Retail and small business lending has been recovering from the financial crisis and is expected to remain a profit driver for financial institutions going forward. However, lending is also an area in which new entrants – marketplace lenders – are rounding on incumbent players in force. So how can forward-thinking lending and credit managers leverage new technologies and data analytics to improve credit decisions, collections and portfolio management, and remain competitive in the changing lending landscape?
From a consumer standpoint, lending products are seen as the cornerstone of a bank’s long-term relationship with their customers, and therefore the loan process presents an important opportunity for lenders to connect with consumers. However, old technology, cumbersome policies and too much manual intervention often hamper the loan origination process, allowing new marketplace lenders to gain an advantage by delivering better customer experience.
The new lenders are also leveraging leading edge technologies to more accurately determine and evaluate credit risk, to ensure long term profitability of lending products. Credit risk has always been a primary concern for lenders, but it has not always been very effectively managed – as amply demonstrated by the financial crisis. Marketplace lenders tend to collect more data than banks do through aggregation services and automation, analyse it in greater depth, and constantly update their risk management knowledge base with portfolio experience and new sources of data. Traditional providers are now looking for new and more innovative ways to manage their credit risk and are approaching risk management from a more holistic perspective, in line with how the new entrants are handling their liquidity and credit risk portfolios.
Another factor driving change in lending is higher customer expectations. Success as a lender going forward requires more than technology: it also requires a new approach to engaging the customer. Today’s borrowers expect to have real-time pricing information based on real-time data available at the click of a mouse. They expect an intuitive, simplified application process, whether it is delivered in person or over the Internet.
The retail and small business lending space will continue to be a key battleground for financial service providers, and the more nimble alternative finance companies. So whether companies have already begun incorporating new technologies and approaches into their lending strategies or are still evaluating their potential impact, it is important to consider how these initiatives can be used to sharpen competitive edge by providing customers with better service at a reduced cost and lower risk profile – a win-win for both the lender and the borrower.
Listen to Envestnet │ Yodlee and a panel of experts discuss the trends and opportunities driving change in lending and credit risk management at leading retail/small business lenders and financial institutions.
- Christoph Rieche, Founder at iwoca
- Phil Grady, CEO at Castlight Financial
- Kathryn Petralia, Co-Founder and Head of Operations at Kabbage
- Terry McKeown, Practice Manager, Credit Analytics at Envestnet | Yodlee
Among the topics for discussion are:
- What are the trends driving change in retail lending and credit risk management?
- How is the competitive landscape changing and why?
- What role does technology play in improving all aspects of the lending process – including credit risk management?
- What are the options to create more accurate predictive ratings models based on alternative data sets?
- How can lenders sharpen their customer focus?
- How will the retail and small business lending businesses develop over time?
- How will credit risk management approaches evolve in the future?