Why Embedded Lending Will Dominate the FinTech Landscape in 2021
Hailed as “one of the most transformative trends in fintech,” embedded lending is on the threshold of a surge in uptake this year as more consumers and businesses embrace non-traditional financial providers. Embedded lending integrates with the systems software that most companies already use to synchronize and track their operations. In a more holistic sense, it’s part of a tech-enabled revolution that enables virtually any kind of business to provide a game-changing financial service, quickly and relatively cheaply. The best-of-breed embedded lending needed for this innovation is: Robust enough to process loans through their entire life cycles, from approval to settlement, and… Flexible enough to initiate lending at any point of sale, from e-commerce portals and in-store registers in commercial settings as diverse as retail outlets, equipment showrooms, doctors’ offices, warehouses, and manufacturing plants. Read case studies. The result is an approach to lending that’s stripped of its dependence on financial-service institutions, and able to deliver and maintain exceptional functionality. In addition, embedded lending is becoming widely available in 2021, as the world is expected to start mending from the economic impacts of the coronavirus. Embedded lending can make clients five times more valuable Providing affordable installment plans to your customers through embedded lending is even more urgent in light of venture firm Andreesen Horowitz’s estimate that it can quintuple a client’s lifetime value stemming from improved buyer engagement and more return business. In addition, embedded lending can help enterprises unlock “new verticals where previously the total addressable market for software was too small and/or the cost of acquiring customers was too high,” according to Andreesen Horowitz. Meanwhile, embedded lending is gaining traction for three reasons — two predicted by Andreesen Horowitz, and one the firm couldn’t have conceived before 2020. The rise of digitalization. Terms are important, so let’s define “digitalization” as opposed to “digitization.” Digitization refers to the process or result of converting data and documents into digital formats that can be shared, analyzed, and reformatted in aid of specific tasks or queries. Digitalization — our topic — is about converting business processes to digital technologies instead of paper and manual-input spreadsheets. Because digitalization enables businesses to extend credit to customers more efficiently without requiring financial-institution involvement, lending is both cheaper and easier to tailor to the needs of the business and its customers. Fintech as a means to new revenue streams. Online retailers like Amazon and Walmart have paved the way to more sales by offering embedded lending to fund purchases, and other software-as-a-service players are similarly tapping into credit markets by offering consumers and businesses bite-size installment loans to help them get the equipment and services they need to thrive. Meanwhile, in a development that could not have been foreseen, Covid-19 took a wrecking ball to economies, healthcare systems, and interpersonal interactions — including those centered on commerce — around the world. In doing so, the pandemic fast-forwarded new-tech adoption by years, as businesses adopted cutting-edge technologies earlier than anticipated to make up for lockdowns and accommodate no-touch and physically-distanced transactions. One mid-2020 report predicts embedded lending will encompass a market opportunity worth about $2 trillion by 2030, compared to a $3.6 trillion addressable market for the top 30 biggest banks and insurance companies at present. Together with embedded payments and embedded insurance, the total embedded market is forecast to surpass $7.2 trillion in addressable market value before this decade is out, according to the same source. Embedded lending means making more of what you already have In this landscape, some experts say the time is near when the term “fintech” will be redundant. “Nearly every company will derive a significant portion of its revenue from financial services,” according to a 2019 take on the convergence of financial service and technology — a development likely to occur, the author emphasizes, “in the not-too-distant future.” Businesses with access to embedded lending can make existing customer engagement even deeper, adding cross-sell opportunities to revenue from finance charges. Customer relations can be further improved with permission-based behavioral-finance inputs that, with help from the embedded tech’s machine learning and artificial intelligence, reduce approval times to mere seconds sharply reduce risks inherent to lending. “In practical terms, the most impressive aspect of embedded lending is its ability to increase revenue at a customer-acquisition cost of zero, or close to it,” says Elena Ionenko, co-founder and business-development head of Turnkey Lender, a leading provider of embedded-lending technology to businesses of all sizes and kinds. “You’re leveraging existing customers in new and deeper ways.” Lending capabilities for every business, everywhere As a result, Ionenko adds, “It’s conceivable that system software will someday include lending and other financial-service technology as a standard feature — both where it’s now common, as in the capital-equipment space, and where it’s still novel, like in types of retail businesses and even healthcare.” For Alex Lazarow, fintech investor with Cathay Innovations, another advantage of embedded lending is its simplicity. “As a rule of thumb, the more distant the core offering is to financial services, the simpler the embedded finance product needs to be,” he writes in a piece for Forbes. So, where something like real-estate lending can afford to put consumers through some hoops, similar parameters around extending credit to facilitate the purchase of an armchair or a toolbox just won’t fly. In this view, “industries far and wide” are beginning to incorporate “financial products and services into their core offerings,” adds Lazarow. In other words, a shift in how and where lending is done that has been emerging organically since at least TurnKey Lender opened for business in 2014, is coming to fruition just in time for a post-Covid economic rebound. Interested in seeing how this works in action? Request a personalized demo today.
TurnKey Lender at the Forefront of The Coming Boom in Commercial-Use Drone Financing
The commercial drone market is set to experience an even bigger boom as more consumers and businesses start to deliver goods, increase security, or enjoy the freedom of filming and flying, triggering greater demand for financing options in a market that caters to large and small buyers alike. Drones, which the US Federal Aviation Administration classifies as “unmanned aerial vehicles” or UAVs, are aircraft that are either remote-controlled or programmed to perform tasks on specific routes autonomously. The market for drone-related hardware and software meant for commercial use will be worth $21.8 billion by 2027, representing a six-year compound annual growth rate of 16.2% from 2020 through 2026, according to a recent industry report. The diverse (and growing) group of industries behind this demand includes agriculture, construction, warehousing and fulfillment, real estate, security, manufacturing, and energy infrastructure — not to mention an array of non-military public-sector applications from hazardous-site inspections to border monitoring. Meanwhile, governments are scrambling to provide safety regulations for a world in which drones join ships, trains, and trucks to ensure the mass movement of goods to market. Drone orders need financing to keep pace with demand, shortages The need for drone financing is further accelerated by two factors linked to the coronavirus pandemic. First, lockdowns and social isolation have increased pressure on online emporiums like Amazon, Etsy, Walmart, and their non-retail counterparts to make site-to-site delivery faster and cheaper. Second, measures to slow the spread of Covid-19 in China — recently stepped up — have disrupted the manufacture and delivery of drone-related hardware and software. The resultant scarcity makes it harder for companies to lock in commercial-drone orders without installment financing to make such investments commercially viable. To understand commercial-drone financing, it helps to know that, though order size varies significantly, it’s almost always a major investment relative to the size and scale of the buyer in question. “In this light, the need for credit is as acute for a rancher who wants a couple of drones to keep track of livestock and inspect fencing as it is for an online retailer or parcel-delivery service looking to buy a fleet of drones to speed last-mile drop offs,” says Dmitry Voronenko, CEO of lending-software maker TurnKey Lender. “Relatively, both scenarios represent significant outlays in the name of long-term savings, and both types of purchase are easier to greenlight when financing is an option,” adds Voronenko. Commercial-drone sellers who take this message to heart don’t have to wait to extend next-generation lending to eager purchasers. They can provide lending that, boosted by machine learning and artificial intelligence, provides instant credit decisioning and automated processes — along with flexible loan and lease options — that improve customer experience, increase order size, and facilitate return business. Commercial drone buyers vary significantly, so customized financing is a must But with so many different types of commercial-drone buyers out there, configuration freedom of provided financing is vital. Fortunately, with the right lending software, drone sellers can: Create customized credit products in seconds Streamline and automate legacy financing processes for digital transformation Deploy bank-grade scoring tailored to in-house business specifications and enhanced by proprietary artificial intelligence Virtually eliminate human error and operation inefficiencies Drone financing can go even deeper. For example, TurnKey Lender’s cloud-based platform works with drone makers’ processing infrastructure to provide seamless loan management, alerts and reporting, and customer portals, in an integrated solution that incorporates flexible business logic. This fusion lays the groundwork for deep-data analysis to shed light on customer performance and preferences, and thereby shape potential loyalty programs. In turn, responsive settings help drone manufacturers roll out new financing programs and special offers in minutes. Robust lending technology also means there’s no limit on lending models a drone seller can make available, including vendor financing, supplier financing, inventory financing, factoring, rent-to-own, lease to own, etc — in just about any permutation imaginable. In-house financing supported by robust technology means more dynamic scoring According to TurnKey Lender’s Voronenko, the most important point about commercial-drone financing is that you don’t have to be a dedicated lender, or do business with a bank, to provide it. While some specialty UAV lenders have emerged, the alternative of “using purpose-built lending software from a fintech company like ours means the data, the customer information, and the fees stay in-house — with you, the drone maker — instead of relying on a third-party financier that can also confuse customers about who they are ultimately doing business with,” says Voronenko, a lending-tech pioneer who co-founded TurnKey Lender in 2014 and provides capital-equipment financing software to sellers and manufacturers in 50+ countries. TurnKey Lender also helps drone makers by responsibly pushing the boundaries on traditional credit scoring. While commercial credit scores are important in evaluating loan applicants, nothing sheds more light on a commercial applicant’s creditworthiness than the structure of its income, their purchasing behaviors, and their short- and long-term cash flow patterns. With the applicant’s permission, TurnKey Lender empowers drone dealers to pull bank-statement data and analyze in terms of credit standing compared to vast data arrays filtered by artificial intelligence. Besides helping drone makers can turbo-charge their credit scoring by reviewing cash-flow dynamics and gathering income and revenue data, state-of-the-art lending technology can set them up to comply with anti-money-laundering and know-your-customer rules in any jurisdiction. In gauging the potential impact of commercial drones, not even the sky’s the limit Loan servicing and management is also made easier when drone manufacturers use lending software that’s designed specifically for capital-equipment financing. TurnKey Lender’s white-label service suite is time-tested and proven reliable by some of the world’s leading lenders to meet the credit needs of businesses large and small. Using its software, drone manufacturers configure their loan servicing so that: Repayments can be made automatically or through the borrower’s dedicated portal Drone makers can send loan statements either monthly or at other intervals As well as appearing in the credit recipient’s online portal, due and past-due notifications can be pushed via text and email Industrial-use drones represent a big and exciting new commercial opportunity with unlimited potential applications. For manufacturers to get more drones out working for their
TurnKey Lender’s Digital Lending In 2020, A Year In Review
The year 2020 was a study in cause and effect. While the coronavirus outbreak became a full-blown pandemic, measures to slow the disease’s spread caught on, in some cases triggering technology upgrades years earlier than planned. Before we zero in on advances in uptake and functionality regarding lending technology, let’s put the year in perspective. To date this year worldwide, at least 2 million people have died from Covid-19, a contagion that attacks the lungs of mammals, and kills via blood clots, multi-organ failure, and septic shock. Making matters worse, the long-term health effects on survivors of the disease can only be guessed at, while workplace disruptions, supply shortages, and a litany of distancing measures have slowed economies and strained public-health infrastructure around the globe. Americans can add to their list of 2020 woes a contentious presidential election against a backdrop of civil unrest, and the stingiest per capita stimulus response to the pandemic of any G7 nation. It’s hard to find a “but on the bright side” rejoinder to any of this. Notable exceptions in the form of kindness, humor, and resilience notwithstanding, 2020 was a desperate, unwholesome, and tragic year, and it’s likely to be remembered in those terms for decades to come. Technology on the rise Meanwhile, something extraordinary happened with business technology in 2020. It boomed even as other sectors atrophied. Consider this. It took the tech-heavy Nasdaq Composite Index about 13 years to recover from the one-two impacts of the dot-com meltdown and 9/11, when the index lost about 75% of its value. Year to date through late December, the index has risen 36%, despite global lock-downs and a nose-dive in March and April. Zoom, a video-conferencing provider that took off in popularity as a way to conduct work-from-home meetings, gained about 145% in share-price value this year. Among other lockdown winners on stock exchanges this year were online retailers like Amazon, gaming console makers such as Microsoft, and a slew of lesser-known tech innovators in fields as diverse as online chat, cybersecurity, and biotechnology. Lending technology enjoyed a significant boost as well, according to Elena Ionenko, co-founder and business-development chief at lending-software maker TurnKey Lender. “In 2020, technology around end-to-end digitization went from something lenders were just starting to think about to something many now see as an immediate must-have,” says Ionenko. “We’ve never had so many inbound queries.” The reason? “Lenders of all types — from traditional players and retailers to medical practices, auto dealerships, heavy-equipment makers, peer-to-peer lenders, and others — gear up years ahead of schedule because of the pandemic,” explains Ionenko. In other words, the Covid pandemic has opened the door to big-picture benefits to lenders such as: Loan approvals in minutes — and the ability to process millions of loans a day Intuitive web and mobile interfaces for unmatched client service 40%+ better applicant conversion rates, 200%+ better operational efficiency Convenience and flexibility that extends customer lifetime value Lenders equipped on those fronts know the heavy lifting is getting done automatically, freeing them to focus on business development and other front-office considerations. On the other hand, lenders using legacy technologies to process financing applications, select risk-appropriate terms, make credit decisions, and collect installments may find they’re losing ground to rivals. Much smarter lending The advantages of end-to-end loan processing — at root, more repeat business, and lower operational costs — are accentuated by developments in “machine learning,” which allows for faster and more accurate decision-making. Machine learning is an aspect of artificial intelligence that takes into account aspects of its environment to make predictions based on specific inputs, mimicking human cognition. Machine learning supports other aspects of artificial intelligence using algorithms and statistical models to perform many if-this-then-that type tasks virtually at once, drawing on patterns and inferences rather than explicit case-by-case instructions. In other words, machine learning takes relevant inputs and constructs mathematical models that bring “thinking” to bear on complex processes. Such improvements matter in a world where technology-enabled financial service is shaking traditionalists to the core. Reflecting this transformation, the global digital-lending platform market is expected to approach $20 billion by 2026 for a compound annual growth rate of 19.6% through the seven years prior. Besides cost savings, faster decisions, and happier customers, machine-learning supports benefits such as: Enhanced accuracy Higher systemic processing efficiency Large-volume data analysis for advanced marketing insights Streamlined compliance By helping lenders push past old-school loan-application assessment, artificial intelligence and machine learning can help them avoid making subjective or discriminatory decisions without having to put too much stock in third-party credit scoring. Instead, applicant traits like spending habits, social-media comportment, and behavioral “tells” regarding financial obligations form more complete pictures of would-be borrowers. Accolades for TurnKey Lender As a pioneer of artificial intelligence in credit assessment and other aspects of lending, TurnKey Lender came in for praise in 2020. The 2020 Canadian Lenders Association commended TurnKey Lender for resilience in the face of adversity, and innovation in a time of crisis as the company worked to ensure the success of its clients. The financial-service consultancy Aite Group zeroed in on TurnKey Lender’s Unified Lending Management (ULM) Solution for particular praise in the categories of Client Strength and Product Features categories — and top prize as Global Innovator. “Any lender getting established in the consumer loan market should consider TurnKey Lender’s ULM platform,” according to Aite. The Financial Technology Report named TurnKey lender CEO and co-founder Dmitry Voronenko one of the top fintech CEOs in the Asian-Pacific marketplace. Elena Ionenko was highlighted as one of leading female opinion leaders by Global FinTech Series along with Carla Goshn, Visa’s head of emerging fintech, Peggy Alford, executive v.p. of Global Sales at PayPal, and Diana Biggs, head of innovation for HSBC’s private-banking unit. Meanwhile, TurnKey Lender continued to innovate in 2020. The company rolled out its v7.3, a scheduled release that includes major new functionality enabling fully operational financing out of the box, updates to the existing features, and minor improvements. It revamped its mobile app to include face and document recognition as standard features Having made the grade for organizational oversight, vendor management, risk
How Manufacturers Can Attract More Customers with In-House Financing
Let’s say the business equipment your company manufactures comes in at a higher price point than most small- to mid-size enterprises are comfortable paying out at any one time. And let’s keep in mind that the notion of “higher price” varies depending on how mission-critical the equipment in question is, and of course what specific prices we’re talking about. In this view, a real estate agency being asked to pay a $500 lump sum for one of those self-directed vacuum cleaners to keep its office spic and span may hesitate to make the investment. After all, $500 is a good chunk for a vacuum cleaner, and a Roomba isn’t exactly core to the business of selling property. On the other hand, it’s pleasant and impressive to have a clean office, and you might save enough on other janitorial costs to offset that $500 pretty quickly. Still, $500 all at once… Complications from the pandemic Now let’s suppose a small forestry company learns it could secure bigger contracts if it bought a bigger log loader to help it gather and ship more raw timber. If fact, their research and experience leads them to believe a specific rig going for about $30,000, and available directly from the manufacturer, would do the trick nicely. Again though, $30,000 can be tough to come up with on the spot, even if the machinery seems likely to pay for itself in a few seasons. When a business is uncertain about equipment purchases from a financing perspective, it can be enormously beneficial for manufacturers to offer to let them pay in installments. Sometimes it’s easier to commit to paying for a $500 robot floor cleaner over time than to shell out immediately. Not because that’s a prohibitive sum, but because it can make better sense from a cash-flow perspective to start enjoying the benefits of a clean office and lower overall janitorial costs when the equipment is being paid for in digestible installments. Same goes for the forestry company, which may prefer paying for its new logging equipment over several years to spread the outlay out as even the company benefits from its capital investment. Factor in an unprecedented economic contraction in Q2 this year brought on by the coronavirus pandemic, and you can sense why many businesses are thinking twice right now before making large purchases, even if the spending is essential to their post-Covid competitiveness. “As a consequence, being able to finance client purchases is a boon to manufacturers large and small — whether the offering consists of robo Hoovers, log loaders, custom-embroidery machines, photocopiers, or blueberry rakes — especially in the face of systemic economic challenges like those we’re all confronted with these days,” says Dmitry Voronenko, co-founder and CEO of TurnKey Lender, a pioneering lending-technology maker. “The big question for manufacturers, especially smaller ones that can’t rely on a network of dealerships and re-sellers, is how to provide financing.” Whether to outsource or do it in-house In other words, should a manufacturer engage with a third-party lender — whether it’s a chartered bank or a specialist equipment-purchase lender — or work with a technology provider like TurnKey Lender to provide an in-house, white-label lending solution? The answer to the question may differ from manufacturer to manufacturer in response to a thorough review of its own as well as its clients’ business priorities. Among the factors that favor third-party lenders are: Ubiquity. It’s easy to find established lenders in the capital-equipment game with a quick web search. Absence of credit risk Less need for staff training Receiving the full purchase amount upfront. The actual loan settlement is between the buyer and the third-party lender. The manufacturer is out of the loop once its paid and the equipment is off its hands In this light, the in-house-with-technology option may seem like a second choice, but it really shouldn’t be — certainly not in this day and age. TurnKey Lender caters to a growing contingent of scrappy yet sophisticated manufacturers with state-of-the-art, cloud-based lending functionality powered by cutting-edge artificial intelligence. This option’s advantages include: Increased operational efficiency supported by artificial intelligence to facilitate smart decisions quickly Improved portfolio yield from technology that lets retailers optimize portfolio yield by working only with the most profitable customers along with predictive models to pinpoint optimal rates and terms 100% of transaction fees Staff training and 24/7 IT support and customer service to answer the retailer’s questions in real-time Client-data integrity and security. In this model, customer data is not shared with third parties In-house underwriting rules. The manufacturer sets its own criteria for credit decisions and controls which clients it wants to approve using risk-based pricing to control risk Business metrics to help manufacturers get a deeper understanding of client behaviors and preferences Mobile-lending capabilities via encrypted apps for secure, on-the-spot service whether the client representative is there in person or using a connected device remotely Affordability due to its modular structure. With TurnKey Lender, a manufacturer can start small and add functionality as needed Scalability that lets a financing program grow as the business grows Request a live TurnKey Lender demo tailored to your business. Learn more: What You Need to Know About In-House Customer Financing & 4 Business Types That Will Benefit From It in 2021 Further benefits of the in-house option Tech-enabled in-house lending also enhances client loyalty to the manufacturer. With a fully-supported white-label you don’t have to worry about clients getting confused by third-party documentation. This makes for more ongoing “touch points” between the manufacturer and its clients, which leads to opportunities for loyalty-program enrollment and for up-selling. The fact that in-house lending, at least with TurnKey Lender, uses advanced AI to make credit decisions and set rates can provide more scope to provide financing for longer-term contracts, such as the logging equipment mentioned earlier, as well as big-ticket items needed by healthcare professionals. Third-party lenders can cost their clients on this front, rejecting applications that look riskier than they really are — subtleties non-industry participants may overlook. “Equipment financing by installments isn’t a cure-all,” says TurnKey Lender’s Voronenko.
Optimizing Loan and Lending Performance in 2021
There’s a widespread perception in the marketplace that end-to-end lending automation comes at a high cost — both in terms of its literal price tag and the operational compromises needed to make such automation a reality. This is untrue when it comes to one leading lending-technology provider. “TurnKey Lender solves every problem there is through the entire life span of every loan there is, from accepting applications to underwriting to servicing and collecting payments,” says Spike Hosch, executive director of BetterFi in Coalmont, Tenn. “Turnkey Lender is also many times more affordable than a lot of other options, including other all-in box solutions.” Support for all lending needs and strategies In the run-up to a post-Covid world, lenders are under pressure to cut costs and reduce risk — while boosting sales by meeting customer expectations head-on. For traditional and non-traditional lenders alike, anything shy of this is considered inadequate in the face of an expected burst of pent-up demand loosed by a return to “normal” life in 2021 and 2022. To help meet this need, TurnKey Lender offers its Unified Lending Management (ULM) platform, which streamlines and automates every lending process from application to final pay-off. This all-digital platform speeds crediting decisions that are bolstered by flexible criteria and built-in artificial intelligence. Whether a lender chooses the ULM as an end-to-end platform or a modular version to address specific needs on an existing platform, TurnKey Lender has the technology and real-time support to strengthen any organization’s loan portfolio. With true end-to-end automation, TurnKey Lender offers enterprises: Origination, servicing, administration, and collection on a fully integrated platform The ability to phase out old lending components and replace them with the latest fintech More time and resources spent on business development and customer service, less time mired in credit checks, ID verification, CRM updates, and collections Actionable lending intelligence derived from accessible data analytics A “white label” approach that ensures their brandings stays top of mind With modular lending-platform architecture, meanwhile, lenders can further expect: Lower costs — enterprises pay only for the parts they use A system that’s configured precisely to their business processes Seamless connectivity to all third-party systems and data providers Though spurred by the coronavirus, demand for digital lending capabilities was on the rise before this pandemic stormed into our lives late last winter. Covid is speeding the wheels of innovation In a pre-Covid call, Standard & Poor’s reckons Digital lenders focused on small and medium enterprises, or SMEs, will see a five-year compound annual growth rate of 21.5% through 2021. S&P predicts consumer-oriented digital lending — a rather more mature market than its commercial counterpart — will see a compound annual growth rate of 12.4% in a five-year period ending on New Year’s day 2022. If anything, says TurnKey Lender co-founder and business-development chief Elena Ionenko, “The demand we’re seeing suggests bigger growth rates through 2021.” And she says this call holds true whether the global economy comes roaring back with help from an effective and widely distributed vaccine against Covid next year, or if the post-pandemic era takes longer to shake off. “If economies respond positively next year to one or more forms of inoculation, there will be more demand for SME lending because consumers’ demand for goods and services will increase,” says Ionenko. “But even if the pandemic continues past mid-2021, pandemic-era requirements for low-touch, fast, and accurate lending technologies like ours will persist. In fact, psychologists think some of the social habits we’ve picked up in 2020 — distancing, extra handwashing, masks perhaps in flu season — will remain with us for years to come.” Adds Ionenko: “In all scenarios, a convincing case is being made for a rapid conversion to digitized lending, compressing into a few years a rollout we foresaw occurring over a decade or more.” No matter what type of business is doing the lending — traditional bank, innovative retailer, or business-to-business financier — each needs to adopt sound digital strategies to keep consumers from switching allegiances to digital-only players, typified by personal-finance apps such as Monzo and Expensify. “Their team was very communicative” The benefit of third-party lending technology is further highlighted by the assertion that up to 90% of banking innovations come from outsiders, most often vendors with the capital backing and sales experience required to make it past banks’ arduous procurement gatekeeping. Lenders that use TurnKey Lender’s ULM platform can expect a raft of such breakthroughs, including: A loan origination engine powered by the self-learning of deep neural networks for perpetually optimized artificial intelligence Configurable loan-application forms for superior user experiences and higher conversion rates — partly from the ability to new customer segments with alternative credit scoring techniques Adjustable credit scorecards to meet your company’s specific business needs and risk parameters For BetterFi’s Hosch, a tech vendor is only as good as its ability to listen and respond appropriately to its clients — and on that basis, TurnKey Lender came through. “From the outset, their team was very communicative,” says Hosch. And, crucially from a trust-building standpoint, “they let us test out a demo of their solution that let us really see if it met our needs.” Hosch also praises TurnKey Lender’s frankness. “They’re very transparent in terms of pricing out upgrades, and pointing out things we needed that TurnKey Lender doesn’t offer,” he says. “In the end, they let us be more efficient at every step of the lending process.” To see how TurnKey Lender has helped businesses of all industries on six continents and how your business can benefit sign up for a demo. Here’s Spike from BetterFi in a customer success story: Read the full BetterFi case study: Consumer Lender Increased Applications Volume By 400% Browse all case studies.
Capital Equipment Financing for SMEs in a Post-Covid Marketplace
It’s emblematic of economic growth, the view of a machine — a building crane, say, or a log loader — toiling against otherwise immovable objects to meet the demands of the marketplace. It’s hard not to stand and marvel. So it’s fitting that capital-equipment financiers (CEFs), which help enterprises acquire capital equipment, are gearing up to play a major role in the global economy’s recovery from the coronavirus pandemic. For many of these lenders, however, the status quo is inadequate. They’re hobbled by last-generation lending technology that’s slow, cumbersome, and rigid. Here, we’ll show how some CEFs use breakthrough fintech to help companies on the economy’s front lines prepare for a post-Covid recovery. Lay of the land for CEFs disrupted by Covid For many businesses, purchasing equipment outright makes less sense than paying by installment. That way, installment payments can be offset by commercial gains derived from using the equipment. And it’s not just large corporations looking to control the immediate costs of capital equipment — a category encompassing everything from farm machinery to medical devices, assembly-line robots, transportation equipment, enterprise software, and even mowing machines. Middle-market companies seem equally keen to continue a 2019 trend that, despite generally slower capital-investment spending, still saw a 4.7% increase in equipment financing last year, as low-interest rates fueled a rise in financing software and equipment purchases, according to the Equipment Leasing & Finance Foundation. Despite suffering in the early days of the pandemic, CEFs seem to have benefited since then from even lower interest rates, and stimulus payments to consumers and businesses in much of the developed world. In the US, for example, the Federal Reserve cut the prime lending rate to zero, and Congress enacted the $3-trillion CARES Act to help keep households and vulnerable businesses afloat. While CEF verticals like mining gear, aircraft, mining equipment found no respite from a Covid-induced slowdown, computers and software roared back to meet the demand for remote-office equipment for around 35% of the working population. Fresh off the sharpest drop in GDP since World War II, CEF outlook for 2021 “is among the most uncertain on records,” says the Washington, D.C.-based Equipment Leasing & Finance Foundation. But the industry group expects general improvement for equipment financiers next year. That said, it expects large banks “to step back from smaller-ticket deals and focus on core markets.” This, says the group– providing, the group says, “an opportunity for independents to increase market share” with small- and mid-size businesses. What small- and mid-size enterprises need from a CEF CEFs targeting a vast middle market of businesses that need machines, software, and other equipment to provide core lending functions need to digitize loan-approval processes that also provide better insights on risk and more dynamism around loan terms, says Dmitry Voronenko, CEO and co-founder of an industry-leading lending-tech company, TurnKey Lender: “It’s case by case, but we frequently advise capital-equipment financiers, especially those that work with small- to medium-size enterprises to look for solutions that are broad and flexible,” says Dmitry Voronenko, CEO and co-founder of lending-tech innovator TurnKey Lender. “They need a solution that will digitize loan-approval processes, be tailored to their specific needs, and then get them to market very quickly.” Generally, CEFs look for lending tech that: Automates legacy processes across each loan’s life cycle Provides nearly instant approvals Boosts sales Is configurable to your specifications Eliminates manual processes Actively and accurately assesses risk Doesn’t require specialist employees While most of these attributes are easy to understand, it’s worth underlining the value of a lending system’s flexibility. For industries that face periodic stress — like the medical field in flu season, or, indeed, during a 100-year pandemic — or seasonality, the ability to provide incentives such as zero down, and in-season-only payments can be a lifeline, and a nice way for a CEF to stand out from rivals. At TurnKey Lender, this wider view, coupled with pervasive digitization, speeds and integrates all processes, from initial application to the loan’s discharge. The integration and automation needed for such outcomes are bolted to the tech company’s Unified Lending Solution. This digital platform includes application processing, risk assessment, approval, loan origination, underwriting, servicing, collection, reporting, archiving, compliance, and more. It also serves to pre-qualify applicants in minutes using the AI-driven credit-approvals engine, improving the user’s experience with the system. TurnKey Lender’s Unified Lending Solution for CEFs In this way, TurnKey Lender applies proprietary machine-learning algorithms and deep-neural networks to help CEF clients evaluate loan applicants. While scorecards and their underlying decision rules are built into the TurnKey Lender’s platform, these can be fine-tuned to meet the particular needs of a given CEF. Customization also comes to the fore in the form of “modularity” — which lets CEFs focus on the parts of the platform they use most while enjoying the benefits of an intuitive white-label interface that preserves their branding. This flexibility can be crucial in some sectors for other reasons. Medical and dental practices that provide proprietary financing with help from robust lending technology can spend more time with patients and less time on onerous payment negotiations — and the same can be said for mining operations, agri-businesses, or logistics companies. “We exist to help everyone on the value chain do what they do best and most profitably. More important, point-of-treatment financing means end-customers get the products, services, or treatments they need rather than the care they happen to be able to afford at the moment,” says Voronenko. But all businesses that require major capital expenditures to compete need CEFs with access to lending systems that busy staff members can use without a major investment of time and energy. “It’s true that a lot of the capital-equipment financiers we speak with are looking now — and I mean right now — for tech advantages they previously thought they’d be assessing five or 10 years down the line as a way to function more efficiently,” says Voronenko. “Now, because we’re all operating in a landscape that’s been bulldozed by the coronavirus, they say the 10-years-off upgrades
Alternative Credit Scoring for Non-Traditional Lenders in Canada
The Bank of Canada recently rained on hopes for a quick recovery from the economic impacts of the country’s coronavirus slowdown — a hope nurtured, many thought, by signs of economic resilience over the summer. Alas, late in October, the Canadian central bank issued a Monetary Policy Report suggesting that hard times will continue, perhaps all the way through 2022. “The Bank estimates that over 2020–23, persistent scarring effects of the pandemic on the labour force,” the Bank of Canada writes. The word “scarring” is a favorite of chief central banker Tiff Macklem, who has been issuing periodic warnings of tissue damage to the Canadian economy since the pandemic was declared in mid-March 2020. Assessments like this should prompt non-traditional lenders — conceivably any business that might want to extend credit, from retailers to car dealers — to rethink how they gauge loan applicants’ creditworthiness. Why? Because businesses of all sizes in every province and territory will be looking for capital to help them through a recession made worse by: A pandemic that isn’t over, resulting in The need for ongoing social-distancing measures that can snag business recovery, such as expensive new workplace configurations and equipment Pinched household budgets and other recession-related woes, leading to Subdued consumer spending Meanwhile, many lenders will be making credit decisions based on inputs that aren’t adequate to the times. Credit scoring in Canada in the face of uncertainty Applying old-school analysis where new market conditions prevail could curtail lending and stall economic activity. For lenders of this ilk, being behind the times could jeopardize opportunities to make sound and profitable loans. Download the free white paper now: HOW-TO-WIN-KEEP-CUSTOMERS-WITH-RETAIL-FINANCING Lenders traditionally rely on credit scoring based on objective financial data and subjective views on some of the would-be borrower’s non-financial traits. In this approach, the financial data includes the prospective borrower’s credit history, and line-item comparisons of historical financial statements submitted by the applicant. Among traditional non-financial inputs are the would-be borrower’s profile (employment, status, degrees, home and car ownership), a qualitative assessment of the borrower’s previous dealings with the lender, and, for business loans, relevant business plans. In this approach, financial data has more weight in determining how stable and efficient the applicant is when it comes to their finances. Although recent word from drug maker Pfizer seems to bode well for a Covid-19 vaccine, the company’s claims have not been verified, and, given the logistic challenges, widespread distribution of a vaccine is unlikely before, at the earliest, mid 2021. For now, it’s prudent to remember we don’t actually know how long either the pandemic or its economic aftershocks will last. “These uncertainties erode the rationale behind applying only traditional credit analysis,” says Elena Ionenko, co-founder and business-development head of lending-technology provider TurnKey Lender. “After all, real-time financial data can be as indicative of repayment as historical information.” Adds Ionenko: “This analysis can be performed on a continuous basis — triggering monthly or quarterly reports — that provide dynamic updates on the loan, which helps lenders see how the borrower is coping in real time with the challenges of a recession, while comparing these results to pre-crisis data.” Guided discretion In a typical lending scenario, lenders start off by “scoring” loan applicants to determine the likelihood of their returning an amount owed with interest in a given period. Most use third parties such as Fair Isaac, whose Canadian FICO scores assign numerical values between 300 and 900, with 900 indicating maximum creditworthiness. For the most part, this traditional scoring relies on factors such as: How long the applicant has been using credit The amount and type of debt an applicant already has Current interest rates on outstanding accounts Lenders use these reports to generate a risk profile of the applicant, which helps lenders determine whether to make a loan in the first place, and the terms of any loan that’s approved. Obviously, applicants with low credit scores tend to be assigned higher rates of interest than those with higher scores, though the ultimate decision is made by the lender, with FICO inputs used as guardrails. Of course, the pandemic has eroded the credit standing of many who have lost jobs or seen wages cut, necessitating new ways to evaluate consumer creditworthiness. Low FICOs and the unbanked For example, a FICO score won’t tell if an applicant has lost her job or seen her income dip in the public-health crisis. One solution to this increasingly widespread problem is working with alternative data sources for determining creditworthiness. One of the most reliable sources of information? An applicant’s bank accounts. Read about TurnKey Lender Bank Statement Scoring on our knowledgebase. Some lending-technology providers empower lenders to examine applicants’ bank accounts and track transactions to take note of spending habits and monitor employment and non-employment income including such responses to the pandemic as stimulus payments, forgivable loans, and unemployment-insurance proceeds. Some advanced lending-tech firms equip lenders to see these data points, and more. For example, alternative scoring can uncover normally hidden risks such as an applicant’s gambling expenditures and overdraft durations and apply them to credit decision making. Read about TurnKey Lender’s AI-Powered Decision Engine. And for consumers who are unbanked or underbanked — 18% of Canadians, according to ACORN Canada — alternative scoring is a must. More so when you take account of LexisNexis research indicating that 51% of traditionally unscorable applicants in the US are as creditworthy as consumers with high traditional credit scores. Augmentation, not replacement “This doesn’t devalue traditional credit scoring,” says TurnKey Lender’s Ionenko. “For predictive power, no one alternative approach is as formidable as credit-bureau input.” Alternative data points are more numerous, more scattered, and less organized than the data that contributes to a traditional credit score, she explains. “This means neural networks and other AI-based tools are required, which is an approach we pioneered.” Fortunately, these resources are now available to lenders, and the additional intelligence this normalized alternative data provides helps lenders understand their customers better, make better loans, and build better-performing loan portfolios. Years using alternative data sources to assess consumer creditworthiness in the developing world has paid off for some lending-tech makers, giving
The Remarkable Rise of Point-of-Sale Financing in 2020 and Beyond
Point-of-sale financing isn’t new, but now it’s gaining more traction in the retail space, energized by a combination of technological advancements and consumer demand for installment-purchase alternatives as the coronavirus pandemic weighs on household access to liquidity. POS installment financing has long been a normal part of buying real estate and automobiles. Which makes sense, right? These are big-ticket items that call for more cash to settle than most people have on hand. Further, it used to be common for shops to offer installment-purchase plans for items outside their customer’s weekly or monthly budgets, but those in-store options receded in the 1970s with the rise of consumer credit cards. “In recent years, POS financing has re-emerged as a common feature of consumer commerce, supplanting credit cards, personal loans, and home-equity lines of credit,” says Dmitry Voronenko, CEO and co-founder of an industry-leading lending automation software maker, TurnKey Lender. “Instead of paying for online purchases outright using a credit card, Venmo, or another e-payments provider, e-commerce-financing giants such as Amazon and Walmart provide POS installment plans, even for items, like vacuum cleaners and earbuds, with relatively modest price tags. But it’s not to say that small to medium product and services providers can’t compete. To level the playing field for any business that wants to offer automatic installment plans in-house, we’ve launched TurnKey Lender Retail, a flexible end-to-end solution for intelligent lending automation with the intuitiveness of a modern SaaS.” Deciding to join the growing ranks of retailers that offer POS loans in one decision. The next one is how. Saying yes to spacing out payments, no to credit cards In the US alone, POS financing already tops $100 billion a year, according to McKinsey. That’s a jump from $49 billion in 2015 to a projected $162 billion for 2021, says the consulting firm, which sees a three-year compound annual growth rate of 20% for POS lending through next year. Meanwhile, brick-and-mortar retailers — from department stores and home-improvement outlets to mattress sellers and exercise-equipment and skateboard makers — are making in-person POS financing available at a time when many consumers are feeling the pinch from the economic impacts of a worldwide public health crisis. This pace could accelerate as a global resurgence in Covid-19 cases starts to entail new restrictions on economic activity. Among non-Covid contributors to the rise of POS lending are four main factors. Popularity: Consumers and retailers are more aware of POS funding options, especially in online settings, though with increasing awareness as an in-store option Ease: The loan application takes place before the sale is finalized, either in the register, via a mobile device, or in making online purchases. Speed: Lending-tech makers have improved POS systems with artificial intelligence, dynamic valuation models and automated administrative functions. Dislike of credit cards: Younger consumers, many of whom are struggling to repay their student loans, view credit cards with more suspicion and hostility than their elders. For these reasons, McKinsey holds that POS financing was well on its way to broad consumer acceptance before Covid-19 struck. Playing wingman to the middleman Merchants thinking of providing in-person or online credit options should look for a POS system with, at a minimum, the following features. A turnkey back office for your employees Virtually instant credit decisions powered by artificial intelligence A user-friendly digital borrower portal Advanced analytics Support for any borrower or credit-product type Customizable application forms suited to your business and your customers An open programming interface for seamlessly integrating third-party add-ins Lead-generation capabilities, especially for up- and cross-selling initiatives and monitoring Ability to test workflows with internals tools and integrated analytics But then a question arises. How is a retail enterprise — whether its a hardware store or a plastic-surgery practice — supposed to accomplish all this, and at scale? One way to achieve this and avoid having to build a bank-like loan department is to outsource the whole shebang to a third party, a middleman, so to speak. Here though, the outsourcer will expect a significant cut of all lending fees paid. This means — post purchase — the relationship will be between the outsourcer and the borrower. As the retailer, you’re effectively on the outside looking in on relationships centered on credit that you made available in the first place. But outsourcing still makes sense if you’re keen to get the whole purchase amount quickly — and more, if you’re running a “no frills” approach providing credit. Unfortunately, this leaves the retailer with little scope for alternative credit scoring and makes it much harder to offer rewards and incentives to your customers. Outsourcing also lets retailers stay clear of the intricacies of underwriting. Download the white paper we wrote for retailers getting ready to embark on a digital lending journey – learn to harness in-house financing and make money crediting: How to Win and Keep Customers With Retail Financing Keep your customer relationships with a smarter DIY approach An alternative to becoming a bank or bringing in an outside lender is doing it yourself — without really doing it yourself. Enter the “software as a service,” or SaaS, business model. In this approach, a fintech like TurnKey Lender provides the end-to-end lending technology along with pre-rollout training, and ongoing 24/7 support. The SaaS model may also provide: Improved portfolio yield from technology that lets retailers optimize portfolio yield by working only with the most profitable customers along with predictive models to pinpoint optimal rates and terms. Increased operational efficiency that’s supported by artificial intelligence for fast and smart decisions. Mobile-lending capabilities via secure web app for on-the-spot customer service whether you’re at a cash register or at the far end of a vast showroom. Affordability due to its modular structure. With TurnKey Lender, you can start small and add functionality as needed. Scalability that lets your POS-financing program grow along with your business. “Another reason many retailers prefer fintech providers like us over outsourcers is flexibility,” says TurnKey Lender’s Voronenko. “Sign up with an outsourcer and in most cases, they make the rules around loan durations, financing types — loans, leases, or lines of credit — and
Simple Retail Financing with End-to-End Loan Origination and Management
There are numerous incentives for retailers and other businesses to offer point-of-sale financing. That’s true whether the “point” in question is a cash register, an online portal, or a mobile device. Traditionally, however, barriers to putting simple financing options at your fingertips have seemed insurmountable.
Five Key Business Models Available for POS Financing
By late 2019, unsecured lending had hit new highs, thanks in part to a surge in point-of-sale financing as consumers and businesses alike became more aware of it as a purchase option — in turn a result of better and more user-friendly lending technology, and increasing competition from online and walk-in retailers alike. In 2018, outstanding balances in the US initiated through POS financing came to around $94 billion, representing a two-year compound annual growth rate of 24%, according to the consulting firm McKinsey — which last year predicted POS-originated purchases would top $162 billion by 2021 for further CAGR hike of 20%. And of course that was before the coronavirus pandemic shredded short- and medium-term financial forecasts for businesses and households alike. We’ve also collected the five key reasons to consider POS financing for retailers in a recent blog post. “If anything, retailers and other product and service providers are keener now than they were pre-Covid to attract customers and encourage sales by providing quick, low-risk installment loans to fund purchases — and not just on big-ticket items,” says Elena Ionenko, co-founder and business-development head of loan-servicing software maker TurnKey Lender. “That said, businesses considering adding POS-purchasing options should take a strategic approach, one that presupposes some familiarity with the different business models that can support such lending.” All the reasons why Besides the spur of shutdowns this year, the recent rise in POS financing is attributable to several principal factors, according to Ionenko. Public awareness: As mentioned, consumers and retailers are gaining awareness of the financing possibilities of POS, especially for goods with large and mid-level price tags. Convenience: Loan applications are processed prior to actual sales, either at the checkout using a mobile device, or as a quick preliminary step in making online purchases. Fintech innovation: Publishers of POS-financing software have streamlined origination and other processes by means of artificial intelligence, dynamic evaluation models, and automated oversight and management features. Credit-Card fatigue: Young consumers (many struggling to repay student loans) tend to be more suspicious and hostile toward credit cards than their elders. But, adds Ionenko, just as would-be lenders should understand the catalysts for the rise of POS financing, they should be conversant with the five main business models that underpin retail and other business approaches to this form of lending. Those are: Balance-sheet rental. In this model, the POS financier partners with an established lender — usually a bank or a fintech — to originate loans. This is often the cheapest option, but it provides limited access to customers through the life of the loan, making it less user friendly in the most fundamental sense. Joining an “ecosystem.” In this version, the POS sponsor — whether its a retailer, a car lot, or a medical practice — taps into an online marketplace featuring multiple firms with experience in POS lending, This version tends to yield more control over approval criteria, higher approval rates, and less “integration fatigue” — again though, post-approval touchpoints with customers may be limited. Credit-card program innovation. Remember the credit-card fatigue we mentioned earlier? Another wrinkle on outsourcing to support POS financing depends on working with a card issuer to carve out lower-interest installment loans for existing card accounts as a way to attract more installment buyers. Going all-in. This one is far-fetched for most businesses that aren’t already, say, banks. The idea is to become a fintech in one’s own right — an undertaking that calls for considerable technological — and probably tech-marketing — know-how. Renting the technology. Businesses can subscribe to pre-existing POS-lending platforms, sparing themselves the toil and expense of investing in proprietary lending infrastructure. The rub here is finding the right technology partner. The case for renting For Ionenko, renting the tech — that is, going for an in-house POS solution enabled by a specialist lending-platform provider makes the most sense. Among the advantages she cites: Better data integrity and security. Client data is kept between your business and its customers with no third-party involvement. This enhances confidentiality — a boon to many businesses, including medical practices. This also diminishes the risk of customers getting poached by competitors introduced to them by third-party lenders. Higher conversion rates. For customers, an in-house solution backed by a dedicated lending-tech maker can make the process of applying for and securing a POS loan nearly as fast and easy as making a payment at a cash register — an innovation that reduces purchase abandonment. Proprietary underwriting. If a business wants to set its own criteria for credit decisions, and wants to provide more flexibility around approvals, in-house rules can help ensure that its interest rates are calibrated to balance policies and risk aversion with profitability and enhanced customer relations. Access to transactional data to increase fast and smart decisions through artificial intelligence, and to optimize portfolio yield with technology that helps retailers the business identify profitable customers for more favorable terms or other relationship-building incentives. Reducing (or eliminating) transaction fees otherwise payable to a third-party lender (which can be as high as 15%).Secure, encrypted apps ensure safe functionality at any location there’s wifi or mobile-data availability. Improved brand loyalty. With fully-supported white-label technology, a business doesn’t have to worry about its customers getting confused by third-party documentation — or losing such a vital touch point to make inroads in long-term relationship building. “Retailers remain under acute pressure from the coronavirus pandemic and measures taken to prevent its spread against a darkening economic backdrop,” says TurnKey Lender’s Ionenko. “Giving customers a choice to fund purchases over time through POS installment financing can reduce ticket shock, build loyalty and help close sales.” TurnKey Lender solution for retailers TurnKey Lender’s Retail Solution allows anyone to provide instant financing to customers to quickly grow new business. With an intuitive user interface and a proprietary AI-powered Decision Engine, you get the lowest possible credit risks with the biggest potential growth spread. The cloud-based platform incorporates retailers’ order processing automation, flexible business logic, and customer portal in
What Non-Bank Lenders Need to Think About in a Covid (and a Post-Covid) World
Non-bank financial institutions have been active lenders to middle-market businesses and consumers for decades, often as lenders of last resort to borrowers in acute need. In recent years, however, NBFI lending has surged as individuals and small to midsize companies have come to view them as welcome alternatives to risk-averse and highly-regulated traditional banks. To make the most of this opportunity as a lender — a chance amplified by the economic and social impacts of an ongoing pandemic of uncertain severity and duration — many NBFIs are looking to simplify approvals, streamline operations, and achieve scale with help from new lending technology. NBFIs fill a market segment neglected by banks The big shift to NBFC-based lenders — a wide category that includes investment banks, insurance companies, hedge funds, an array of lenders in the mortgage, peer-to-peer, payday and microfinance spaces, as well as retailers, utilities, and medical practices — occurred during and after the Financial Crisis of 2008. With banks choking on unserviceable subprime-mortgage debt, and a substantially bailed-out financial sector forced into a series of shotgun mergers and higher capital-reserve requirements for lending, NBFIs quickly came into sharp relief for cash-strapped businesses. Meanwhile, near-zero interest rates — a result of unprecedented easing by central banks in the developed world — made traditional banks, themselves shell shocked by a barrage of bank failures, wary of lending to businesses. In turn, this low-rate environment made the higher rates NBFIs tend to charge appear more palatable than ever before. In the year 2000, NBFIs accounted for less than $50 billion in financing worldwide, according to a Bloomberg report published just before the coronavirus pandemic. By 2019, the annual amount had jumped to nearly $800 billion. In the same pre-Covid report, Bloomberg predicts NBFI lending will approach the $1-trillion mark in 2020. But the rise of NBFIs isn’t solely attributable to low rates and relatively decent terms — a backdrop in play now as much as it was in the last recession. To a large extent, the surge we’re seeing now is also linked to advances in technology, particularly artificial intelligence. Artificial intelligence enables smarter lending “Loan origination and underwriting powered by AI employs algorithms that get more accurate and efficient over time, a process likened to human learning,” says Dmitry Voronenko, CEO and Co-founder of banking-tech provider TurnKey Lender. “This task-processing capacity lets us combine traditional and alternative credit scoring and data sources so NBFIs can make more loans while minimizing risk, maximizing returns, and enhancing the overall health of loan portfolios.” For example, a micro financier that works with businesses lacking access to conventional lenders needs a technology partner that can help it control credit risks, reduce human error — and make time-to-funding as short as possible. The solution is end-to-end automation through the full life cycle of every loan across: Loan origination and underwriting based on alternative as well as traditional sources Loan servicing characterized by simplicity, interactivity, and intuitive approaches for smooth processing and monitoring Debt collection coupled with flexible notification settings and payment-provider integrations for automatic or on-demand collection Reporting and tracking for staff management, compliance, and internal business-process analytics Credit-risk management based on customizable scorecards for proprietary models derived from a blend of traditional and alternative borrower-evaluation techniques Meanwhile, so-called payday lenders, which specialize in short-term consumer loans, use TurnKey Lender’s technology to overcome traditionally persistent defaults and delinquencies, drive speedier approvals, and improve conversion rates and lead generation. Case studies in NBFI lending: Capitex and BetterFi The following examples show advanced lending technology in action for two North American NBFIs. Canadian alternative lender Capitex Finance needed lending technology flexible enough to meet the company’s specific needs around credit scoring and sufficiently intuitive for borrowers — mainly with lower credit scores — to enjoy a smooth and positive experience. Capitex decided on TurnKey Lender for automated loan management across origination, underwriting, servicing, collection, reporting, oversight, and analytics. “The team at Capitex impressed us from the very start,” says TurnKey Lender’s Voronenko. “They had extensive theoretical and practical understanding of credit criteria, and they knew exactly what they wanted from a technology partner — and of course were delighted to meet their specifications.” You can check the case study we wrote about Capitex here. US-based BetterFi is a non-profit “economic justice” enterprise mandated to provide financial coaching and affordable loans to unbanked and underbanked consumers as an alternative to predatory lenders. With manual application processing eating into time better spent with customers, BetterFi wanted an automated cloud-based solution aligned with the nonprofit’s tight budget, small staff — and extra reporting criteria unique to charitable organizations. Going with TurnKey Lender, BetterFi met those criteria and more — in a package that allowed for smooth operations with round-the-clock support to bolster limited in-house IT support. Here’s BetterFi’s success story: Digitized lending for a post-COVID future BetterFi and Capitex are among a number of NBFIs looking to do more than survive an economic downturn. “These are forward-looking companies with smart and dynamic leaders,” says Vorenenko. “They’re consciously laying the groundwork for accelerated growth coming out of this crisis, whenever that may be.” Meanwhile, even as they eye the next economic cycle, TurnKey Lender’s client firms “want to know the technology they’ve engaged enhances their businesses now and will continue to as new requirements and opportunities arise,” adds Vorenenko. “As a result, they’re on the hunt for technology partners that can help them achieve faster originations, scalability, security, ease of use, and 24/7 support.” Reach out to the TurnKey Lender team today to learn more.
Measuring the Success of Your Digital Banking Automation Platform
Way back before Covid-19 struck, the digitization of banking services seemed like an inevitable part of a broad-based move to an “internet of everything.” But the public-health crisis — with businesses locked down for months at a time — has highlighted the need to roll out internet and mobile banking that goes beyond deposits, balance inquiries, and bill pay. Digital-platform spend seen jumping 11% through 2022 In May, PNC Bank chairman Will Demchak told CNBC the bank’s digital usage had been going up “by a percentage point or two” a quarter “for a bunch of years.” Where digital accounted for a quarter of PNC’s revenue in normal times, the proportion of digital sales activity approached 75% “without much volume fall-off” this past April. In another sign of rising interest in digital banking, telecom AT&T says it’s been in talks since the pandemic started with “banks, wealth managers, insurers, and other financial institutions” about ways to integrate in-house or third-party digitized banking services with cutting-edge communications for customers and staffers alike. Activity like this bolsters MarketsandMarkets’ prediction that annual spending on digital-banking platforms will go from $3.3 billion in 2018 to $5.7 billion by 2033, an implied compound annual growth rate of 11.2%. COVID triggered a need for enhanced digital banking Meanwhile, a recent report by JD Power suggests consumers now favor retailers and banks that support digital-powered no-contact payment, and an April 2020 study by William Mills Agency shows 73% of US adults are using digital-banking services in light of the coronavirus pandemic. For Dmitry Voronenko, CEO and co-founder of TurnKey Lender, these are signs “consumers and companies are in the midst of a profound behavioral shift that is accelerating digital adoption.” And that’s a shift, he adds, fintechs are eager to support. To help banks understand how to track the effectiveness of new or improved digital-banking services available to retail customers, we offer the following checklist of key performance indicators. But first, Voronenko has a warning about generic KPIs. He believes long and overly-specific KPI lists can do more to hinder decision-making than ease it. “Some KPIs are tangential, some are subject to decay or erosion as business priorities evolve, and some are just irrelevant from the start,” says the executive, who has a doctorate in artificial intelligence. “We advise our client firms to focus on KPIs that speak forcefully to their real-world needs.” How to measure the results of your digital platform So, with Voronenko’s proviso in mind, we suggest the following KPIs for banks looking to understand what to measure to track the success of a digital-banking platform — and to shape the platform itself. Time to funding The longer it takes to get an approved loan funded, the more likely a would-be borrower is to abandon the application. For digital banking operations, this is a solid KPI for consumers used to fast turnarounds from everything from app-summoned cabs to online food pre-orders for pickup. Completion Speaking of abandonment, 40% of consumers have started but decided not to complete an account-opening application. They cite onerous personal questions, lengthy questionnaires, and other sources of friction. Completion rates increase when applications are easy to start and finish online. Turnaround This is a measure of how long it takes for a customer request to be fulfilled. Again, this is important because consumers have grown more impatient. It’s also a clear indication that an effective digital platform must include, or be compatible with, multiple communication channels, phone and email options, as well as online chat, with speedy resolution of customer issues the goal of every such encounter. Conversion Digital technology tends to increase conversion rates. It accomplishes this in part by avoiding process bottlenecks that occur when applications have to pass from the digital realm to the real world — in the form of disparate bank departments. Having to move digital processes in and out of silos — creating more junctures at which digital documents can be mislaid, resulting in wasted new-business opportunities. Onboarding Banks have a bad habit of requiring prospective account holders to meet with a bank officer, typically in person, and fill out most of the required paperwork there and then. With COVID-19, and the rise of a generation happier to open an app than drive to a branch, that approach won’t fly anymore. Where compliance allows, all-digital account sign-ups that are encrypted, secure, and feature ID verification and e-signing capabilities can do a lot to boost onboarding rates. Among other sources of friction for onboarding are poor form design, ambiguous instructions, and anything that forces them to click away from the form they need to complete to become a customer. Touchpoints How will customers get access to your digital services? A company website? An app for mobile devices? Will chatbots come into play? Should they? However the bank decides to configure its multichannel outreach, it’s important not to make customers jump from channel to channel — that there not be too many touchpoints in any sort of sign-up. In this spirit, your chatbot shouldn’t be telling customers to check their email accounts for a link she needs. The chatbot should send the very link. Net promoters Want to encourage your customers to promote you to friends, family and business contacts? Provide them with solid, full-spectrum digital banking services. One bank found that, while digital customers cost 1.5 times more than non-digital customers, the digital crowd generates twice as much income as the non-digital bunch. For Lightico, “the connection between digitization and loyalty couldn’t be clearer.” That’s in line with the consulting firm’s May 2020 finding that 79% of US consumers prefer banks that can provide all-digital processes. From theory to practice with fintech-delivered AI In addition to these core KPIs, organizations keen to add or enhance digital-banking capabilities might consider other, arguably less measurable, criteria for selecting a provider. For Bank Innovation, an online publication for bank-based technology officers, the big three things to weigh are: How the vendor relates to regulators How the vendor handles