The LendTech Collective
Insights to stay ahead!
Monthly Newsletter| Feb 2020| Issue 102
Mining Better Insights from Data through Analytics
IDC predicts that by 2025 world’s data will grow 61% to 175 zettabytes, with as much of the data residing in the cloud as in data centres. With such an explosion in data, analytics has rapidly changed from being a ‘nice-to-have’ to a ‘must-have’.
In today’s complex business environment, the customer experience has taken center-stage – highlighting new expectations in the way businesses interact with their customers. They expect seamless, consistent, and personalized experiences – that’s where the power of analytics comes into play. By using data and analytics to anticipate and respond to customer behavior, companies can develop new and creative ways to cater to their audiences – revolutionizing the customer experience.
Analytics in lending: It all starts with data
The lending industry is data-intensive with typically massive graveyards of unused and unappreciated credit processing data. As lending firms and credit bureaus face increasing pressure to stay profitable, understanding customer needs and preferences becomes a critical success factor. In this scenario, data mining and advanced analytics techniques are being increasingly adopted by firms. The major areas of focus are:
Credit Scoring: Customized credit models enables credit managers to reduce the lending risk by making data-driven decisions
Budgeting: Firms can streamline the budgeting process with greater efficiency
Fraud Prevention: Data analytic techniques will help the organization to detect the possible instances of fraud and implement an effective fraud monitoring program to protect the organization.
Loan Approval: Can improve productivity and optimize resources and it can decrease loan defaults and help the business to capitalize on available funds
Being the best in an industry is no longer enough; now companies must aspire to be at least at par across industries to compete effectively. So, firms should take the right tactic.
The approach to implementing analytics:
>Align business goals with analytical outcomes
>Identify the right analytical partner/tool
>Identify the best data visualization tools
How can it help the lenders?
The consumer lending business is centred on the notion of managing the risk of borrower default. Credit scoring systems and predictive models attempt to identify the chances of uncertainty and provide guidance for the identification, measurement and monitoring of risk. It gives the lenders a clear picture of whom to trust and who had defaulted the payments in the past. It will help lenders to make faster and more accurate credit decisions. More and more firms start looking at analytics models as the ability to see even a tiny piece of the future can lead to happier customers, improved efficiency and productivity, and more successful business decisions.
1.Helps you set realistic goals
2.Better decision making
3.Helps in mass personalization
4.Increase revenue and lower cost
5.Effective risk management
6.Compliance monitoring and reporting
7.Efficient debt recovery
8.Monitor social media
9.Customer behavior insights
With several years of experience in the lending domain, Insight Consultants offers a powerful and user-friendly solution that enables informed decision-making through accurate predictions and easy-to-build decision models. If you are looking for ways to harness the power of data analytics, CONTACT US
From a Labyrinth of Spreadsheets to Real Time Dashboards
Research by Thomson Reuters suggests that technological advances such as cloud computing and real-time data will have the biggest impact on the corporate finance and accounting function in the next ten years!
Fast growing Start-ups and mid-cap companies will be very familiar with this problem – at the initial stage, there is a lot of work done with spreadsheets. The main areas of interest are:
Proformas – The business model is usually forecasted for a year on how it should perform by design. The idea is then to track the actual performance of each function in the business model against this design document and formulate early actions for corrections as necessary.
Budgets – The more astute ones would budget on a quarterly basis to have a tight control on financial management. Sensitivity analysis on budgets are always yearned for when making decisions on staffing, IT spend etc.
Accounting cycle closure – A monthly closure of the books after recording everything accurately is very important to ensure that financial data used is credible. While cloud-based accounting, applications provide the backbone for this, various reconciliations call for spreadsheets in active use.
Management reports – Usually generated on demand and often someone in accounting is tasked with creating these on spreadsheets.
Very soon, the business leaders will realize that while spreadsheets are very versatile and often unavoidable, even within a robust technology infrastructure, getting real-time insights to drive the business in a competitive environment requires more than what they offer.
(A few illustrations of the dashboard visualization and data sources used are also provided if you are interested in a closer scrutiny. The specimens pertain to a business in is the alternative lending industry.)
3 Steps to a Dynamic Dashboard
Based on our experience of enabling a fast-growing startup from inception to a mature phase, involving real-time dashboards, here are 3 steps to make the transition, for any business in a similar situation.
From management reports to dashboard visualization.
The corporate finance and accounting function need to work closely with the executive leadership to generate reports on demand. If you are struggling for resources or the right mix of talent, you must think of virtual teams that can engage remotely to boost your current capability. Across a few cycles of report generation and reviews, you will arrive at sufficient consolidation required for visualizing a dashboard. (Illustration: Consolidated graphics for the lending business that form a real-time dashboard)
Mapping information flows from the data sources.
A fast-growing business means a dynamic environment even for the technology infrastructure, with applications making their way in and out. Having a clear mapping of data sources and information flows towards useful reports is very important at this stage. (Illustration: Summarized data table)
Implementation of a BI tool.
With the first two steps in place, someone with skills on any BI tool, like PowerBI can build the necessary integrations into the data sources and apply the necessary transformations to realize the dashboard that has been already visualized.
If you are one of those businesses that find yourself in the place where you are ready to take the journey from spreadsheets to dynamic dashboards, by optimizing technology you might already have or can easily procure, feel free to Get in touch with us
In the News
Traditional Lenders Losing More Ground As Fintech Loan Share Surges
The market for personal loans is accelerating quickly, but traditional lenders aren’t seeing any of the gains. When consumers can access credit with a simple app and a tap, banks and credit unions find themselves battling online lenders full bore, as fintech disruptors steal more market share and solidify their lead.
Over the last six years banks have lost 12 percentage points of market share to fintech lenders and credit unions have lost 10 percentage points. Traditional finance companies have lost 11 percentage points of share. Fintech lenders picked up the 33 percentage points, growing from a 5% share of the personal loan market in 2013 to 38% in 2018.
“Consumers have been trained to look online for a fintech lender before they will look for a traditional lender,” says Jason Laky, Senior Vice President and Line of Business Leader at TransUnion, in an interview with The Financial Brand.
Google “personal loan” and most of what you’ll see on the first page will be paid or organic listings for fintech personal lenders like Lending Club, LendingTree, Avant, Marcus (offered by Goldman Sachs), and Rocket Loans, or personal finance sites like Credit Karma, Credit Sesame, and Nerdwallet presenting curated lists of sources of fintech personal loans or the ability to apply once to multiple lenders.
A review of marketing campaigns tracked by Mintel Compere media indicates that many unsecured lenders actively send outbound marketing efforts to consumers as well, sometimes directly, sometimes under the auspices of marketing services.
TransUnion Earns 100 Percent on 2020 Corporate Equality Index
TransUnion (NYSE: TRU) received a perfect score of 100 on the 2020 Corporate Equality Index (CEI), the nation’s premier benchmarking survey and report on corporate policies and practices related to LGBTQ workplace equality, administered by the Human Rights Campaign (HRC) Foundation.
TransUnion is proud to be an employer of choice and the company believes that people are empowered at work when they can contribute their ideas and talents, share their passions, and learn from one another. TransUnion offers several benefits that support equality and inclusion, such as adoption reimbursement and medical coverage for gender confirmation procedures. Associates also can participate in affinity groups such as Out and About, which creates a platform to empower TransUnion LGBTQ associates and their allies. Additionally, in 2019 TransUnion signed HRC’s pledge to support the Equality Act, legislation designed to provide protections against discrimination based on sexual orientation and gender identity in employment, housing, credit, education and other arenas.
“It is an honor to be recognized by the Human Rights Campaign for our continued dedication to equality for our LGBTQ associates the second year in row,” said Anne Leyden, Chief Human Resources Officer at TransUnion. “We believe in providing the opportunity for all associates to learn, grow and contribute at TransUnion, and we strive to create a workplace that reflects these ideals.”
Funding Circle tops FinTech Leaders 2020 ‘Business Lending’ category
Funding Circle announced its first place ranking in the Center for Financial Professionals (CeFPro) FinTech Leaders 2020 Report; winning the category of ‘Business Lending.’
The FinTech Leaders 2020 Report is the most comprehensive independent study of the global fintech ecosystem and rankings of the leading fintech players around the world. The research is industry-led with independent insight from CeFPro’s specialized FinTech Advisory Board of over sixty experts; evolving around the end-user perspective, it is inclusive of over 1,200 surveyed perspectives and votes from CeFPro’s community of finance, technology, operations, risk and compliance professionals.
“CeFPro’s FinTech Leaders report takes the pulse of the industry through end-user votes and perspectives and is supported and endorsed by 60 international industry Advisory Board Members, from across multiple disciplines and geographies. The research report, along with the rankings, are formed from votes cast by end-users,” said Andreas Simou, Managing Director, CeFPro. “Funding Circle’s pole position in the Business Lending category was entirely decided by industry votes and can be considered an endorsement by their peers with what has been achieved in such a relatively short period of time.”
As the largest small business specialist lender in the world, Funding Circle has upended the traditional lending system and created a system that puts small business owners at the center. This modern lending approach enables small businesses to access fast, affordable and transparent funding for a variety of business needs; while investors have the opportunity to earn attractive, risk-adjusted returns from a previously inaccessible asset class. Funding Circle’s business lending platform is the largest operating in any of our geographies by total global loan volume, number of investors and loans outstanding.
Mortgage rates sink to their second-lowest levels in three years
Mortgage rates continued their slide over concerns about how the worsening coronavirus outbreak will affect the global economy.
According to the latest data released by Freddie Mac, the 30-year fixed-rate average sank to 3.51 percent with an average 0.7 point. (Points are fees paid to a lender equal to 1 percent of the loan amount and are in addition to the interest rate.) It was 3.6 percent a week ago and 4.46 percent a year ago. The 30-year fixed average hasn’t been this low since September and is at its second-lowest level in three years.
The 15-year fixed-rate average dropped to 3 percent with an average 0.7 point. It was 3.04 percent a week ago and 3.89 percent a year ago. The five-year adjustable rate average went down to 3.24 percent with an average 0.3 point. It was 3.28 percent a week ago and 3.96 percent a year ago.
“Mortgage rates fell over the past week, heavily influenced by growing global fears surrounding the ongoing coronavirus outbreak that continued to drive market movements this week,” said Matthew Speakman, a Zillow economist. “While the epidemic’s impact on global commerce remains unclear, markets appear to be erring on the side of pessimism, preparing for slowdowns in growth and, potentially, another cut to the Federal Reserve’s benchmark interest rate.”
LendIt Fintech USA 2020
13-14 May, Javits center, NEW YORK
Central Bank Interest Rates and Current Libor Rates
|GBP Libor (overnight)||Interest(01-10-2020)||Central Banks||Interest Rates|
|Euro Libor||-0.56786 %||American Interest rate (FED)||1.75%|
|USD Libor||1.57413%||Australian Interest rate (RBA)||0.75%|
|CHF Libor||-0.78460 %||British Interest Rate (BoE)||0.75%|
|JPY Libor||-0.09667 %||Canadian Interest Rate (BOC)||1.75%|
|GBP Libor||0.66763 %||Japanese Interest Rate (BoJ)||-0.10%|