Financial institutions are collecting, organizing and using client data and automation to help consumers navigate today’s rising interest rates. Banks can use that data to better understand clients and help them make “good financial decisions,” James White, industry principal for banking at fintech Total Expert, tells Bank Automation News in this episode of “The Buzz” […]
Long considered a nuisance, distributed-denial-of-service attacks, or DDoS, are a growing problem for banks and other financial businesses, according to a new report. The volume of DDoS attacks targeting financial firms increased 22% year-over-year as of November, according to a new report first provided to Bloomberg News by the Financial Services Information Sharing and Analysis Center, […]
Chris Tremont, chief digital officer at Grasshopper Bank, will join the panel discussion “Automation and the pursuit of efficiency: A frank discussion on cost/benefit” at the Bank Automation Summit U.S. 2023 on March 2, at 2:15 p.m. ET.
Chris Tremont, chief digital officer, Grasshopper Bank
View the full agenda for Bank Automation Summit U.S. 2023 here.
Tremont will offer insight into the importance of balancing automation and human capital as financial institutions continue to invest in digitization. He will also discuss the value of partnerships following the bank’s recent collaboration with automation platform Ramp.
Grasshopper’s Lauren McCollom, director of banking as a service, spoke about embedded financing and open banking at Bank Automation Summit Fall 2022.
The Summit will take place March 2-3 at the Westin Charlotte in Charlotte, N.C., and brings together U.S.-based industry experts to discuss banking automation and technology topics, including ideation in banking and solving data expandability issues through the cloud.
Americans are leaning on the use of digital banking and its associated tools to help feel financially resilient amid economic uncertainty. Digital adoption has continued to grow, and the 46% of Americans who consider themselves financial experts rely more on digital tools now than they did in 2021, according to KeyBank’s “2023 Financial Mobility Survey.” […]
A picture tells a thousand words. The popular Alex cartoon which shines a light on banking practices and attitudes, this morning featured medium ranking investment banking executive Clive trying to influence his boss on the subject of his bonus. He constructs a list of deals that he has pitched and lost over the last year. His boss points out the paradox of lost deals as being a justification for a bonus. Clive then points out that the banks that won these deals have been left with the underlying assets and that it has therefore cost competitors a fortune. This, of course is very true. When I had to make credit decisions I was aware that that asset had my name all over it perhaps for a significant length of time. Underwriting decisions cease to be an issue once the asset are sold. The credit decision is therefore a snapshot of the moment in time and not a considered view of future prospects. Does this make for considered future risks? I don’t think so. The shadow banking markets are going to find this out to their detriment over the next couple of years. Banks like Credit Suisse are already struggling and so will many of their counterparts.
It seems like the old days are coming back with a vengeance. In these inflationary times bank relationship managers are going to have to take a good and detailed look at the management accounts of the companies within their remit. Energy costs are going through the roof and businesses are being stretched. British Gas is apparently taking a very robust approach to its credit policies and threatening companies with overdue bills with winding up orders. It is a relatively easy process in the UK although not well known and it is a very blunt instrument. If you wind up a company it no longer remains a customer. Seems as though British Gas has decided that a bigger risk is to let the debt build up and spiral out of control. What it does point out is that bankers need to be able to read and understand the financial statements of their clients and act accordingly. In times like these time is of the essence. This situation is of course coming on top of a steep hike in interest rates which is also going to affect companies which are highly leveraged marginally profitable of both. Unfortunately banks don’t train their credit officers to the same degree these days. To become a lender you had to go through a grounding in business and financial analysis. Looking at the future rather than the past was a big part of it.
It hasn’t taken long for mortgage lenders to realise that the wild west markets of not so long ago were a totally unnecessary overreaction. The UK mortgage lending market is one of the most competitive in the world and god know how much the rush to hike rates so fast and so high has cost lenders in lost business higher administration costs and market reputation? In any case they are now having to make amends as “products” have become uncompetitive. As I have mentioned before the real problem is that these loans are not priced properly in the first place. The situation we find ourselves in today was ideal for a total rethink and an introduction of new thinking but I don’t believe that it going to happen. Mortgage lenders don’t seem to have the intellect to recognize the opportunity which would be good for borrowers and lenders alike.
Howard Tolman is a well know London based ex banker, entrepreneur and IT specialist
I needed to think carefully to get my head around this one. Apparently the FCA think that the retail credit agencies in the UK have significant variances between the information they hold on borrowers. This would not be particularly important except that the major banks rely on the credit agencies to make decisions for them. On top of that whatever the credit agencies decide won’t make any difference to the credit decision or the other variables that stem from the credit decision. What you get will be a product. If the institution that you bank with doesn’t have a product then it’s hard luck. Apparently the Credit Rating industry rakes in some £ 800 million every year from doing whatever it does. I suppose that what it is to collate information from banks which is by definition quantitative rather than qualitative who then base their decisions around a series of benchmarks which have very little relationship with the circumstances that the borrowers find themselves in. The FCA insist you KYC but the market practice tells you something else. This has nothing whatsoever to do with serving clients and more to do with not knowing your customer. Since the rating agencies got themselves ensconced in the banking business there is not real competition. Interest rates bear no relationship to risk and a product mindset provides poor service at a high price. Who wins?
I am supposed to be writing about lending but I cannot help but focus on how some people evaluate risk. After all lending is in the risk business and investing is just another string to the bow of that risk business. Nevertheless I have to say that some of the great and the good seem to have been taken for outright fools by the emergent Crypto scandal. This includes Bill Clinton and Tony Blair, by the way, who both spoke at a crypto gig earlier this year lending at least a tiny bit of credibility to this make-believe market. I have not yet met anybody who can give me an adequate and coherent reason why any crypto currency has any value whatsoever except that a lot of very foolish people were at one time convinced that it was valuable and a hedge against FIAT currencies and that a whole industry has grown up around a group of fools and chancers. Admittedly some people have made a lot of money but I am sure that a lot more has been lost. Bitcoin has stated remarkably stable falling from a high of around $ 66 k to $ 16k or 76%. How much further can it go. Well I’ll tell you right down to zero and the only reason it is stable is that those hold ing it are too scared to admit that they were sold a pup.
The fact that China is financing a number of projects in developing countries as part of its Belt and road initiative is already well known but a controversial railway project in Kenya financed by China and a recent General Election in Kenya have conspired to force the Kenyan government to disclose the terms of the loan. Originally signed in 2014 the terms and conditions of the loan were shrouded in secrecy. This is a common factor in most if not all of loans made by Chinese entities to developing nations together with collateral rights, binding arbitration in Chinese Courts restraint of trade clauses and high rates of interest. Kenya has stated that loans from China are strangling its economy. When you consider that China is the worlds largest lender with assets around 6% of Global GDP many countries could already have fallen into this trap. It is not clear what Beijing was trying to get out of these arrangements but a raft of bad debt and a lot of ill will seems the most likely outcome.
Howard Tolman is a well known London Based ex Banker, IT specialist and Entrepreneur
European fintechs in search of venture capital funding are in luck this spring. The Startup Booster Program at FinovateEurope, taking place March 14 through 15, has been crafted to help early stage companies pitch their new ideas in front of investors from across the U.K. and Europe.
Fintechs that are less than five years old and haven’t closed a Series A round can apply now for the opportunity to have two hours to network and pitch their innovation to an audience of VCs, angels, corporate venture studios, and accelerators. Some of the investors participating in this year’s program include:
Here are three reasons why early stage, European companies in search of venture funding should make this year’s Startup Booster Program a priority:
Two-hour investor networking reception All startups accepted into the Startup Booster Program will have a table to pitch, ask and answer questions, and make an impression.
Your three-minute pitch video and pitch deck are shared with investor attendees Finovate provides startups with guidance and best-practices to make an engaging, three-minute pitch video. We’ll also share your video with the investor audience and event attendees.
A full event access pass for only £600 per ticket Startup Booster participants receive special, discounted tickets to FinovateEurope that grant access to the entire event for only £600 per ticket. That’s a discount of £1,199 when compared to the current rate of £1799 for general audiences.
We’re also hosting a dedicated stream with content aimed to help early stage companies on their journey towards growth. Session topics include discussions on scaling your startup, selecting the right funding, landing a bank client, regulations, and a look at the newest opportunities in the space.
Since we launched in 2007, we’ve actively looked for ways to foster growth in the fintech industry. Helping early stage companies find access to funding is one way we’re doing so– which helps build and better our industry, as well. If you meet the criteria listed above, apply today.
Payments fintech Marqeta announced today it will acquire credit card management platform Power Finance in an all-cash transaction to help supplement its credit offerings. The cloud-based solution is expected to accelerate the capabilities of Marqeta’s credit products including card issuing, digital wallets and transaction processing, according to a Marqeta release. The Oakland, Calif.-based fintech (NASDAQ: […]
Digital communications platform Eltropy and collections platform provider AKUVO announced a new partnership, integrating Eltropy’s texting functionality into AKUVO’s Aperture solution.
The integration will enhance the collections process for community financial institutions (CFIs).
Eltropy made its Finovate debut in 2017 and returned to the Finovate stage last year for FinovateFall in New York.
A newly-announced partnership between digital communications platform Eltropy and cloud-based collections platform provider AKUVO will enable credit unions to leverage the texting capabilities of Eltropy’s platform to enhance collections operations. Now, credit unions, community banks, and other community financial institutions (CFIs) will be able to access Eltropy’s texting communications platform from AKUVO’s Aperture solution.
“Integration between Eltropy and AKUVO’s Aperture will provide collectors with a powerful texting platform to guide their account holders through a proactive, effective collections experience,” AKUVO Chief Revenue and Operating Officer Steve Castagna said.
Headquartered in California and founded in 2014, Eltropy made its Finovate debut in 2017 and most recently demoed its technology at FinovateFall 2022 last September. At the conference, Eltropy demoed its Eltropy One offering, an all-in-one omni channel solution that lets financial institutions manage both inbound and outbound member and customer communications from a single console. Text, secure chat, video, voice, co-browse, chatbot, and secure file exchange are among the functionalities Eltropy provides – all in a secure and compliant fashion.
In addition to facilitating the delivering of seamless omnichannel customer experiences, Eltropy’s platform leverages AI to help CFIs better resolve issues and consumer inquiries. The technology detects both subjective conditions like consumer sentiment and mood as well as objective data like specific relevant keywords and phrases to provide real-time guidance and personalized recommendations. The company’s partnership with AKUVO, according to Castagna, underscores a shared “visionary approach” to using both data and analytics to help enhance the financial wellness of members and customers.
“One of our primary goals in 2023 is to build stronger integrations with vendors who have strengths in areas of need from our CFI customers, so we look forward to partnering with AKUVO who is making waves in the collection industry with their Aperture platform,” Eltropy VP of Strategic Partnerships Jason Smith said.
With $25 million in funding, Eltropy closed out 2022 with new partnership announcements with digital banking solutions provider Tyfone and credit union lending technology company Origence. Also last year, Eltropy acquired both video banking company POPi/o and AI conversational intelligence platform Marsview.ai. Ashish Garg is Eltropy’s founder and CEO.
Credit unions and community banks are looking to digital communications platform Eltropy to strengthen call center authentication and ultimately reduce fraud as voice-cloning tools and advanced AI present more opportunities for fraudsters within financial services. In the third quarter of 2022, email scams increased 217% year over year, especially following digitization that skyrocketed amid the […]
Marqeta is acquiring credit card program management platform Power Finance.
The company will add Power Finance’s credit card program management capabilities to its own card issuing platform.
Financial terms of the deal were not disclosed.
Global card issuer Marqeta agreed to acquire credit card program management platform Power Finance. Terms of the deal, which is scheduled to close in the first quarter of this year, were not disclosed.
Power Finance was founded in 2021 by CEO Randy Fernando and CFO Andrew Dust to offer credit card program management services to companies seeking to create new credit card programs. The company’s platform takes care of credit card management, customer experience, application decisioning, transaction processing, and more. And because Power Finance is pre-integrated with third-party data vendors, it saves companies time when setting up KYC and underwriting processes.
“Companies like ours were made possible because of the path Marqeta blazed in modern card issuing, demonstrating the possibilities in payments with flexible and modern payment infrastructure,” said Fernando. “At Power, we built a full-stack, cloud-native credit card issuance platform, and by becoming a part of Marqeta we have the ability now to bring this innovation to a much larger market at global scale.”
Once the deal is finalized, Fernando will lead the product management of the Marqeta credit card platform.
Marqeta will leverage the acquisition by adding Power Finance’s credit card program management capabilities to its own card issuing platform. “It will allow us to accelerate processing revenue derived from credit programs, and improve our competitive positioning when competing for new deals, offering our customers a holistic credit card program management solution,” Marqeta said in a blog post announcement.
Marqeta launched its card issuing platform in 2010 to enable clients to manage their own card programs. The company offers configurable and flexible payment tools and customizes payment cards for their end customers. Earlier this month, Marqeta launched a Web Push Provisioning Solution to enable consumers to transact from their mobile wallets without having to download a separate mobile app.
Marqeta is a publicly traded company listed on the NASDAQ under the ticker MQ. The company has a market capitalization of $3.54 billion.
This week on Finovate Global, we feature an extended conversation with Paga founder and CEO Tayo Oviosu.
Serving more than 21 million unique users in Africa, Paga is a payments and financial services ecosystem that makes it easy for people to request, send, and receive money; pay bills; get remittances and more. Founded in 2009, Paga is Nigeria’s leading mobile money company.
We caught up with Tayo Oviosu to discuss the current state of fintech in Nigeria and in sub-Saharan Africa, in general. We also talked about how Paga is helping boost financial inclusion and empowerment in the region, and what we can expect from the company in 2023.
Paga was recently recognized with placement on the CB Insights 250 list – one of seven African start-ups featured. What is going right with fintech in sub-Saharan Africa these days?
Tayo Oviosu: It was an honor to be ranked by CB Insights in its Fintech 250 list and, as one of only seven African start-ups featured, it speaks to the pioneering approach we are introducing to the world – revolutionizing payments and creating a financial services ecosystem for Africa.
As sub-Saharan Africa gains recognition on the global stage, we are seeing innovative and pioneering products emerge and rise in popularity amongst consumers, diversifying the products they can choose from.
In 2020, we saw Stripe acquire Nigerian fintech Paystack – which disrupted the ecosystem and spoke to a future-oriented outlook that has validated the region as an exciting space, full of potential. This speaks to the increase in funding and investment opportunities in the region.
As the ecosystem continues to rapidly grow, the vision of an integrated African market is closer to being realised, with new opportunities constantly emerging. At Paga, this is something particularly pertinent to our mission of making life possible for businesses and individuals. Our consumer ecosystem (Paga) helps people send, pay, and bank digitally. We now serve over 21 million unique users at our agents and consumer direct channels. We developed our seller ecosystem (Doroki) to help businesses digitize their payments and to manage their business operations digitally. Our Platform-as-a-Service offering enables ecosystem businesses and developers to build, launch, and grow, via our API infrastructure.
Looking at Nigeria specifically, what is the most interesting thing going on in fintech in Nigeria right now?
Oviosu: We are seeing more options for customers come to fruition through a growing market. Fintechs are competing innovatively to meet customers’ different needs with various tailored products.
Subsequently, there are more lending products and services, which are crucial in affording consumers more flexibility, and options to help them reach their goals and needs, and unlock their potential.
Overall, the landscape is improving in terms of communication between companies and regulators – helping firms overcome short and long-term obstacles in compliance.
The recognition of Paga amongst such a global cohort speaks to the innovation we are driving – and the calibre of our ecosystem. Our market potential, investor profile, technological innovation, and business relationships are on a global scale. To have a Nigerian platform lauded globally is an achievement in the Nigerian fintech space in and of itself.
Let’s talk about Paga. What services does Paga offer and who is the company’s target market?
Oviosu: Paga offers an extensive, hybrid payments ecosystem for online and offline customers. We make it easy for people to send, pay, and bank digitally.
For the individual customer, we allow simple seamless payment transactions, transfers, and bill payments – embedding our services into the daily needs of our users. We also help businesses to achieve their goals; powering reliable, real-time transactions, allowing online payment collections, and bill payments – all with minimal transaction charges. For Paga agents in our offline channels, we create jobs and incentives for those helping serve their communities – and also offer financial support via our overdraft offering. We also help developers to build, by enabling them to leverage our extensive platform via our (payment) APIs and providing them with the needed technical support.
In November, we launched our cards in partnership with Visa – both physical and virtual cards – enabling our consumers to pay at over 100 million merchant locations globally, anywhere Visa is accepted. This is just another example of how we make life possible for all our users.
Our current target market is largely contained in Africa, and driving accessibility to what is still a comparatively under-served market. That said, we have plans to expand beyond this and we will keep you posted on our journey.
What makes Paga unique in the payments business?
Oviosu: Paga emerged within the context of a largely cash-dependent economy, with both individuals and businesses suffering from this inefficiency. We took on the mission of improving financial accessibility in Africa as part of the digital payments revolution – and our growth is ever-accelerating as we do so. Our transaction values are soaring: from achieving our first two trillion Naira (over $4 billion based on current official exchange rates) from January 2012 to March 2020, to achieving our most recent two trillion Naira from February 2022 to September 2022 – in just eight months!
Our ecosystem aims to solve payments and services for consumers and sellers, but what makes us unique is our ecosystem approach. We understand that cash is still popular in Africa, and so we provide onramps and offramps in order to increase our reach. Our on-and-offline infrastructure makes us accessible and we pride ourselves on our deeply connected ecosystem – connecting our users to all the banks, enabling seamless transactions to individuals and merchants, and ensuring convenience for our users in their day-to-day lives.
Our customer-first approach is embedded into our DNA, and as we enter new phases of innovation, we strive to solve problems and provide opportunities for our users – whether that be helping people to save, helping businesses digitize, or offering lending services to consumers and SMEs amongst others. Foundational to this is our Platform-as-a-Service and our strong infrastructure – for consumers, sellers, and third parties.
You recently launched a Visa-branded virtual naira card. Why virtual first?
Oviosu: We wanted to address the need in Nigeria for effective virtual cards. As a digital financial services company, we felt a digital product would adhere to our mission and address our customers’ needs quickly and effectively. We have always sought to simplify the use of and access to payments and financial services.
Customers are able to activate their digital cards in less than 20 seconds – immediately gaining access to Visa’s global network. Moreover, for both physical and virtual, we offer benefits unique to Paga’s digital platform, such as real-time transaction notifications, seamless payments via unique ‘JustPaga.me’ pages, and unique Nigerian Uniform Bank Account Numbers (NUBANs) that serve as added protection for the card.
Paga and Visa have worked together before. What makes Visa a good partner for Paga right now?
Oviosu: On our mission to power payments and accessibility, our partnership with Visa has facilitated the growth of our reach. We are able to reach even more consumers, and diversify Paga’s ecosystem for our existing consumers. Through our strategic partnership, we can carry more Africans into the financial system and bridge the accessibility gap.
The partnership has also strengthened aspects such as reliability and security – facilitated in collaboration with Visa’s Cybersource in launching our direct online card processor. The partnership has been instrumental in bettering the user experience.
What can we expect from Paga in 2023? New services? New markets?
Oviosu: We are focused on deepening our current offerings in our ecosystem. We are staying true to our customer-focused mission and are constantly seeking to better serve all our users.
In 2023, we expect to see more significant partnerships occurring in the fintech space, as well as more niche focuses. This will widen options for businesses and consumers to meet their needs. More widely, this will accelerate economic growth as jobs are created, and infrastructure is improved. We are also looking to increase our reach. Currently, our customer base stands at over 20 million, with 140,000 agent points. We are projected to reach 40 to 50 million users in Nigeria – but are also looking beyond this. Earlier last year, we announced our operational license in Ethiopia – in partnership with the Bank of Abyssinia – and as we continue to work towards making it simple for people to send, pay, and bank digitally, we invite you to watch this space!
Here is our look at fintech innovation around the world.
OneSpan is acquiring blockchain-based document storage company ProvenDB.
The purchase will help OneSpan add document storage to its existing product offerings.
Terms of the agreement, which is expected to close this quarter, were not disclosed.
Digital agreements security company OneSpan agreed to acquire blockchain-based document storage company ProvenDB. Financial terms of the deal were not disclosed.
Headquartered in Australia, ProvenDB was founded in 2018. The company provides a blockchain-based database that enables users to store data, cryptographic signatures, documents, and more. The company also offers a product that adds proof, trust, and integrity to clients’ existing databases.
Under the agreement, ProvenDB will enhance OneSpan’s Transaction Cloud Platform to public and private blockchains. Integrating ProvenDB’s technology into OneSpan’s existing offerings will also add a new product offering that provides customers with secure vaulting capabilities and helps OneSpan secure digital agreements.
“Digital artifacts are simply too easy to fabricate, tamper, or delete in the era of Web3 leading to security breaches and loss of trust in digital information. In this world of evidence tampering and deep fakes, it is critical that we have non-repudiation and copies of the original artifact with an immutable chain of custody throughout the entire customer journey,” said OneSpan President and CEO Matthew Moynahan. “Securing business processes end-to-end leveraging blockchain technology will play an increasingly critical role in preserving the integrity of digital transactions and agreements to fuel this modern digital era. We have an ambitious plan to disrupt the digital agreement market and ProvenDB will accelerate that plan. OneSpan’s mission, the focus of our entire go-to-market strategy, is to restore trust and confidence in today’s most critical customer experiences, such as revenue-generating transactions or customer and vendor onboarding, and ensure that their integrity is never in question.”
The transaction is expected to close the first quarter of this year.
Founded in 1991 and formerly known as VASCO, OneSpan offers a range of digital identity and anti-fraud solutions. The Chicago-based company authenticates four billion users each year and counts 60% of the world’s largest banks as clients. OneSpan went public in 1997 and has a current market capitalization of $540 million. Matt Moynahan is CEO.
Santander Corporate and Investment Banking has launched a business-to-business product via a new buy-now, pay-later solution. Madrid-based Santander CIB tapped global trade credit insurance company Allianz Trade and B2B payments platform Two for the venture, which aims to provide large, multinational corporations the ability to instantly defer payments at checkout, according to a Santander release. […]
JPMorgan Chase & Co. has a head start when it comes to developing and deploying artificial intelligence in banking, according to a new study. The Wall Street bank hires more people with skills needed for AI, files more patents and makes more public pronouncements on the uses and ethical implications of the technology, the Evident […]
Frost & Sullivan is a growth-focused research and consulting company that offers a wealth of expertise across more than 10 industries. Frost & Sullivan’s Information & Communications Technologies Research Team conducts an annual voice-of-customer survey that contains inputs from key decision makers across industries.
The banking, financial services, and insurance (BFSI) industry includes commercial banks, insurance companies, non-banking financial companies, and other entities.
This study uses an integrated 360-degree research methodology to provide insights from end-user organizations, IT decision-makers, and influencers within the BFSI sector.
An analyst perspective on the state of adoption and future investment plans highlights opportunities for financial services organizations to equip their workers with the advanced tools they need to achieve operational agility and interact with customers via the channels they wish to engage.
This study also discusses opportunities for improving customer and employee experiences.
Successful innovation in business requires much more than just a good idea. Strategic planning and having the proper teams and technology are also key, but what might be the most important element is listening to what the client wants. Banks need to listen to specific client feedback to determine where to invest time and capital […]
Lenders have always faced some level of uncertainty, but the past few years have truly put the industry to the test. While many have enhanced their systems with new enabling technologies, there are still a number of uncertainties– including inflated income due to Covid relief funds and increased spending power thanks to a student loan repayment pause– that create confusion in the underwriting process.
We spoke with PayNearMe’s Senior Director of Sales Jill Bohlken for some insight into how today’s lending environment has changed and what we can expect to see going forward into this year.
Describe the current lending environment and how it has changed over the past few years.
Jill Bohlken: In one word, the current lending environment is unpredictable. A number of converging market forces are causing some uncertainty among lenders, merchants, and borrowers alike.
We have consumer prices continuing to rise, leading to less disposable income and more borrowing by consumers to cover costs. According to the New York Fed’s Q3 report, households last year increased debt at the fastest pace in 15 years, and credit card balances collectively rose more than 15%.
Meanwhile, seven interest rate increases led to lower margins for lenders at the same time they face increased competition to attract new customers.
External forces like supply chain disruptions continue to inhibit some lending markets, such as auto. And emerging trends such as longer loan terms (upwards of seven years for an auto loan) and instant financing carry increased risk of delinquency, prompting lenders to build reserves and reduce overhead to cover themselves in case of default.
Can you discuss any notable trends or changes in consumer borrowing behavior that you have observed?
Bohlken: Last year, the economy saw unprecedented demand for goods and services driven by a surplus of Covid relief funds combined with a shortage of supply. More recently, we’ve seen loan demand start to normalize due to inflation and higher interest rates. For billers, managing risk and delinquency is always a priority. According to Experian, 60-day delinquencies for new car loans sat at 0.48% by Q3, with used car loans at 1.17%.
A more positive trend was the rise in online loan applications completed exclusively by web and mobile devices. This self-service innovation improved the speed of transactions and accelerated loan approvals, not to mention making the experience more convenient for consumers.
What tools, data, or technologies can help lenders mitigate the risk of default before extending a loan?
Bohlken: The expanding use of artificial intelligence and machine learning to analyze large swaths of data and produce actionable insights is by far the most exciting tool lenders should pursue. Payments platforms can feed a data warehouse to store transaction data in one place, then apply machine learning models to either an individual client’s data or aggregated industry data to create smarter risk models.
For instance, AI can be used to analyze cohorts of customers using hundreds of data points (zip code, income level, credit score, etc.) and assign the group a risk score. AI can even bring in data from government sources, such as unemployment and GDP reports to shed light on risk further. This research helps lenders determine how and where to find high-probability, low-risk customers and adjust their risk analysis and marketing spend accordingly.
How about once the loan has already been extended?
Bohlken: A payments provider can help lenders prevent late or missed payments using a number of tools and strategies, such as sending payment reminders by text, email, or push notification. The provider can offer a wide range of payment channels to allow customers flexibility in how they pay. In cases of chronic late payment, the provider can intervene with offers to help avoid default, such as flexible repayment plans.
What’s especially exciting is that AI and ML now make these strategies even more effective. For example, AI can be trained to constantly scan payments behavior to identify customers who have multiple late payments, then automatically initiate a series of engagement messages that move the customer toward payment. AI can also automate solutions to common payment problems. For instance, if a customer has multiple ACH returns, AI can apply a business rule requiring them to pay with cash or card only.
These automated solutions save lenders both time and money. Not only does the AI circumvent many behaviors that could lead to default, but it also eliminates the time and labor of manually resolving payment problems.
Looking ahead in 2023, will lenders be more hesitant to extend loans to borrowers?
Bohlken: It’s hard to say with certainty, but demand does remain fervent. According to a recent Consumer Pulse study, one in four Americans plan to seek new credit or refinance in 2023. However, according to Experian, auto loan balances have grown by 7.6%, so lenders may want to shore against risk, adjusting the credit profiles of their customers and trimming back-office budgets to keep a higher level of reserves.
At the same time, lenders may lean into the adage, “a bird in the hand is worth two in the bush.” That means putting more emphasis on servicing existing portfolios and maximizing return by reducing delinquency, lowering the cost to collect, and improving operating efficiency through automation and optimization.
If lenders cut back on extending loans, where will the overflow in demand go? Will consumers turn to payday loans, or will alternative lenders be able (and willing) to fill loan demand?
Bohlken: In my interactions with many large lenders I have noticed that many are reducing their workforce, a way of battening down the hatches and right-sizing operations to suit the precarious lending environment.
In terms of consumer overflow, I see movement in several “alternative” types of loans, including buy-now-pay-later, which breaks payments for a large-ticket item into several payments; and buy-here-pay-here, which allows car dealerships to act as both seller and lender. Both these options appeal to customers who may have poor credit and/or limited options for securing traditional financing.
Payday loans, on the other hand, are losing their luster after almost a decade of bad press and heavy regulatory oversight. They still play a part in some consumer borrowing, but most consumers who can find alternatives will do so to avoid the heavy interest rates and fees.
Digital mortgage lending company Better launched a new product, One Day Mortgage, that offers borrowers a mortgage commitment letter within 24 hours of applying for a loan.
During a period of beta testing, Better reported that it processed over $50 million in commitments, offering commitment letters in an average of 12 hours.
To qualify for the One Day Mortgage, borrowers must be salaried, make a down payment of at least 3%, and upload required documents within four hours.
Digital mortgage lending company Better launched One Day Mortgage, a new tool that does what it says– it enables borrowers to get a mortgage in a single day.
Using One Day Mortgage, home loan borrowers can get pre-approved, lock-in their rate, and receive a mortgage commitment letter, all within 24 hours. This timeframe is weeks faster than the industry average of more than 30 days.
Today’s announcement comes a couple of weeks after Better first launched the service in beta to a small group of customers. Since then, Better has processed over $50 million in commitments from its One Day Mortgage product. What’s more, it has helped customers receive a commitment letter in an average of 12 hours.
The One Day Mortgages are available to borrowers working in a salaried job and making a downpayment of at least 3% on a Fannie Mae or Freddie Mac mortgage. To further qualify, applicants must provide requested documents– including pay stubs, W2s, bank statements, and more– within four hours of locking in their rate.
Better’s One Day Mortgage product is a fairly large step forward for the mortgage industry, which has not seen much innovation in the past decade, despite the onslaught of new enabling technologies. The fast turnaround is made possible by Better’s digital-first approach that takes place completely online. This model enhances the user experience by offering a fully digital document upload and tracking tool.
“One Day Mortgage unlocks it all,” said Better shareholder and Partner at Novator Capital Prabhu Narasimhan. “It takes away the weeks of uncertainty that permeate the entire real estate transaction. If we can execute mortgage commitments in one day and closings in three days, we can complete entire transactions in less than one week to make the entire process better.”
Offering customers a mortgage commitment letter within 24 hours is certainly a competitive advantage for Better. As company chairman Harit Talwar explained, “This milestone will add immense value to the consumer, create a significant strategic moat for Better, and be a near impossible act for competitors to follow.” And he’s most likely right– for the time being. We probably won’t see other mortgage lenders offering 24-hour mortgage loans any time soon, but it’s quite possible the new offering will be industry standard by the end of the decade.
Founded in 2016, Better has seen its share of hardships in the past year. Last year, Better conducted its fourth round of layoffs in less than nine months, letting go of almost 4,000 employees during that time. What’s more, the company’s CEO Vishal Garg made headlines numerous times last year for his contributions to what employees described as a toxic work environment.
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