How the Cloud is Helping Banks in Consumer Lending
As economies recover, as consumers once again shift from debit to credit, new opportunities exist for all types of lenders to meet pent-up demand for auto loans, mortgages and beyond.
It’s an opportunity for middle-market financial institutions (FIs) to create new revenue streams at a time when they’re sandwiched between their exponentially larger, well-known brethren (such as JP Morgan) and smaller, nimble FinTechs. that are less burdened by legacy infrastructure. and paper processes.
MeridianLink CEO Nicolaas Vlok, whose company debuted on July 28, told Karen Webster on Wednesday that its cloud-based software and online platforms were designed to help community banks and cooperatives mid-market credit (UC) with assets between $100 million and $10 billion “overweight” in consumer lending. In its S-1 filing with the Securities and Exchange Commission (SEC), the company noted more than 200,000 active system users, 1,900 FI customers and 63 CU customers.
Instead of just automating the lending process and workflow for these banks, Vlok said MeridanLink’s platform integrates multiple data sources into these workflows to support better and more accurate credit decision. .
He said middle market FIs, especially UCs and community banks, have challenges as they jockey with these peers for wallet share for several reasons.
First, and most obvious, is because they may not be meeting their customers where they want to be met, which is digital first. It’s no secret that the great digital shift has firmly entrenched consumers – especially younger ones – in mobile channels as they go about their daily financial lives. PYMNTS research shows that three-quarters of bank consumers intend to keep most of the online habits they have adopted during the pandemic. When it comes to filling out a loan application online, Vlok said the experience can be anything but user-friendly.
Second, there is a lack of data to enrich the underwriting process so that these banks have more and better data with which to underwrite risk. With more and better data, middle market banks can extend credit to more borrowers without taking on undue risk.
Third, the inability to obtain “portfolio-level” data for customers within their own financial ecosystem, requiring these banks to enter the same information repeatedly for customers who may inquire about different loan products. . Without this portfolio view, banks are also missing the opportunity to offer personal loans to consumers that could potentially save them money on loan repayments.
MeridianLink’s platform provides the “omnichannel and digital access points consumers have come to expect,” with streamlined, automated, cross-checked checkouts and data feeds across a variety of sources and service partners. data verification. Vlok said the platform’s decision engine eliminates the step-by-step approvals that typically accompany a candidate’s file as it moves through channels (both paper and digital).
Multiple points of contact, simplified decision-making
Vlok said MeridanLink’s end-to-end loan origination platform provides banks with a flexible and streamlined way to review and approve a variety of consumer loan applications. With automated lending decision making at the center of this model, middle market FIs will be able to “reduce the cost of capital for millions of people and give them access to better rates.”
In one example he cited, an applicant with a high FICO score of 780 to 800 would see the online workflow for their loan application evolve quickly, including electronic document signing and near-instant approval. Numbers are filled in automatically, as are data feeds from employment verification providers and credit reporting agencies and the Kelley Blue Book. These situations, he acknowledged, are not that complicated.
Where it becomes more complex and therefore potentially more risky is when applicants are in greater demand when it comes to credit ratings, where data is key to making those decisions.
“Someone with defaults on their credit rating might need more handling and might be moved to a queue” with banking representatives and human interaction involved, he said.
Vlok said the MeridanLink platform was designed with these applicants in mind, where a combination of automated workflows and rich data sources can improve the odds that more borrowers can be approved. In many cases, FI customers can start with a few “modules” on the platform – account openings or full online credit card processing capabilities – and then expand to other offerings, such as loans automobiles.
“We are making the investment to go digital,” he said. “All they have to do is run their business on our platform.”
MeridianLink’s recent data analytics acquisitions will help banks and UCs better understand their customer bases and refine their go-to-market strategies, being more proactive than reactive and creating a more personalized customer experience. and relevant.
A bank with an end-to-end view of customer data in these once disparate business silos would be able to tell customers they have three months left on an existing car loan and offer a pre-approval amount on a new car loan. Pre-approval would be available through their mobile app to be picked up by a car dealership, streamlining the process of getting that new car if that was the consumer’s preference.
The goal is for consumer lending to democratize into a self-sustaining ecosystem inside these smaller FIs, which lack the infrastructure and capacity to go it alone, Vlok explained.