FinTech Lending Q1 And Q2 2020

Updated: Oct 9, 2020

Photo Source: The Arizona Banker Magazine

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We are honored to have our President Director Kamil Knap and CEO Ryan Sester published an article about FinTech Lending Q1 And Q2 2020 on Arizona Bankers Association's The Arizona Banker Magazine Pub. 10 2020 | Issue 3


CHAPTER I. FINTECH FinTech lending originated and has become popular in the United States and around the world in the 12 years since the 2008 financial crisis. FinTech innovators saw a need when larger banks reduced consumer lending and filled the void to provide financing. One of the main reasons behind the success is the digital setup of the marketing, underwriting and funding processes. The critical point of the online lending concept is to attract as many consumers and small to medium-sized businesses as possible by campaigns over the internet, social media, and emails. Utilizing the main advantage of lending — a product everybody wants — money helped to attract demand combined with a technology-based, online culture. In many cases, the campaigns are not focused on the loan itself but rather focused on the new utility or product that is now closer to the borrower through the loan. Each and every campaign is measured by utilizing different funnels, matrixes. The analysis of the lending process is optimized over different channels add more and more visitors to the webpage. Fintech has always been prepared to pay for that Facebook click and credit reporting lead.

Fintech’s initial focus is to attract as many visitors to the webpage as possible, having led 1000s of views and direct borrowers directly to the application. Potential and current borrowers are not shown a fancy company webpage or complex information. The objective is to make the click to an application as simple as possible.

For banks that operate in different parts of the country, what happens on the West Coast matters. So, what other public policy issues under discussion in California might spread? Last year, the governor signed a measure allowing municipalities to establish a public bank under the false narrative that private sector banks were misaligned with the value of their communities. We know that public banking advocates will take their success in California and attempt to export it to other states.

This January, Governor Gavin Newsom unveiled plans to restructure the regulatory agency that oversees California state-chartered financial institutions. Under the plan, the California Department of Business Oversight (DBO) will be renamed as the Department of Financial Protection and Innovation (DFPI) and will increase its emphasis on consumer protection and innovation relative to financial technology and products. These reforms are being advanced, in part, given concerns about a shift in priorities at the federal level, a desire for the state to demonstrate ongoing leadership, and an interest in fostering innovation and establishing the appropriate controls for providers of financial services.

According to preliminary information provided by the DBO, the purpose of this proposal is to 1) restore financial protections that have been paralyzed at the federal level; 2) protect consumers from predatory businesses, without imposing undue burdens on honest and fair operators; 3) spur — not stifle — innovation in financial services by clarifying regulatory expectations for emerging products and services; 4) extend state oversight to important financial-services providers not currently subject to state supervision; 5) increase public outreach and education, especially for vulnerable populations; and 6) provide more effective response to consumer complaints.

Should the plan to restructure DBO be successful, we anticipate other states will follow. California relishes and takes great pride in its role as a legislative pioneer. As the legislative year in California unfolds, we’ll have a better sense of public policy issues that may catch fire elsewhere.

CHAPTER II. APPLICATION The application process on the Fintech Lender’s webpage is again optimized. What information do we need to know first, save the data, and then have the consumer proceed to the next page? Attract consumers to the amount of money they may apply for at an attractive rate, obtain the name, phone number, email and click next. Once the borrower does not continue the application, he may be contacted and asked if he needs assistance. This technology needs to be optimized and improved to facilitate the progression of the lender.

CHAPTER III. UNDERWRITING AND VERIFICATION The Underwriting process is the next step. Underwriting starts with gathering the data required to evaluate risk and to make a sound decision. Engaging the borrower to be attracted to the process and motivated to move to the next step is critical. It is important to simultaneously make the process interesting to the consumer and to verify the details provided on the application are correct. Verification may be completed internally or by an external provider. Examples of fraud prevention analytics measure the time to enter a birthdate, how many times the name has been rewritten, asking the borrower to connect their bank account and additional information. In addition, complete a review to ensure the borrower is not stacking loans (other Fintech lenders providing loans to the same borrower concurrently.)