Category: Consulting

As financial institutions shift toward a digital end-to-end lending process, they are setting the groundwork for a new era in banking founded on Fintech partnerships and an open ecosystem.

 

Rise of open banking

 

Open Banking—driven by regulatory, technology and competitive dynamics—calls for banks to use APIs to make certain customer data available to non-bank third parties. The innovation is both evolving the industry toward hyper-relevant, platform-based distribution and giving banks a rich opportunity to expand their ecosystems and extend their reach.

 

Open Banking has become a global movement driven by regulatory, customer and ecosystem forces, each shaping the outcomes of a bank’s Open Banking initiatives. In order to deliver these outcomes, realize the full value from Open Banking, as well as keep improving their offerings, banks need to measure and monitor not only the key performance indicators (KPIs) specific to Open Banking, but also the impact of these KPIs on the performance of the business at a higher level.

 

The potential benefits of open banking are substantial: improved customer experience, new revenue streams, and a sustainable service model for traditionally underserved markets.

So, Open Banking in simplifying payments-how it helps? 

 

Open Banking in Simplifying Payments 

 

Open Banking grants access to financial data to third-party developers (provided users give their permission). By enabling non-financials to develop APIs around existing banking infrastructure, a host of innovative new services and applications are now improving the customer experience.

 

Cloud-based APIs are at the heart of fast and efficient digital transformation strategies. Simple plug and play functionality make it possible for financial institutions to adopt an integrated environment of applications, all designed to automate critical workflows to return faster credit decisions. The method of aggregating data across multiple accounts into one, easy-to-use platform, offering customers a 360-degree view of their spending and simplifying the ever-growing number of financial touchpoints customers encounter daily. Open banking will also enhance real-time payments, going head-to-head with the card scheme to enable instant transactions between retailers and consumers.

 

Sharing of limited data on “thin file” consumers can help to advance financial inclusion goals, pooling limited information to arrive at more precise risk-scoring and credit-underwriting decisions. By introducing more consumers to the formal financial system, open banking increases the market opportunity and the potential to deliver profitable services in the future.

 

Conclusion

 

From offering personalized insights to simplifying payment transactions, open banking provides the spark banks need to develop modern financial tools that provide even more value to their customers. As the payments landscape grows increasingly competitive, American banks that embrace APIs will appeal to prospective customers with innovative services while strengthening loyalty among their existing clientele.

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2020 has been a year of uncertainty for every business. For financial institutions, marketers, and everyday consumers, 2020 has presented challenges that are simply unprecedented. As we entered 2021, in the post pandemic world, lending has changed and evolved.  Lenders are looking at an era of unprecedented uncertainty in lending, as potential write-offs loom and the effects of a low-interest rate environment inhibit profitability.


Here is the list of major trends in commercial Lending in 2021 and let’s find out how lenders can adapt to those changes.


Lending Outlook 2021: the road ahead

 

1)Drop in Refinancing

2)Slow Recovery Rate

3)Drop in Qualified Borrowers

4)Auto Financing will be stronger

5)Fintech Lenders will attract more loans

 

Let’s see the trends in detail:

Drop in Refinancing: Refinancing are projected to drop by 46%. Low mortgage rates will drive a shift towards refinancing.

 

Slow Recovery Rate: Pandemic has created a destructive economy with business shuts and job losses. This scenario led to a slower recovery rate in consumer lending business.

 

Drop in qualified borrowers: Qualified borrowers could be hard to come. Given the current state of the economy, while demand for consumer loans should stay high, the quality of eligible consumer loans might not.

 

Stronger Auto Financing Sector: Auto loans remain a source of high-quality loans. Sales of new cars rebounded somewhat in 2020 and that rebound will continue to influence the sales picture over the next few years.

 

Strong Fintech Sector: Fintech lenders will attract more—and better—loans. Not only are fintech lenders increasing their market share, but they are also moving up credit tiers and going mainstream. As consumers go online first to find the best offers, marketplace lending is gaining in popularity and fintech lenders are consuming more of the loans that credit unions want and need.

 

 So, How Lenders can stay ahead of changing trends in commercial lending?

 

Areas lenders need to focus on 2021 to stay ahead

 

2020 was certainly a year for the record books with a global health crisis that forced economic impacts across the globe. As we now approach 2021, financial institutions are looking at an era of unprecedented uncertainty in lending, as potential write-offs loom and the effects of a low-interest rate environment inhibit profitability. However, the year ahead also reveals some unique opportunities for financial institutions. To compete, you need to create a competitive advantage for your lending products and meet consumers where they are (online). Transparency, flexibility, peace-of-mind — now is the time to provide value that goes beyond just a competitive rate. Give consumers a reason to choose your loan.

 

Branchless Digital Natives: Much of the allure of online lending lies in the speed and transparency of the end-to end process. Self-service tools and options make it possible for consumers to keep tabs on the status of a loan application, while also cutting resource costs for institutions.  Branchless digital natives have digitized the end-to-end lending process, gaining significant efficiencies from automation. As firms face the imminent challenges of 2021, realizing cost savings through digital efficiencies should be a top priority.

 

Digital Adoption: Firms will need to focus more on strategic adoption of digital assets, reaching toward end-to-end digitization, rather than the piecemeal addons that marked early approaches. End-to-end digitization relies on automated workflows and a single source of data to connect front and back office operations. Instances of repetitive or non-value-added work are reduced in favor of real-time processing. With real-time processing, financial institutions gain immediate access to data and insights, empowering a faster lending lifecycle.

 

Open Banking : Cloud-based APIs are at the heart of fast and efficient digital transformation strategies. Adoption of cloud-based APIs will usher in a new era of open banking and opportunities for future expansion into a broader ecosystem, where financial institutions can explore offerings and consume them at speed. 

 

Covid-19 had a widespread impact across the global economy. To stay ahead of changing trends in commercial lending, firms must stay focused on speed, agility and efficiency to make it through 2021.


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Digitization: breaking barriers to financial growth for Credit Unions

Digital disruption is taking over and swiftly transforming the financial services industry. Due to their strong commitment to enhanced member experience and member satisfaction, credit unions especially need to capitalize on digitally-assisted channels that have become the primary modes of member engagement in a digital-first environment. If your Credit Union does not value digitization, then… Continue reading Digitization: breaking barriers to financial growth for Credit Unions

COVID-19 presents novel issues for underwriters, who are grappling with the need to support their clients accessing funding and also maintain disclosure standards and manage their risk when the typical tools / processes that they use to do so may not be available in the same way. Between changes in borrowers’ employment, delays in tax filing, and ensuring all information is up to date, underwriting has become more of a “real-time” process.

 

A “business as usual” approach based on largely manual processes, expert judgement and existing underwriting criteria will not work. It cannot cope operationally and it cannot be relied on to consistently deliver the best decisions. Many client requests will be triggered by rapidly declining revenues and a poor financial outlook, which would fail normal underwriting criteria at the first hurdle. Underwriting criteria will therefore need to be adjusted to enable lending to companies that are viable and should return to health after the effects of COVID-19 have dissipated.

 

For lenders, it is vital to proactively and regularly gauge changes in the status of the borrower and to ensure all things are in place to make for easy and successful closing. For servicers, it is just as important to stay abreast of information on any type of leniency to assist borrowers that may be facing hardship.

 

In this crisis time a loose underwriting process may put both the lender and borrower in a tough position that causes the mortgage to fall through, go into default, and ultimately create a difficult and stressful situation for both parties.

 

While navigating this new landscape, what underwriting tips should be taken into consideration  to ensure a smooth closing?

 

Underwriting Tips to lenders

 

More frequent credit check: The underwriting process consists of many moving parts and 30 days can go by rather quickly. It is the lender’s duty to make sure all origination documents are current and meet guidelines. In order to do so, lend-ers should check borrowers’ credit profiles and utilization more frequently. Significant changes in credit can be good indicators that there may be changes in employment or financial circumstance.

 

Clear understanding of borrower’s unique financial situation: One other key part of navigating the underwriting process during COVID-19 is taking into consideration those unique circumstances to ensure the business continues as expected. For a lender it is important to investigate the previous or status of loans from other lenders to make sure there isn’t any alarming activity. For instance, if the borrower currently has forbearance on their previous mortgage and is seeking a new loan, that will impact the new loan indefinitely.

 

Seeking Flexibility for Borrowers: For a lender, while they need to continue the business of providing loans, they also must make sure the loans show no signs of going into default. The lender must also look out for the borrower and make sure they do not get into a situation that could cause financial ruin later. Lenders also should remain up to date on the latest guidelines that have been adjusted due to COVID-19. 

 

Conclusion 

 

Since the imposition of public health restrictions across much of the world due to COVID-19, many issuers are facing profound challenges. Here we have attempted to highlight some of the specific impacts on underwriting and what additional underwriting tips Lenders should follow to overcome. For lenders, it is now part of their job to look more closely at the borrower’s eligibility and go the extra mile to confirm that the borrower’s status hasn’t changed during the closing process. It also is important to make sure that there are options to be able to facilitate loans under these different circumstances. While delays and challenges will persist, it remains possible to navigate these complex challenges while maintaining disclosure standards and adequately managing risk.

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The economy of the country is largely impacted by the pandemic and as a result Lenders are facing complexity and uncertainty on the business front. The Credit Risk management strategy has been a nightmare to Lending firms. The economic fallout created a situation where lenders are experiencing large number of loan defaults. The rapid pace of change result in challenges for lenders in identifying, managing, and mitigating risks at least for an interim period. In this tough scenario how can lenders effectively manage credit risk?  Here, Insight Consultants have come up with an effective credit risk management strategy that lenders can follow for a competitive advantage.


Fill up the form to read the full article to know how your lending firm can implement this and be best prepared to handle the downstream impacts of the current global situation.


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The economy of the country is largely impacted by the pandemic and as a result Lenders are facing complexity and uncertainty on the business front. The Credit Risk management strategy has been a nightmare to Lending firms. The economic fallout created a situation where lenders are experiencing large number of loan defaults. The rapid pace of change result in challenges for lenders in identifying, managing, and mitigating risks at least for an interim period. In this tough scenario how can lenders effectively manage credit risk?  Here, Insight Consultants have come up with an effective credit risk management  strategy that lenders can follow for a competitive advantage. 


Fill up the form to read the full article to know how your lending firm can implement this and  be best prepared to handle downstream impacts of the current global situation.



read the full article to know how your lending firm can implement this and  be best prepared to handle downstream impacts of the current global situation.


Contact Us

Top 7 Fintech predictions for 2020 and beyond

Fintech is evolving so fast and the Global investments in FinTech more than tripled in 2014, reaching more than $12 billion. It is a revolution which is changing consumer behaviour. Fintech industry is experiencing digital transformation, and we’ll soon see it different from what we have now. Let’s check out the top 7 fintech predictions… Continue reading Top 7 Fintech predictions for 2020 and beyond

Digitized credit risk management: Approach and benefits to lenders

When you lend money and provide credit, you put yourself in a vulnerable position. Smart lenders minimize their credit risk by knowing exactly what they are getting into, and how predictable they can forecast activity on the loans. To boost the quality of the overall loan portfolio, lending firms need to reset their value focus… Continue reading Digitized credit risk management: Approach and benefits to lenders

Chatbots – Your AI-based virtual assistant

Chatbots are changing the way brands interact with their customers, and when the chatbot is of high quality, those changes are usually positive. Businesses can reduce customer service costs by up to 30% by implementing conversational solutions like chatbots. over 80% of service queries are repetitive, and a virtual assistant that can cut down wait… Continue reading Chatbots – Your AI-based virtual assistant

The Cloud – A game-changer for your business

Cloud computing is just another revolution in how computing power is delivered to a business. It allows businesses to store all data on remote servers, making it easier and cost-effective for both internal users and customers to access it from any place, any time. Small business owners who want to reduce costs without sacrificing their… Continue reading The Cloud – A game-changer for your business

Digital transition: must consider points

Modern lending systems are all about providing access to funds anytime, anywhere, for customers who are increasingly tech-savvy.  Digital channels fulfil the customers’ need for convenience and continuous availability, while at the same time offering lending firms’ new opportunities for growth. But transitioning to a fully digital lending firm is not always easy. Lack of… Continue reading Digital transition: must consider points

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