“Lending and Banking: Connected” was the tagline of this year's Lendit Fintech Europe conference in London. The event connected more than a thousand attendees, speakers and industry professionals to discuss the future of finance. Here are three lending lessons that we took away from the amazing event!
One of the main Lendit 2019 takeaways is also the most obvious - future-oriented financial service company success often depends on strategic, innovation-fuelling partnerships. Discussing Raisin's recent acquisition of MHB Bank, founder Tamaz Georgadze remarked that apart from eased platform compliance, Raisin bought the bank to be in direct control of the value chain, so that they could upgrade their services to satisfy both the increasing customer expectations as well as their investors. Georgadze further admitted that Raisin are “very open to acquisitions because we believe that we ourselves are limited in our capabilities and thinking.”
Another notable conversation around the topic of strategic acquisition took place between Société Générale's Claire Calmejane and Treezor's Eric Lassus, who told the story of how the multinational bank and fintech went from an 'engagement' to a 'wedding'. Remarking on the importance of collaboration, Claire Calmejane noted that Société Générale sees the future of retail banking as a “platform-play” and found Treezor to be a beneficial aspect for introducing their services to even more potential customers. “I think the future is going there. I think if we look at our next strategic planning 2025 [...] there is a deep belief from our management team that this platform-play was critical for the evolution of our business,” she remarked.
Arguably one of this year's best data-driven business lending use cases was covered by OakNorth's CEO and co-founder Rishi Khosla. In his keynote, Khosla revealed that the SME lender has purposefully gone against the trend of digitised customer relations. In resolving a “pent-up demand within the community that's meaningfully underserved”, the company's relationship managers would interact with customers in the more traditional manner of the 70's and 80's, often times meeting customers directly.
But OakNorth didn't just grow to issue £4 billion in loans with only 1 default and no losses based on great customer relationships alone. Speaking on the role of technology, Khosla revealed that taking a technology driven approach has enabled the company to utilise “many more data sources than one otherwise would”, currently processing 5x the number of transactions compared to a traditional lender. He added that OakNorth is using data-powered technology to “add significant leverage, i.e. enablement, increase in efficiency, productivity” to their clients existing teams, rather than presenting banks with a totally new way of doing things. Following a$440 million investment round led by SoftBank, OakNorth is currently valued at $2.8 billion.
Speaking on The Impact of Open Banking and Data Availability on SME Lending, Greg Carter of Growth Street noted that small business owners would most commonly worry about managing uncertain cash flows; this holds them back from building a new product or winning over clients. Offering SMEs flexible working capital finance to up to £2million, Carter noted that “customers will share their data if the business can provide them with speed and certainty in return.”
Access to finance is a basic human right. Still, thousands of thin-file loan applicants are rejected on a daily basis for all types of consumer products due to insufficient credit information. For example, in 2017 Forbes reported that 32% of all mortgage applicants with imperfect credit were rejected. In the UK alone, nearly 25% of adults are considered near-prime or thin-filed, making it extremely difficult for them to get a traditional loan.
During Lendit's Augmenting Underwriting with AI and Beyond panel, lenders from the US and Europe shared their strategy for improving lender underwriting process using the latest technology.
Sharing the story of how Underwrite.ai uses Artificial Intelligence to provide better customers scoring in the US, the company's co-founder and CEO Marc Stein noted that the company's models, built around thin-file customers revealed that “50% of FICO unscored consumers actually had payment behaviour equivalent to prime borrowers.” Yet, they were all still turned down by lenders. “If we're gonna solve this kind of problem around credit access, we need to move beyond the tools that have been used for the past 50 years,” he added.
“Until we start looking at the individual in real time and unpacking those behaviours and allowing borrowers to begin to personalise that experience [...] we'll continue to see massive adoption of online lending,” concluded Jack Alton, the CEO of Neuro-ID.
Here’s what we've been up to recently.
In recent years, tech giants like Apple, Google and Amazon have started planting flags in the financial sector, intruding on traditional financial institutions. Facebook is finally joining the race with Libra, its digital currency described as a “simple global currency and infrastructure that empower billions of people.”
As a society, we are gradually moving away from paper cash, increasingly gravitating towards alternative digital payment methods - contactless-cards, cryptocurrency, mobile and wearable technology. Regulatory driven initiatives like EU's PSD2 and UK's Open Banking are propelling financial innovation and enabling the emergence of new products and services.