help them toward their financial goals. To get this clarification out of the way now, cross-selling cannot mean shoehorning a customer into a product that’s only right for the institution. Cross-selling is knowing your customer, their history, and their needs well enough to present products and services when they’re relevant. And, good systems should empower people to do just that.

Creating a Frictionless Customer Journey

For example, McKinsey and Company identified a major bank that created a frictionless, integrated customer journey. By doing so, they “unlocked over $300 million in additional margins” by tapping into “underutilized customer data” and delivering “targeted marketing messages and various points in the purchase-decision process.” Imagine that your financial institution could create its own frictionless sales process by integrating CRM data with unstructured and credit data so effortlessly that your personal bankers could present a pre-qualified mortgage offer to an account holder who recently listed their home on Zillow. Yeah, that’s customer service.

Automating the Financial Industry

With stories like McKinsey’s popping up, it’s no surprise that experts see automation as the single most impacting force in the financial industry over the next decade. To be sure, it doesn’t make sense for you or your customer if your company is cobbling together outdated systems to make credit offers, forcing customers to wait while their officer manually ambles back and forth between systems. Building an integrated, frictionless process of your own not only makes financial sense, but it’s also required if you want to keep up with the future of banking.

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Blogs by our Clients: Breaking down the Barriers to Financial Inclusion

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Blogs by our Clients:
Breaking down the Barriers to Financial Inclusion

New research, supported by Oakam, highlights need for shake up in the way the financially excluded are assessed for credit worthiness

In Oakam’s experience those using ‘high cost’ credit is a diverse group which includes those on low incomes and those with little credit history such as recent migrants.  These consumers are usually borrowing with a very clear understanding of the costs associated with their borrowing choices.  In fact, as recent research by Which magazine revealed, a ‘high cost’ loan is very often a cheaper option for consumers than an overdraft facility on their current account (which begs the question…high cost in comparison to what?).  However, it appears that even responsible users of ‘high cost’ credit – those that make the required repayments and manage their other debt obligations at the same time—suffer from constrained future access to credit.  This is clearly unjust.

There is no doubt…the way credit is accessed in the UK is broken for millions of people.

It was designed for big banks with credit bureaus developing credit scores for mortgages, credit cards, and personal loans for Prime borrowers.

However, for those on the low end of the economic spectrum, credit scoring tools today may in fact be trapping consumers in high cost debt.

Taking a small loan, even with a high APR, can be the right decision for a consumer if it lowers the chance of default on other obligations.

However, Oakam has evidence that even when taking a small loan improves how that customer services their debt obligations, their credit score can suffer long term damage.

The impact of this damage means the customer finds they have fewer options for accessing credit, forcing them to rely even more on high cost credit and the cycle continues.

At Oakam, we recently supported the work done by academics from The London School of Economics and Political Science, Sussex University, and New York University looking at the long term impact of the use of ‘high cost’ credit.  The full study can be downloaded from the Social Science Research Network.

In their paper, the authors found evidence that “using high-cost credit may leave a stigma on a borrower’s credit history: if borrowers that take up high-cost loans are tagged as high-risk by lenders, they may as a result face higher borrowing costs in the future.”    If users of high cost credit actually showed deteriorating repayment behaviour this increase in future borrowing costs might make sense. However, the authors also found “that borrowers that take up a high-cost loan suffer an immediate decline in their credit rating. This decline cannot be explained by the repayment behavior of the borrower, because, if anything, taking up high-cost loan improves repayment behavior.”

At Oakam, we view our success as synonymous with our customers’ success.  As one company we alone can’t change the plight of the financial excluded.  What we can do is make sure that our product and services are designed to create the best customer outcomes, which we believe are access to credit today to address a pressing need and the option to access to more credit at a lower price in the future.  For example, we lower customer’s interest rates over time, offer small weekly repayments, and always allow a loan to amortize as opposed to being rolled over into an even larger debt.

But there is only so much we can do when the broader system is stacked against ‘high cost’   borrowers.

Some companies, like Aire, are pioneering new ways of assessing borrowers credit worthiness.  And, other companies such as Pockit and TransferGo are making financial services more accessible to lower income consumers.  But more needs to be done.  That is why we urgently calling for policy makers and like-minded Fintech companies and lenders to address the systemic problems relating to access to credit for lower income or financially excluded customers.

This blog post discusses the impact of the current system for assessing credit worthiness on the well- being of ‘high cost’ borrowers.  A future blog post will discuss how the underlying costs of providing credit to the financially excluded is a key driver of the higher costs these customers face.

Oakam is backed by Cabot Square Capital LLP, a leading financial services private equity firm.

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The ‘under banked’ foreigners are an untapped customer base for lenders in the US

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The ‘Under Banked’ Foreigners
are an Untapped Customer Base for Lenders in the US

In 2015, the U.S. Department of State issued 477,780 temporary work visas to foreign nationals

These people represent 0.3 percent of the U.S. labor force and are a largely untapped customer base for U.S. businesses. Why? They do not have traditional credit history established in the U.S. and so businesses are not comfortable taking on the risk of their business. When I moved from Australia four years ago on a work visa, I could not even get a cell phone contract.

I approached multiple phone providers and they all told me the same thing. That I did not have enough of a credit history to merit a long term phone contract with their company. This is because most companies – not just phone providers – use traditional databases and resources like the FICO score to determine the creditworthiness of an individual.

FICO scores are a purely U.S. based metric and so, while I own property in Australia and hold a job in the U.S., I was requisitioned to a month to month plan on a lesser phone carrier. This month to month plan has allowed me to build my “financial reputation” and one day I hope to graduate to a regular cell phone plan within the U.S.

My new credit reputation will then also give banks the confidence to one day give me a business, home or auto loan. But it will have taken them over two and a half years to do so. In the meantime, my phone carrier and other traditional lenders have lost out on millions of dollars on potential long term contracts with me and thousands of other “under banked” foreign nationals.

As financial tides turn around the globe and the makeup of the U.S. workforce continues to diversify, many alternative and P2P lenders are realizing that relying on the limited data of a FICO score to provide a credible risk assessment of a potential customer is no longer viable. Casting a wider net to incorporate data from international bureaus and an individual’s social media profile can provide a better risk profile for customers who come from overseas, so that both customers and businesses can benefit in a more positive way.


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Happy 50th Birthday Barclaycard: Is It Now Time To Retire?

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Happy 50th Birthday Barclaycard:
Is It Now Time To Retire?

Barclaycard, the UK’s first credit card, hits a major milestone today as it celebrates its 50thbirthday.

It was on this day back in 1966 when the very first Barclaycard was dispatched. By the end of that year, some 1.25 million Brits had received one through their letterboxes. While not all of these people went on to make a purchase using their card, for many, this plastic rectangle was a liberating addition to their wallets and purses.

Just like with Bank of America’s Americard launch in 1958 (which was later rebranded as Visa), Barclaycard kick-started the democratization of the UK lending industry. For example, women no longer needed a male guarantor to get credit, while paying for meals out and shopping became quicker and easier for consumers and merchants alike.

With credit limits of no more than £100 and just one month to pay back the money borrowed, this was by no means an overnight credit revolution, but the launch of the UK’s first credit card did set the wheels in motion for what today has become an enormous industry. Indeed, in November 2015, some 60 million credit cards were in circulation in the UK.

But at the grand old age of 50, will it soon be time for Barclaycard (and the many other credit cards now on offer) to reach for the pipe and slippers?

This isn’t likely to happen anytime soon. The credit card industry is doing a pretty decent job of developing and adopting new technology to streamline its processes and make credit even more accessible to customers. Contactless technology, mobile payments and wearables, improved security, as well as the use of Big Data in order to make swift, accurate credit decisions, are all colliding to make today’s credit card payment process simple, quick and hassle-free.

But despite all this innovation, don’t expect credit card providers to have it all their own way in the future.  The emergence of P2P lending, online payment services, payday loans and pre-paid cards (to name just a few) means that today’s consumers and small businesses are faced with considerably more choice and control over how and when they access credit.

It is this increased market competition that will ensure that the democratization of credit – a process that started in the UK 50 years ago today – will continue to evolve.

You can learn more about how Barclaycard fits into the history of lending on our infographic.


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Money20/20 Europe – a breath of fresh air

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Money20/20 Europe –
a breath of fresh air

The arrival of Money20/20 in Copenhagen brought a breath of fresh air to the European conference circuit. The high-energy, well-structured event generated a bright atmosphere for conversation and collaboration – and not just because business in the networking area was conducted in colourful sheds. Notable by their absence were customers, but industry players were out in force and a recurring topic of conversation was how today’s banks and financial institutions can add immediacy to their processes.

The fact that customers have taken to services like Amazon 1-Click, Twitter and Alipay suggests that immediacy is what they want.

To deliver it, banks and FIs need to be digital and online. That’s a minimum, but it isn’t enough. They also need decision-making that supports immediacy. Manual, complex risk analytics and decisioning is clunky and slow. Automated, streamlined processes returning a rapid ‘yes’ or an immediate ‘no’ credit or loan decision are what’s needed.

People share information online constantly; and it’s resulted in new forms of data. The complete view of a prospective customer no longer resides only in bank statements and spreadsheets. It’s also in online reviews and online behaviour.

If a consumer wants to know if a company is reliable and provides value for money, they’ll look at review sites and read what people have written about them on Twitter. Why wouldn’t the same information form part of risk decisions taken by finance and payments providers?

Inspiring speakers at the event included BBVA’s CEO Carlos Torres Vila and Sebastian Siemiatkowski, CEO and co-founder of innovative e-commerce company Klarna, which is changing the way people pay for goods online. Ricky Knox, co-founder of digital-only bank Tandem talked about how their approach is reimagining the bank as we know it.

It was a successful start in Europe for the Money 20/20 brand. We look forward to October and Las Vegas.

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What we can expect at Money 20/20 Europe

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What we can expect at Money 20/20 Europe

Money20/20 Europe next month promises to be an inspiring few days of discussion, debate, information sharing and collaboration. With evolving regulation, rising customer expectations and increasing levels of competition, the financial services and payments industry is a challenging one to be in; but innovators are meeting these challenges through some exciting trends. I’m expecting to hear about:

1. The route to easy mobile payments 

Online and mobile shopping ushered in a whole new era of commerce. As options for single click-to-buy make shopping even more convenient, so lengthy checkout processes that demand a raft of personal and payment details become an even greater obstacle. Online shopping cart abandonment is a problem for retailers and merchants. Central to addressing it, are simple, quick, secure and convenient payment processes incorporating risk analytics for rapid credit decisioning. E-commerce company Klarna takes friction out of the online buying process to help ease the way to a higher rate of purchase completion. Klarna separates the buying from the paying, making a rapid risk analytics decision on every transaction so shoppers need input only basic personal information and can choose to make payment after goods have been received.

2. Meeting the SME lending need

The British Bankers Association has reported that net lending to SMEs of £2.1bn last year was the first annual rise since 2011. However, total loan facilities approved in 2015 saw a 12 per cent decrease compared to 2014.

Meanwhile, the newer breed of funding providers continue to gain ground. For all financial institutions fintech offers a way to bridge the SME lending gap, providing compelling benefits that include automation, more staff resources to focus on customers rather than process and data for advanced analytics.

3. The age of data

In today’s digital age, would-be borrowers generate huge quantities of behavioural and lifestyle data online that can provide indicators of creditworthiness and ability to repay. This data can be useful to credit risk scorers, complementing established data sources and possibly providing an alternative route to a credit decision. Innovations in credit risk analytics can be instrumental in reaching the underbanked who may have struggled to secure funding in the past.

4. The digital transformation trend

Customers won’t wait days for a credit or loan decision anymore. Rapid decisions and transactions are the expectation for a real-time experience. This is unachievable for financial institutions tied-up by complex, resource-intensive processes. Manual processes and silos in the workstream are obstacles to the fast and efficient sharing of information. Addressing this requires a digital transformation of systems and processes. It’s a far-reaching, challenging exercise but through it, automation can increase productivity, reduce costs and improve customer service. Information held and processed digitally also provides greater traceability through a real-time status view across business functions. Not only does this improve operational efficiency, scalability and business insight but also helps with regulatory compliance.

5. Success through collaboration 

Fintech provides exciting opportunities for financial institutions faced with expensive, resource-intensive regulatory and risk management obligations. Through collaboration with technology partners, credit and loan providers can cut through patchworks of legacy systems, business process silos and labour-intensive manual processes. Success in a vendor partnership lies in its ability to fulfil integration needs – seamlessly integrating risk analytics and decisioning solutions with data sources and customer relationship management tools, and a single solution to meet the needs of all business lines. In an ever-changing market, flexibility is paramount, as is the expertise and capability to adapt to meet evolving regulatory requirements.


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