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Monthly Newsletter | Jul 2020 | Issue 107

Featuring

Robotic Process Automation: Guiding through tuough times.
Building Resiliency and adapting to challenges: Tips to Lenders
In the News
Major Events
Key Stats

Focus On

Robotic Process Automation : Guiding the Way Through Tough Times.

In the face of crisis, such as the unprecedented COVID-19 pandemic, businesses are turning to Robotic Process Automation (RPA) as a guiding force to navigate through turbulent times. While managing in normal circumstances may be routine and predictable, crises bring unexpected challenges and outcomes. The pandemic has caused severe financial disruptions, leading to an overwhelming number of individuals seeking financial assistance from lenders. However, traditional manual processing and lengthy approval chains are proving inadequate to handle the surge in customer demand.

The incorporation of Robotic Process Automation offers a transformative solution, streamlining workflows and automating processes to effectively meet customer needs in a timely manner. By embracing RPA, businesses can enhance their resiliency, adapt to challenges, and ensure the efficient delivery of financial assistance to those in need.

Robotic Process Automation to transform key lending functions:

Today’s empowered customers have no patience for the mounds of paperwork and lengthy processes that was the hallmark of traditional lending. Used effectively, Robotic Process Automation platforms can streamline workflows and automate many of the steps humans have traditionally completed.

Using Robotic Process Automation tools, the entire origination process is streamlined. The initial customer request is captured via a digital form on the bank’s website. It is then sent through an automated workflow to each of the parties that must grant approval. The entire process can be completed in just minutes, compared with the hours or even days required in the past.

Introducing Robotic Process Automation can also help a lending firm fully document and improve its internal processes. Rather than relying on inefficient paper trails, automated workflows can be created that match exact requirements and ensure prompt responses for customers.

Easy customer management – Customer management is made easy through automation. RPA can mitigate the inconsistency and delays of manually collecting financial data and other mandatory customer information

Daily operations – The banking industry deals with heavy volume of data. Manual processing of this data is a time-consuming and error-prone process. RPA facilitates seamless communication and transfer of information from legacy to newer software. It automates menial and repetitive tasks, thereby reducing the turnaround time in processing a request.

Enable Compliance– RPA mitigates the risk of data compromise that goes together with manual manipulation of customer information. With automation, the risk of non-compliance, data loss, or data compromise is greatly reduced.

Loan processing – Underwriting is the most crucial step in lending. It means predicting if a potential borrower would be able to pay back. However, manual process of collecting information is tedious, complex and error prone. RPA powered software enables compilation of a prospect’s record from multiple systems, websites, channels and service providers. Once the data is collected, it is entered into a company’s systems for underwriters to analyze it.

Harness the Power of Robotic Process Automation: Meeting Customer Expectations and Building Resilience in Challenging Times

In today’s dynamic landscape, customers have elevated expectations regarding their interactions with lenders. They seek prompt responses to inquiries and rapid approvals. By leveraging Robotic Process Automation (RPA), lenders can streamline their operations, integrate disparate systems, and ensure a seamless flow of reliable and consistent data throughout the loan origination process. The result? Accelerated processes that not only meet customer demands for speed but also offer robust audit and control benefits.

Amid the pressures induced by the ongoing pandemic, implementing RPA proves vital in preparing lending firms for future challenges. Embracing automation empowers these firms to navigate the current crisis while establishing a resilient foundation to overcome obstacles down the road. By proactively adopting RPA, lenders can enhance customer satisfaction, expedite loan processing, and position themselves as leaders in the ever-evolving financial landscape.

Insight Consultants has a broad range of AI-powered capabilities and services that are designed to help chief information officers automate their IT infrastructures to be more resilient to future disruptions and to help reduce costs. So, if you are you looking for ways to harness the power of automation, or would just like to know more, Contact Us

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Building Resiliency and Adapting to Challenges: Tips to Lenders

The COVID-19 pandemic is forcing lenders to contend with a host of issues, including quarantines, diminished cash flow, travel restrictions, supply chain disruptions and overall strains on workflow. The crisis requires companies to consider not only their short-term crisis management, but also how their business continuity plan will need to be adapted.

The unprecedented and unexpected demand for relief, and the speed with which lenders are required to or choose to implement new regulatory requirements and deliver relief, challenge many participants in their ability to implement a comprehensive protocol of controls and processes that ensure and document compliance with existing legal requirements, internal policies and processes, regulator expectations, and best practices.

At Insight, here’s our most recent insight to the lending industry. By talking to our existing customers and keeping in touch with the industry, we’ve come up with challenges the industry may be currently facing and tips and best practices for managing these challenging times.

Key challenges and tips to overcome

Non-performing loans: Due to the pandemic, the economy has come to a sudden halt. This has brought about high levels of non-performing loans (NPLs), i.e. loans that are in (or close to) default. High NPLs are problematic because they impair balance sheets, depress credit growth, and delay economic recovery. It’s a tough balancing act and one that demands careful management of the lending transaction lifecycle, from origination through to collection, recovery and handling bad debts.

Key takeaway:

Implement customer-centric measures to distressed borrowers by analyzing customer data

Create debt restructuring support to non-healthy clients

Introduce a clear communication strategy for affected customers on relief programs

Volatility in credit scores: Lenders are experiencing unanticipated twists to the application process due to fluctuating credit scores. Customers’ credit scores declining due to increased credit card usage, missed payments, etc. It’s a tough time for lenders to handle this unevenness between loan approval and closure.

Key takeaway:

Introduce decisive support to borrowers with data and insights

Introduce individual customer cashflow modeling to proactively reach out to customers with tailored, relevant solution proposals

Develop new policies to address Covid-19 specifically and communicate it with borrowers

Restructure guidelines

Running business maintaining social distancing: As the globe continues to navigate through uncertain times, the safety and well-being of every individual remain the top priority. In affected areas, you’ll have customers who can’t, or don’t want to, go somewhere in person to sign paperwork. Here lenders need to be prepared in dealing with social distancing norms without disturbing daily business.

Key take away:

Provide real-time gross settlement systems which facilitate electronic payments and online loan processing

Provide clear communication on the virtual service options you provide

Be prepared to move in-person staff to online channels to provide additional support to strained call centers.

Refinancing Demand: Refinancing can be either a good thing or a bad thing for both lenders and borrowers. However, for lenders, when catastrophes like the virus send rates south, there will be a huge demand from customers to refinance at lower rates. This means new information management but at the same time you are being customer friendly and empathetic. Many lenders have trouble keeping up with this red-hot demand.

Key take away:

Introduce skipping the full appraisal process for refinances

Introduce Cash-out refinance option

Implement hardship and forbearance options

Crisis Management: Managing in normal times is repetitive in nature where problems are minimal, and outcomes are usually as expected. Crises on the other hand are sudden and outcomes are unknown. Thinking long-term while amid a crisis is a challenging exercise. No one can be fully prepared. Just think pre and post Covid-19.

Key take away:

Mitigating the manipulation of customers and employees during times of crisis

Bringing the benefits of automation to improve operational efficiency

Refocusing compliance management and improving business profitability

Scaling cyber risk programs in the new economic reality

Operating in an uncertain world means you must be digitally native, agile and, data-driven.

Insight Consultants can help you in the adoption and use of digital native processes, set up an adaptive, agile strategy, and build flexible solutions to respond to altered circumstances.

To find your footing in this new normal, Talk to Us

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Bank of America only big bank participating in Main Street Lending

The Boston Federal Reserve released its initial list of banks that will be participating in the Federal Reserve’s Main Street Lending Program, and only one mega bank was on the list — Bank of America (NYSE: BAC)

Bank of America was also the only bank to be listed as a lender in all 50 states, plus Washington D.C.

Beyond Bank of America, only one other top 10 bank, Truist (NYSE: TFC), was on the list of participating banks. Truist will provide loans in 16 states, followed by KeyBank (NYSE: KEY), which was listed as a lender in 15 states.

The $600 billion Main Street Lending Program was established by the Federal Reserve to provide loans for small- and mid-sized businesses to get through the COVID-19 crisis.

The program offers five-year loans with floating rates, and principal and interest payments deferred. The loans are in the range of $250,000 to $300 million. After making the loans, the banks then sell 95% interest in the loan to the Federal Reserve to collect on it, backed by the Treasury if the businesses don’t repay. The lender retains 5% of the loan.

Federal Reserve Board Chairman Jerome Powell said this week that about 300 banks had signed up to participate. However, banks are “not getting a ton of interest from borrowers,” Powell said in a Congressional hearing this week.

SBA Treasury releases the names of PPP recipients

The U.S. Small Business Administration (SBA) and Treasury released the names of all organizations that received Paycheck Protection Program (PPP) forgivable loans of $150,000 or more.

The SBA and Treasury also published data for recipients of PPP loans less than $150,000 but did not reveal the names and addresses of those businesses.

The data released provides the following details for all of the nearly 4.9 million PPP loans: North American Industry Classification System (NAICS) codes, ZIP codes, business type, demographic data, not-for-profit information, and jobs supported. For loans of at least $150,000, the SBA also listed business names and addresses sorted by the following loan amount ranges- $150,000 to $350,000, $350,000 to $1 million, $1 million to $2 million, $2 million to $5 million, $5 million to $10 million.

The list of names is accessible via the SBA Paycheck Protection Program Loan Level Data webpage.

A five-week extension for the PPP approved by Congress and signed by President Donald Trump reopened the application window for PPP funds until Aug. 8. The application window for the PPP had closed June 30 with $131.9 billion in funding remaining, but the SBA resumed accepting applications from lenders this week.

Treasury and SBA had committed to releasing the loan-level data in an agreement reached with the bipartisan leaders of the Senate Small Business Committee. Lawmakers and critics of the program had called for greater transparency into who was receiving the loans from the $659 billion PPP program.

The PPP in brief

Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. The legislation authorized Treasury to use the SBA’s 7(a) small business lending program to fund loans of up to $10 million per borrower that qualifying businesses could spend to cover payroll, mortgage interest, rent, and utilities. PPP borrowers can qualify to have the loans forgiven if the proceeds are used to pay certain eligible costs. However, the amount of loan forgiveness will be reduced if less than 60% of the funds are spent on payroll over a loan forgiveness period of either eight weeks or 24 weeks.

The program launched in early April with $349 billion in funding that was exhausted in less than two weeks by businesses and other entities seeking funds to help cope with the economic impacts of the COVID-19 pandemic. Congress then approved another $310 billion in funding for the program, but demand for the loans fell after public backlash prompted several businesses to return their PPP loans. The dampened demand was also attributed to concerns about the rules for loan forgiveness.

New P2p Lending credit card aims to shake up the industry

London-based peer-to-peer lending platform Elfin Market is set to launch what’s thought to be the first physical credit card in the P2P market. The card will be linked to the fintech’s existing product, the Elfin Purse, and will let customers make transactions and withdrawals on the go.

Founded in August 2016 by Lakshithe Wagalath and Mansour Bouaziz who have combined industry experience and technical know-how, Elfin Market connects borrowers to lenders without expensive intermediaries.

Lakshithe Wagalath, co-founder and chief operating officer of Elfin Market, told Peer2Peer Finance News: “The Elfin Card will enable borrowers to make payments directly from their Elfin Purse and make their experience just as user-friendly as with a regular credit card, but much cheaper.

The card comes with a representative APR of 5.8 per cent, although the actual rate will depend on a customer’s credit rating.

Mike Carter, head of platform lending at 36H Group, the peer-to-peer branch of Innovate Finance, told AltFi: “P2P lenders have made strong inroads into the unsecured personal loan market over the past 10 years, and several Fintech players already provide payment cards for consumers.”

“The credit card market is an extension to this, combining credit underwriting skills and Fintech user experience with P2P funding, to deliver an innovative and competitive product in a market dominated by large players,” he added.

Back in February 2020, Elfin Market announced it had reached its £400,000 crowdfunding target in just over 24 hours and went into over funding as a result.

UK Banks prepare code of conduct on defaulting of covid-19 business loans

UK banks are preparing a code of conduct for pursuing businesses that default on taxpayer-backed coronavirus loans, amid industry estimates that up to eight out of 10 borrowers could fail to repay in full.

The Guardian understands that the industry lobby group UK Finance and the state-owned British Business Bank have kicked off talks with commercial lenders in an effort to set industry-wide debt collection standards well ahead of repayments falling due.

Loans granted under the coronavirus business interruption loan scheme (CBILS) and bounce-back loan scheme (BBLS) for small and medium-sized businesses have a 12-month repayment-free period, and on the first batch this will run out in the spring of 2021. Discussions about what happens on defaulted loans then are understood to be in the early stages.

Industry estimates suggest that anywhere between 40% to 80% of businesses could default on their bounce-back loans, the banking executive said. A portion of that will be down to fraudulent applications, which are believed to account for about 10% to 15% of total BBLS, they added.

A City taskforce warned last month that £36bn worth of government-backed loans could turn toxic by next year, as companies struggle to repay growing debts during the Covid-19 crisis.

Government data released earlier this week showed that banks had approved more than 1m loans worth £42.9bn as of 28 June, including £11bn worth of CBILS and £29.5bn of BBLS. Most BBLS borrowers are small business owners or sole traders that have never taken out a commercial loan.

There is currently no deadline to set a debt collections standard, but one high street banking source said the “the decisions need to be in place fairly quickly. A British Business Bank spokesperson said: “The British Business Bank has regular meetings with lenders, UK Finance, HM Treasury and others to discuss the operation of the government’s Covid-19 response to loan guarantee schemes. Among other topics discussed is the need to treat customers fairly should collection of debts be required in the future.”

Events

THE US FINTECH SYMPOSIUM

14-15 Sep 2020, Chicago, United States

Key Stats

Central Bank Interest Rates and Current Libor Rates

GBP Libor (overnight)	Interest (07-09-2020)	Central Banks	Interest Rates
Euro Libor	-0.56043%	American Interest rate (FED)	0.25%
USD Libor	0.08288%	Australian Interest rate (RBA)	0.25%
CHF Libor	-0.79280%	British Interest Rate (BoE)	0.10%
JPY Libor	-0.08250%	Canadian Interest Rate (BOC)	0.25%
GBP Libor	0.05338 %	Japanese Interest Rate (BoJ)	-0.10%

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Monthly Newsletter | May 2020 | Issue 105

Featuring

Impact of digitization in credit risk management
Credit Scoring Model: an effective tool to evaluate loan risk
In the News
Major Events
Key Stats

Focus On

Impact of Digitization in Credit Risk Management

The financial sector is witnessing a rising tide of competition and encountering numerous threats from different fronts, including regulators, investor expectations, the emergence of new competitors, and customer demands for accessing funds and submitting loan requests through diverse digital channels. These factors collectively contribute to the lenders’ vulnerability, particularly in managing credit risk.

Smart lenders minimize their 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 and digitize their credit risk process.

Digitalization offers huge potential to improve credit risk management. It is likely to result in more transparency of risk assessment. It allows lenders to make rapid assessments of the credit worthiness of applicants quickly.

Digital trends in financial industry

Changing customer expectations
Tighter regulatory control requiring greater risk function effectiveness
Growing importance of strong data management and advanced analytics in staying competitive
New attackers driving business-model disruptions
Increasing pressure, especially from financial-technological companies, on costs and returns

Digitizing credit risk management allows lending firms to withstand new pressures and create value. It can bring value in areas like sales and planning, mortage process and insight and analysis. Digital credit risk management uses automation, connectivity and digital delivery and decision making to create values in protecting revenue, reduce cost of risk mitigation and reduce operational cost.

Lenders are beginning to respond to these trends, albeit slowly.

Analytics in enabling “digital credit risk”

To stay competitive, banks need to use data and analytics effectively to gain insights. Analytical techniques enable the implementation of credit strategies and workflows for decisions and risk monitoring. While analytics provide deep insights about customers’ behavior, it also apprises financial institutions with factors that have influenced their changing buying patterns and habits.

Predictive analytics can enable credit managers to reduce the lending risk by making data driven decisions. Using statistics and machine learning techniques, they can analyze the data available from various sources to create credit scoring models on their own, specific to their business. These models incorporate financial and non-financial data such as demographic and profile information to do forward-looking analysis of the probability of default for a borrower over various timeframes, and calculate the potential expected loss in case of default.

In fact, Predictive analytics can be utilized to improve the customer experience throughout the loan lifecycle. Marketing departments can benefit through improved targeting in their campaigns, and credit risk departments can create scorecards to make more informed decisions on whether or not to accept an application. Opportunities for cross-sell and upsell can also be identified by analyzing the behavior of existing customers and by assessing the risk of default, proactive actions can be taken to mitigate the risk early. Collection analytics can predict the likelihood of delinquent customers paying back the debt and the right channel to reach out to these customers. This would not only help in increasing the interest revenue, but also in reducing the collection costs.

Keep Reading

Credit Scoring Model: an effective tool to evaluate loan risk

SME lender already know that the market offers a huge opportunity, but also know that it’s incredibly difficult to drive high approval rates without increasing risk. Finding the technology, you need to implement your risk strategy and effectively wrangle the risks of SME lending in an ever-evolving industry is a challenge.

Here Credit scoring models provide an opportunity for lenders to more efficiently evaluate loan risks and lower the costs of small-business lending.

Scoring Model: Learn from the past and anticipate future

Scoring Models help lenders in emerging markets standardize and improve their lending decisions. These models define customer scoring based on a statistical analysis of past borrowers’ characteristics instead of using judgmental rules.

Credit Scores – a number that represents an assessment of the creditworthiness of a person, or the likelihood that the person will repay a loan.
By analyzing a sample of historical client and business data, trends are deduced to better understand (potential) clients and predict future events such as credit repayment.
Scoring is a method of assigning a numerical value (the “score”) to a client in order to predict how likely he or she is relative to others to experience some event or perform some action in the future. This is predicated on the notion that past behavior is indicative of future behavior for populations with similar characteristics.

Credit Scoring may alter small-business lending in several ways:

Borrower-Lender Interaction: Traditionally, a small-business need to meet with a loan officer in person and apply, including financial statements, business plans and a variety of other records. In fact, by using a credit-scoring system, a lender with no physical presence in a community can lend money to small businesses without ever seeing a business plan or financial statements.

Loan Pricing: The price of small-business loans will decline for higher-credit quality borrowers under credit scoring because these borrowers no longer have to bear the cost of a full human underwriting. Some businesses that previously had been thought to be high risk under a traditional underwriting system may be classified as lower risk under a credit scoring system.

Availability of Credit for Small Business: Repayment prospects of a small-business applicant makes it more likely that a lender will price the loan according to its expected risk. This prospect should increase the availability of credit to small businesses.

Increased Lending Opportunities: Lenders who use credit scores have the confidence to approve more loans, because credit scoring gives them more precise information on risk and other credit factors.

Fair Credit decisions: Using objective credit scoring, lenders can focus only on the facts related to credit risk, rather than their personal feelings. Factors like your gender, race, religion, nationality and marital status are not considered by credit scoring

For the lender, scoring leads to process automation, which facilitates process improvements, leading to many byproducts such as improved management information, control and consistency. It also increases the profitability of SME lending by reducing the time and cost required to approve loans and increasing revenues by expanding lending opportunities and service levels

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In the News

US Banks tightened loan sanction in first quarter

Loan officers at US banks reported significantly tightening standards and terms on business loans in the first three months of the year as the coronavirus outbreak in the United States began to shutter large parts of the economy and millions became newly unemployed.

The officers also said that there was greater demand for business loans from medium- and large-sized firms, but that business loan demand from small businesses was roughly unchanged.

Banks reported tightening standards across all three consumer loan categories — credit card loans, auto loans, and other consumer loans – but saw weaker demand for them during the same period. “Banks reported that the changes in standards and demand across loan categories reported for the first quarter occurred late in March as the economic outlook shifted when news emerged about the rapid global spread of COVID-19,” the US central bank said in its quarterly survey, referring to the respiratory disease caused by the virus.

The latter half of March was when US states and local governments shut non-essential businesses and issued “stay-at-home” orders to limit the spread of the virus. Since then, such businesses have struggled to stay afloat, leading to actions by US lawmakers and the Federal Reserve to try and limit the fallout and stave off a wave of bankruptcies.

The US Small Business Administration has processed over 3.8 million loans for more than half a trillion dollars since the launch of the Paycheck Protection Program on April 3, the government agency said on Sunday. The program is designed to provide forgivable, government-guaranteed loans to small businesses shuttered by the outbreak. The central bank said last week it would soon open its “Main Street Lending Facility,” with US$600 billion in loans available to companies with up to 15,000 employees and $5 billion in revenue.

US banks previously reported keeping loan standards mostly unchanged for many business loans and commercial real estate loans in the fourth quarter of last year.

In tightening standards, loan officers cited a deteriorating or more uncertain economic outlook, a worsening of industry-specific problems, and reduced tolerance for risk. They also said because of the coronavirus outbreak they “were focused on existing clients rather than granting loans to new clients.”The Fed surveyed loan officers at 67 domestic banks and 22 US branches and agencies of foreign banks

New AI Banking solution rolled out to accelerate SME finance

The officers also said that there was greater demand for business loans from medium- and large-sized firms, but that business loan demand from small businesses was roughly unchanged. Banks reported tightening standards across all three consumer loan categories — credit card loans, auto loans, and other consumer loans – but saw weaker demand for them during the same period. “Banks reported that the changes in standards and demand across loan categories reported for the first quarter occurred late in March as the economic outlook shifted when news emerged about the rapid global spread of COVID-19,” the US central bank said in its quarterly survey, referring to the respiratory disease caused by the virus.

Since early March, the Fed has pumped trillions into US financial markets to try and keep credit flowing to businesses and households. It has launched numerous crisis-fighting programs, slashed interest rates to near zero and resumed large-scale asset purchases. US banks previously reported keeping loan standards mostly unchanged for many business loans and commercial real estate loans in the fourth quarter of last year.

In tightening standards, loan officers cited a deteriorating or more uncertain economic outlook, a worsening of industry-specific problems, and reduced tolerance for risk.They also said because of the coronavirus outbreak they “were focused on existing clients rather than granting loans to new clients.”

The Fed surveyed loan officers at 67 domestic banks and 22 US branches and agencies of foreign banks

Aus Fintechs team up to launch investment platform

Three fintechs have joined forces to develop a wealth platform for the Australian market, with a former Citi banker having signed on as its chief. The new platform, Stropro, has been launched with backing from Seed Space, an early-stage venture capitalist. Stropro has leveraged partnerships with anti-money laundering compliance tool provider bronID, registry services provider Automic Group and technology solutions vendor eNoah iSolution.

Stropo has marketed itself as Australia’s first dedicated network for structured products.

Ex-Citi banker Anto Joseph has taken the role of fronting the platform, as its chief executive. Mr Joseph said the fintech set a goal in early 2019 to deliver an end-to-end digital experience for structured product investors.

“After working in investment banking for many years, we saw a huge gap in the market for structured products to be accessed by wholesale investors, SMSFs and the wealth professionals who advise them,” he said.

“What we have created is a first-of-its-kind technology platform dedicated to structured products in Australia.”

The platform’s user interface was designed by Justin Hall of eNoah iSolution. Stropo has also been fully integrated with Automic and bronID, with the aim to enable seamless customer onboarding and experience.

But the platform is angling to integrate itself with more providers.

Ben Streater, chief product officer of Stropro commented: “We are in conversations with major accounting and wrap platforms as part of our mission to drive greater transparency and efficiency within the structured products industry.”

Last year, Stropro was accepted onto Microsoft’s flagship start-ups program.

Stropro head of technology Ritam Anand Gaur said Microsoft’s program will enable the fintech to enhance its technology platform, with its focus on best practices in application architecture, data security and privacy.

Fed expands PPPLF loans to non-depository lenders

The Federal Reserve expanded access to its Paycheck Protection Program Liquidity Facility (PPPLF) to non-depository lenders, and announced that the PPPLF will accept purchased paycheck protection program (PPP) loans as collateral.

Currently, Small Business Administration (SBA) qualified lenders include banks, credit unions, community development financial institutions, members of the Farm Credit System, SBA-licensed small business lending companies, and some fintech companies.

Under the new terms, financial institutions that pledge a purchased PPP loan will need to provide documentation from the SBA demonstrating that the institution is the beneficiary of the guarantee for the loan. View the term sheet.

Earlier this month, the NCUA Board approved an interim final rule determining that PPP loans will receive a zero percent risk weighting under the NCUA’s risk based net worth requirement if the loan is pledged as collateral as part of the Fed’s PPPLF. NAFCU outlined what credit unions should know regarding the rule in a Final Regulation Alert.

NAFCU has remained in close communication with member credit unions participating in the PPP to ensure they are able to access the funds to provide to small businesses in their communities.

The association will also continue advocating for more guidance and resources for the PPP, especially as it relates to loan forgiveness and future funding. Learn more about recent PPP developments, and access the association’s recently updated PPP FAQs for more information.

Events

FINTECH CONNECT

2-3 DEC 2020, EXCEL, LONDON

Key Stats

Central Bank Interest Rates and Current Libor Rates

GBP Libor (overnight)	Interest (05-05-2020)	Central Banks	Interest Rates
Euro Libor	-0.57057%	American Interest rate (FED)	0.25%
USD Libor	0.05725%	Australian Interest rate (RBA)	0.25%
CHF Libor	-0.79180 %	British Interest Rate (BoE)	0.10%
JPY Libor	-0.08933%	Canadian Interest Rate (BOC)	0.25%
GBP Libor	0.05950 %	Japanese Interest Rate (BoJ)	-0.10%

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Monthly Newsletter | April 2020 | Issue 104

Featuring

COVID-19 Impact : Challenges and Opportunities to Lending Industry
How to navigate through COVID-19-5 quick steps to Lenders
In the News
Major Events
Key Stats

Focus On

COVID-19 Impact: Challenges and Opportunities to Lending Industry

COVID-19 has curbed the globe, unexpected and unwanted. Virus outbreak has belted lenders with a ripple effect the size of a perfect storm- record refinancing demand, time-consuming credit checks, fluctuation in credit scores and lots of questions about getting short-term loans until income stabilizes. Lenders should bear in mind that this crisis is likely to reinforce, in direct proportion to its extent and duration and maybe even more, several existing trends.

Implications of Covid-19 in Lending

Workplace dynamics and talent management durably changed after an extended period of remote working
Customer routines and expectations shifted with expectations for proactive communication and care
Operational resiliency remains critical with mounting risks of pandemics, societal and geopolitical tensions, and climate change
Rise in cyberattacks and fraud, as businesses and employees adapt to remote working

The covid-19 outbreak is, hopefully, a once-in-a-century event. For now, however, it’s too early to think about the lessons we’ll learn. It’s crucial to address client’s concerns and provide services with as little interruption as possible.

Despite the negative outlook, fortunately, there is a brighter side here. Economic uncertainty creates opportunities for new business models powered by emerging technology. For FinTech, the future is Contactless Lending, a great boon during this crisis

Amidst this bleak scenario, ‘Contactless Lending’, greater adoption of digital channels, enables firms to cater to the needs of clients globally.

As countries go into lockdown, people are forced to keep social distance and work from home. This crisis highlights how important digital capabilities are and products are, and how important speed and seamless integration are. Contactless payments and branchless lending are widely implemented.

Here is a list of digital initiatives to not only survive covid-19 but thrive on the other side of it.

End-to-end loan digitization
e-signature workflow solution
Automated follow-up solution
Virtual service option
Data analytics strategies
Advanced chatbots

Those who invest in advanced analytics, innovation, and digital transformation can leverage their customer experience and digital product advantages more than ever.

Business downturns are not uncommon. Those firms that recognize and adapt to new market conditions have the chance to outperform. For lending firms of any size, the message is clear: Digitize or risk losing customers — or even risk failure.

Keep Reading

How to navigate through COVID-19 crisis: 5 quick steps to Lenders

As the world copes with the corona virus, the outbreak is causing widespread concerns and the biggest danger to the global economy since the 2008 financial crisis. The situation is fast-moving with wide impacts on consumers, businesses, and communities across the globe. Lenders have business continuity plans, but there are no clear contingency plans to face situations like widespread quarantines, extended office closures, and added travel restrictions.

In response to COVID-19, most lenders are developing their contingency plans quickly. Some are adapting existing plans to handle this outbreak, while others are starting from scratch. Confident action today can position your business to thrive tomorrow.

Here we identify five action steps lenders should take to navigate this unprecedented situation.

Effective crisis management plan: Most Contactless lenders already have business continuity plans, but those may not fully address the fast-moving and unknown variables of an outbreak like COVID-19. Lenders must plan and act on a crisis management basis before, not after or if, it becomes a necessity. Create a dedicated crisis management team. This team must conduct a contract risk assessment and identify preventive actions, manage customer-supplier contract disputes due to economic impacts or supply disruptions, and even be prepared to invoke “force majeure” clauses when required.
Stand up operations to handle increased volumes: Given remote working and sickness-related resource constraints, firms need to establish a more sustainable approach to processing the surge in lending applications. This should include electronic channels to manage COVID-19 related loan applications and the extension of automated credit decision-making to as many applications as possible, allowing manual credit underwriting to be focused on exceptions and higher risk cases.
Proactive Communication: The immediate priority is communication and assurance. Everyone is facing this crisis together, so be transparent about what your business is going through. Customers can empathize with brands facing a crisis if you communicate with them properly. Clarity and transparency are crucial in sustaining confidence at both a client and a market-wide level.
Better use of digital capabilities: As businesses move from reacting to mitigating the impact of the outbreak, strategies to emerge stronger may come in focus. Accelerate digital transformations as the shift to remote working reveals gaps in IT infrastructure, workforce planning and digital upskilling.

Business continuity strategies: As companies move from reacting to mitigating the impact of the outbreak, strategies to emerge stronger may come in focus. Protect growth and profitability through actions such as scenario planning, more frequent financial modeling exercises to improve resiliency, and new models that incorporate economic impacts of past pandemics.

The Path Forward

Eventually, the coronavirus pandemic will subside to allow for the ‘new normal’. In the meantime, there is an opportunity to learn from the consumer and employee alike. For many firms, there will be new opportunities spawned by innovations tested, marketing models adjusted, and delivery networks transformed. There will be major winners and some losers that result from this unexpected disruption of business.

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In the News

Trump small business lending program is a failure to launch

Just a day after the launch of a $350B loan program designed to rescue millions of small businesses, technical glitches continue to cripple the process. The launch of a $350 billion loan program designed to rescue millions of small businesses pummeled by the coronavirus pandemic, technical glitches continued to cripple the ability of the nation’s top lenders to begin processing the loans, throwing into doubt when any of the applicants will start receiving any money.

The lending program, which forms part of the $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act, is a much-needed lifeline for the 30 million small businesses across the country. It offers loans of up to $10 million to companies who employ fewer than 500 people. Those loans are forgiven if the businesses meet certain conditions, such as using most of the funds to pay worker salaries for the eight weeks following the loan closing.

Major banks like Bank of America, WellS Fargo and JPMorgan Chase received tens of thousands of applicants within hours of the program’s launch

To begin the lending process, small businesses must submit their application via an online portal on their bank’s website. A banker then conducts a phone call with the applicant.

However, there’s no way in the hastily fashioned system for the banks’ computers and those of the Small Business Administration, which administers the Paycheck Protection Program loans, to talk to one another. Bankers have resorted to entering applicant information by hand into E-Tran, the proprietary system used by the SBA to guarantee loans and generate loan numbers.

Senior banking executives at Bank of America and Chase told NBC News they were still waiting on loan numbers to come back from the SBA, and so far had not processed any more than a trickle from the flood of applicants.

Bankers said they were working systems to automate and speed up the process but had no idea when these customers would start to see money in their accounts.

An email from the Small Business Administration to lenders apologized for “ongoing technical issues,” which included slowness and the inability of “many” lenders to create new logins or reset passwords. The SBA did not immediately respond to an NBC News request for comment.

US doubles interest rates on loans after small business complain

The federal government doubled the interest rate that lenders may charge small businesses — from 0.5 percent to 1 percent — under the $350 billion emergency loan program after top U.S. banks complained that the previous rate would require them to take on too much financial and legal risk.

Treasury Secretary Steven Mnuchin and Small Business Administration Administrator Jovita Carranza released the updated guidelines hours before the lending program, known as the Paycheck Protection Act, launched. The change is intended to make the program more attractive to smaller community banks worried they would reap “unacceptable losses” if required to offer a 0.5 percent interest rate.

Companies may borrow up to 2.5 times their payroll, or up to $10 million, which can be used for payroll and other expenses, like insurance premiums, mortgages, rent or utilities. The loans, which are guaranteed by the federal government, will be fully forgiven if 75 percent of the money goes toward keeping workers employed, according to the SBA.

But small banks had sought a higher interest rate. In a letter to Mnuchin and Carranza, Rebeca Romero Rainey, chief executive of the Independent Community Bankers of America, said a 0.5 percent interest rate was not “feasible” and instead pushed for a 4 percent rate.

“It would not make these loans profitable for lenders; we recognize that’s not the purpose of the Program,” Romero Rainey wrote. “But a 0.5 percent rate would create unacceptable losses for lenders, which have a duty to preserve their financial strength for the sake of their communities. We recommend changing the guidelines to allow for rates at the 4 percent level provided for in the CARES Act or as close as possible to that level.”

Organizations can apply for PPP by calling their banks and other SBA-backed lenders directly.

Kabbage finds a way to support emergency loan program

Kabbage, an online lender that recently stopped lending after being routed by economic fallout from the coronavirus pandemic, has started accepting applications for the Paycheck Protection Program.

The company’s leaders hope that by helping to distribute the program’s funds they will help small businesses bounce back and rehire workers who were furloughed.

Kabbage stopped lending on March 29 to give itself time to upgrade its systems and teams to support the Paycheck Protection Program, which is being administered by the Small Business Administration and the Treasury Department. It also cut off credit lines to customers after many of its small-business borrowers went out of business due to challenges presented by social distancing.

Kabbage furloughed an undisclosed number of its 500 employees and shut down its operation in India.

Kabbage had to upgrade its systems because the PPP requires data and documents the lender normally doesn’t have. Nine documents must be provided, including the Form 941 from the IRS.

Kabbage had to provide a way for applicants to upload the documents and apply optical character recognition to extract relevant data from the documents. It also had to adjust its Know Your Customer and Know Your Business systems.

Kabbage, which will offer the loans to new and existing customers, should have an advantage because it’s used to automated lending decisions, Petralia said.

“If you look at the 30 million small businesses in the U.S., 90% of them have fewer than 20 employees and 80% have fewer than 10 employees,” she said. “They’re looking for very small amounts. It’s very hard for any manual process to serve all these small businesses that need small amounts at scale.”

NISSAN seeks $4.6 billion credit line after Corona Virus hit

Nissan Motor has requested a 500 billion yen ($4.6 billion) commitment line from major lenders after sales were battered by the coronavirus outbreak, two people with knowledge of the matter told Reuters.

Like other automakers, Nissan has been hard hit as the pandemic decimates demand and disrupts production, but the Japanese automaker is more vulnerable than others.

Even before the outbreak, it was badly hit by a slump in profitability following decades of aggressive expansion and the scandal surrounding ousted leader Carlos Ghosn.

Nissan is requesting the funding given the possibility that the impact of the coronavirus on production and demand could continue for an extended period.

The Nikkei business daily reported earlier that Nissan is seeking the commitment line from Mizuho Financial and two other major commercial banking groups, as well as from the Development Bank of Japan.

Events

Future of fintech

16-18 Nov 2020, Sanfrancisco, CA

Key Stats

Central Bank Interest Rates and Current Libor Rates

GBP Libor (overnight)	Interest (15-04-2020)	Central Banks	Interest Rates
Euro Libor	-0.56786%	American Interest rate (FED)	0.25%
USD Libor	0.06613%	Australian Interest rate (RBA)	0.25%
CHF Libor	-0.79000 %	British Interest Rate (BoE)	0.10%
JPY Libor	-0.98337%	Canadian Interest Rate (BOC)	0.25%
GBP Libor	0.05950 %	Japanese Interest Rate (BoJ)	-0.10%

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Monthly Newsletter | March 2020 | Issue 103

Featuring

Beware, Online Fraud, a big challenge to the Lending Industry
How RPA can strengthen Cyber Security?
In the News
Major Events
Key Stats

Focus On

Beware! Online fraud, a big challenge to the lending industry

“It takes 20 years to build a reputation and few minutes of cyber-incident to ruin it.” – Stephane Nappo, Global Head, Information Security, Société Générale International Banking pole. Online fraud is an ever-increasing threat to lending firms. It is a critical problem to address as it directly affects the firm’s profitability, its customer experience and its bad debts.

Types of online fraud :

Loan Stacking: taking multiple loans from different lenders at the same time without intent of paying them back. Fraudsters can take most advantage in online lending as they are serving a significant portion of the population with little or no credit history.
Account take over (whale phishing): directly target high profile individuals at an organization, with the aim of stealing money or sensitive information or gaining access to their computer systems for criminal purposes
Identity Theft: criminals use someone else’s identification to secure a loan. In any case, once the identification of the victim has been verified, the fraudster gains access to loan funds and disappears.
Web Scraping: extract large volumes of data from web pages and applications and create legitimate-seeming fake accounts
Accessing data leaked on the dark web

Many customers choose to go online lending because of its rapidity. At the same time, online lenders are also serving a significant portion of the population with little or no credit history. Fraudsters can take advantage of this loophole, without much consequences. Regulations, compliance and overall risk management also place a significant operational burden on online lenders.

How does online fraud impact digital lenders and Fintech?

Loss of client trust: Clients expect their delicate financial data to be secure. Online fraud is perceived as a breach in the security of personal and financial information, which causes loss of clients.
Loss of reputation: Unable to secure clients data directly affects firm’s reputation which in turn affects securing new clients as well as relationship with partners and investors
Financial loss: Fraud reduces organisational assets and increases its liabilities, which impede the going-concern status of the firm

Fraud prevention is the not just the responsibility of individuals who may fall victims, but of the lenders whose reputation and assets may be on the line as well. While traditional fraud management techniques have been effective in detecting fraud, there are some inherent challenge

Typical Challenges in conventional Fraud Management Techniques

Inflexible Systems: Lack of flexibility to integrate with different functions of the enterprise and adaptability to read data from traditional and non-traditional medium. As a result, the alerts thrown by these systems are more siloed in nature as opposed to offering a more integrated view.
Multiple Systems: Firms have multiple fraud management systems across the value chain and there are instances where a transaction gets flagged resulting in a harrowing experience for the customers.
External Data Access: Lacks in ability to access external data that can act as an additional source for user satisfaction
Real-time Profiling: Need for real-time profiling to keep up with the pace and rate of online transactions without disrupting the customer experience

While firms are beefing up conventional techniques and investing in their existing security processes to ensure multiple layers of protection are created, it could be worth exploring additional or alternative approaches. The need for computational power to process large amounts of data and make decisions real time is imperative for businesses to reach quickly to fraud attacks. The only true way to keep the online digital world safe and secure is by analysing the digital identity of every online user.

In this aspect, automating your cybersecurity will improve the productivity and value of the security team. So, let’s find out how automation solutions can improve your firm’s Security.

Keep Reading

How lenders can fight fraud risk with RPA

Lenders face higher costs of fraud than other industries.

According to LexisNexis Risk Solutions, for every dollar of fraud, lending companies incur $2.82 in costs, which includes fees, interest, etc. Large digital lenders, with over $50 million in annual revenue, are hit hardest by fraud in this space

When lending went digital, it gave fraudsters new venues to take advantage of the system. With more transactions moving online daily, the threat of reputational damage or financial loss is higher than before.

Robotic Process Automation (RPA) in this aspect is a promising science that can help protect against malicious cyber intruders. Manually handling the security threats daily is impossible and it may end up in irregularities. Automation will remove these challenges, as the software is designed to handle the massive amounts of manual work, can respond quickly to alerts and can function without direct user involvement. Online lending frauds may be on the rise, but so are RPA-led technologies that combat them.

How RPA can strengthen Cyber security?

Often the day-to-day processes are repetitive in nature and can take too long to complete manually. Paired together with an increase in the number of alerts and small security teams, organizations cannot perform efficiently and become at risk of successful attacks. Firms can leverage RPA’s Machine Learning capabilities to create business rules that are unique to your business. Combining machine learning (ML) and artificial intelligence (AI), RPA can enable automation – taking the human effort out of the equation.

RPA software bots can be programmed to track, oversee and provide a quick report on all financial data of the lenders. The RPA bots are also able to raise red flags in the event of any suspected fraudulent activity and department responsible for Cyber Security & Fraud Prevention can act and outsmart any agent responsible. If there are delays to attending to the red flags raised by the RPA software bots, they can even go ahead to block the fraudulent transactions and safeguard the lender’s data.

In order to better grasp the directions of robot assistance let us now zoom in on some examples of RPA security-related application areas.

Data Validation: RPA can boost the efficiency of checking the suitability of access data.
Inventory Tracking: Software robots can continuously monitor the inventory and update it whenever they discover risky areas
Data Classification: Robots can be deployed to detect sensitive data, and either validate it or remove it if stored in unauthorized locations
Reduce Cyber Threats – RPA can effectively deploy to detect threats. By running a fast-paced analysis of the encountered malware alerts, bots can select the most relevant information bits and, based on this, make responsible decisions as to when and how to address the threats
Compliance made easy: RPA minimises human access to sensitive data, which can reduce risk and compliance issues
24/7 Security: RPA doesn’t tire or mentally “clock out” on the job, providing 24/7/365 security coverage.

Whether intentional or by human error, people pose the biggest risk to the cyber well being of organizations and businesses. By removing the human aspect, it makes your data more secure.

Modern cyber attacks have become heavily automated. If organizations try to defend against these attacks manually, the fight becomes man versus machine, with highly unfavorable odds for the organization. To successfully protect against automated attacks, it is essential to fight machine with machine – by incorporating automation into cyber security efforts.

Are you ready to embark on your own RPA journey? Please feel to Contact Us if you would like to understand more on how RPA can be implemented for your business

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In the News

Coronavirus to Hit Global Banks’ Capital Markets Revenue

Uncertainty over the intensity, geographic reach and duration of the coronavirus (COVID-19) outbreak is negatively impacting primary market activity and significantly increasing volatility, making it likely that capital markets revenue at the global trading and universal banks (GTUBs) will be adversely affected, Fitch Ratings says. We do not expect this hit on earnings to affect GTUB ratings if the outbreak is quickly contained, but prolonged revenue weakness and deterioration in asset quality if a weaker economic outlook becomes more deep rooted could pressure capital levels and ultimately ratings over the longer term.

Following strong market activity during the first two months of the year in Europe and the U.S., increased market volatility will likely reduce issuance activity, which will dent revenue in the normally seasonally strong first quarter. Policymakers have highlighted a determination to use fiscal and monetary tools to lessen the economic and financial market impact of COVID-19, financial market volatility will likely persist while uncertainty remains. The Federal Reserve lowered its target fed funds rate by 50 bps in response to slowing growth from the COVID-19 outbreak. While the Fed response may spur issuance activity, it will also negatively affect asset yields, resulting in lower margins and reducing bank profitability.

While increases in volatility can aid trading revenue, we believe the recent sharp rise in volatility and trading volumes reflects high levels of uncertainty. Transaction volumes in many trading businesses could taper off once investors and corporates have readjusted their portfolios. This environment resembles fourth-quarter 2018 and first-quarter 2016, which saw days with elevated VIX but notable year-over-year declines in markets businesses.

All GTUBs have material capital markets businesses, but their contribution to overall profit varies. In the U.S., FICC and equity trading revenue accounts for around a third of total revenue at Morgan Stanley and around 40% of total revenue at Goldman Sachs in any given quarter. For JPMorgan, Citigroup and Bank of America, the level is lower, with less of a negative impact on overall profitability. At the European GTUBs, trading businesses account for about 25% of total quarterly revenues on average for Barclays, Credit Suisse and Deutsche Bank, with a lower contribution at BNP Paribas, Societe Generale and UBS.

BitGo Launches Its First Institutional Crypto Lending Service

As the cryptocurrency lending industry continues to grow, another major crypto company is getting into the business.

BitGo, a crypto firm that claims to handle over 20% of all Bitcoin (BTC) transactions, is launching an institutional-level crypto lending service on March 5. The debut of BitGo’s lending feature comes after a several-month-long private beta test.

Nick Carmi, the head of financial services at BitGo, emphasized that the new crypto lending product was developed with the goal of creating a lending business that is similar to lending services in the traditional financial markets.

The executive noted that BitGo’s lending service is part of the company’s sustainable business model: Major features of BitGo’s lending offering include fully collateralized loans, customized and detailed reporting for each client as well as the ability to work with regulated custodian BitGo Trust, the firm announced.

Nick Carmi, BitGo’s head of finance and a Wall Street veteran who joined the company in May 2019, told Cointelegraph that the new lending service marks a first for the company. The executive added that BitGo is focused on the institutional market and does not have plans to make the product available to non-institutional traders.

According to the announcement, BitGo’s crypto lending service was built by a team of Wall Street investment specialists with a focus on institutional clients.

BitGo CEO Mike Belshe said that the company’s lending service is “melding the best” of Wall Street expertise with institutional investors and Silicon Valley’s technology and innovation.

BitGo’s move to institutional lending comes a couple of weeks after the company announced it was expanding to Europe with two cryptocurrency custody services. BitGo established two separate crypto custodies in Switzerland and Germany on Feb. 10, outlining that the two countries are among the most friendly jurisdictions for crypto business.

Phoenix Lending is launching new Stable Income Product

Phoenix Lending has announced new Stable Income Product with free debit card following the enthusiastic participation of lending products in February.

Launched on February 1, Phoenix Lending has successfully raised over US$4.5 million in one month. The annualized interest rate of Stable Income Products started from 24% and has dropped to 14% for BTC and 18% for USDT. The new products are available for subscription from March 2, and the interest payoff date is once every 30 days starting from May. Users who meet the following conditions are eligible for claiming the free Debit Card.

Conditions

Subscribe BTC 14% Stable Income Product equivalent to US$1,500 or more. (deposit more than one month is required)

Subscribe USDT 18% Stable Income Product equivalent to US$1,000 or more. (deposit more than one month is required)

Card Details

Cost of the Card: US$400

Shipping and Handling Fee: US$50

Users can deposit digital asset to the Debit Card and make purchases in cooperative shops around the globe.

The qualifications and details of the event will be announced on the website. Except as otherwise provided, if the newly announced relevant terms and conditions are in conflict with or inconsistent with any present provisions, the newly announced details shall prevail without further notice.

Next Step of Phoenix

To make digital asset investment to be more accessible and secure, Phoenix is planning to launch custody services on its platform. “We are now approaching the biggest custodian for partnership so that we can provide the best investment experience for our users,” said Winston Hsieh, the CIO of Phoenix Lending.

Phoenix is also supported by BaaSid, an information security company based on blockchain technology, which recently announced partnerships with HITACHI Sunway and NEC by providing application consisting of high-class data split and blockchain technology. Phoenix will later implement such application as a secondary authentication service on the platform.

UK banks announce lending support for coronavirus-hit firms

Some of the UK’s biggest banks have announced measures to help businesses and customers to cope with the economic impact of the coronavirus outbreak.

Britain’s largest high-street lender Lloyds said it would offer £2bn of loans without fees to small firms hit by the virus, and said some of the worst-affected businesses would be offered payment holidays.

In a similar vein, Barclays has informed business customers affected by the virus that they can have a 12-month repayment holiday – a period when loan repayments are waived – on existing loans over £25,000.

State-backed RBS has said borrows who have been affected by the virus can defer mortgage and loan repayments by up to three months, and will also waive various other fees.

None of the banks laid out how badly its customers would have to be affected to qualify for the lending support, however.

An RBS spokesperson said: “We will look to understand each customer’s situation on a case-by-case basis and can offer a number of options to help them manage their finances.”

The measures from lenders come as coronavirus spreads quickly throughout Europe and the UK, having broken out in China in December. The virus has killed five people in Britain, from 319 confirmed cases.

Businesses across the country have told staff to work from home, while restaurants and other businesses have reported lower footfall as people stay at home.

Chancellor Rishi Sunak is expected to unveil spending measures to support the economy during the outbreak when he gives his Budget tomorrow.

Incoming Bank of England governor Andrew Bailey has said that some kind of “supply-chain finance” for businesses from the government and Threadneedle Street is likely.

David Oldfield, group director of commercial banking at Lloyds, said firm-owners are “worried what the outbreak might mean for their business and with no knowledge of how or when they might be affected”.

He said Lloyds was making extra lending available to help firms manage “temporary interruptions to their business and to their cashflow”.

Events

FINTECH WORLD FORUM 2020

21-22 MAY 2020, LONDON, UNITED KINGDOM

Key Stats

Central Bank Interest Rates and Current Libor Rates

GBP Libor (overnight)	Interest (03-12-2020)	Central Banks	Interest Rates
Euro Libor	-0.57614%	American Interest rate (FED)	1.25%
USD Libor	1.08663 %	Australian Interest rate (RBA)	0.50%
CHF Libor	-0.82960 %	British Interest Rate (BoE)	0.75%
JPY Libor	-0.10450 %	Canadian Interest Rate (BOC)	1.25%
GBP Libor	-0.19088 %	Japanese Interest Rate (BoJ)	-0.10%

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