2020 Trends in Lending

NICOLE VALENTIN-SMITH | February 13, 2020

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Borrowers' changing expectations fuel new demands for lenders. Influenced by easy, intuitive digital experiences in other parts of their lives, today's borrowers have heightened expectations when applying for and managing loans. For the lending industry, 2020 will be defined by how well it meets those new demands.

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Wall Street Ren

The Wall Street Ren is a leading nonprofit, independent, nonpartisan organization of Chinese American leaders in finance, business and economic. Our mission is to provide an open forum for the promotion of sound capital market standards and practices. Each member has achieved positions of leadership on Wall Street in a broad range of professions. As a financial market leader, we has cultivated relations with China, advocated for opening the country’s financial markets and encouraged its integration into the global financial community .

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How to Utilize Open Banking Opportunities in 2020

Article | April 27, 2020

Everyone wants to build a creamier, faster, and more efficient financial services journey — which in 2020 is not a point of controversy or friction. Today, customer demand is touching peaks. It is customer demand that forces businesses come out of their silos and collaborate with others to create products and services that are open-source, non-proprietary, and do not lock down users into an ecosystem. The launch of Open Banking is initiated to fundamentally change the way consumers, businesses, and banks pay and get paid, and how they maintain their data. The foundation of a unified Application Programming Interface, or API, across financial institutions, constitutes a foundation in which data can be seamlessly and securely shared right away. While open banking is in the initial stages of its evolution, many assume this trend to expedite and reshape the banking industry in significant ways. Thanks to open banking developments around the world, customers are becoming more informed of the essential value of their information and are increasingly seeking more command over their financial data. Table of Contents •Why is Open Banking Important? •How Does Open Banking Work? •Open banking in United States •The Wave of Change in Payment Arena •Cloud-based Processing Services •Conclusion Why is Open Banking Important? The most valuable asset in the 2020 world is data, and banking data is the finest of the crop, as it facilitates insight into how consumers and businesses are employing money, saving, and acquiring debt. The data has got value and the data that the bank holds and the customers, belongs to the customer and not to the bank, that’s a fundamental realism or premise that the government has is writ large in European legislation. You will be pestered by its called GDPR but fundamentally enshrines the fact that the data belongs to you, the consumer or to the SME, not to the financial institution. And if you as a consumer want to use that information to get access to better products and better services, it’s entirely your right to do so. That’s what open banking is trying to deliver. It holds the promise of making finance more convenient, better tailored and fundamentally smarter. From industry point of view, open banking promises to lower the barriers to entry to financial services and lower the barriers to innovation in financial services. That’s why it is so exciting for many of the fintechs. Open Banking delivers enormous opportunities in 2020, for the fintech ecosystem that goes beyond necessary to invigorate customer relationships and transform businesses. Through ecosystem partners, banks can enter customer journeys earlier than before and create added value to expertly serve enduring customers as well as attract new ones. Customers foresee seamless digital experiences, and platform-based business models, that are a quintessential element of the digital economy. When embracing the opportunities Open Banking brings, banks can leverage the ability, speed, effectiveness, and innovativeness of startups to enhance their product and service offerings. Banks also have access to other banks’ data. By genuinely performing multi-banking services, they can drag competitors’ customers and spread awareness of their brand. How Does Open Banking Work? Let’s put this into three: • What the banks do • How you get registered • What the customer sees The banks have put into places API’s, this means they have made huge technology decisions to expose customer data and access the data from other third parties. For open banking to work, you have to be governed by the OBIE rules. The OBIE is open banking implementation entity and you can either be an AISP or a PISP that sits under the OBIE. The AISP essentially means you are an account information services provider and PISP means you are payment initiation services provider. One means you can aggregate transaction data and customer data, the other means the payments that you can initiate from your third party, from your bank. The third element to this is TSP, a technology service provider. And they basically provide all the rails between the banks and between third parties to make sure that this whole system runs right. From the consumer perspective, at the end, it gives them the ability to share their data with third parties but crucially have the permissioning power to be able to do that. An AISP can condense reams of bank account statement data and pass it to the customer in a single interface, making it ideal for treasurers of multi-banked organizations. Payment service users – whether they are individuals or businesses, can guide their banks or payment service providers to share their bank balance and transaction data with regulated AISPs. To display this information on a user-friendly dashboard, the AISP can convert all this transaction data into the expected format and send it to the customer’s ERP or Treasury Management System. Before the initiation of Open Banking, businesses and consumers were logging into each bank individually to initiate payments, using various workflows and security etiquettes. With the arrival of Open Banking, individuals or businesses are now equipped to mandate their multiple banks or payment service providers to receive payment instructions via their PISP’s app. Learn more: Open banking in the same language Open banking in United States According to Deloitte Insights, The open data revolution is most obvious in Australia, the United Kingdom, and other countries in the European Union. Each has distinct regulations that require banks to share customer data with third-party providers as per customers’ instructions. Other countries, such as Canada, Japan, and Singapore, are also considering similar regulations. Australia, however, has taken it a step further: It has gone beyond the financial services sector, applying an expansive set of rules on consumer data rights and data-sharing to other industries as well. We do not know yet whether this will be a model for other countries, although, in the United Kingdom, similar efforts are underway. While the open banking model in the United States may take a different path, US banks can learn valuable lessons by looking at how it has been implemented in more regulatory-driven environments. Bank leaders may find it particularly helpful to review how different regions set technical and customer experience standards for data-sharing. To date, there are no signs that new open banking regulations are being developed in the United States. Learn more: Open banking model strategy The Wave of Change in Payment Arena One interesting example of the innovation encouraged by Open Banking is HSBC’s Connect Money application. This application enables customers to view all their accounts within single application-even if those accounts are scattered across different banks. According to an article by Accenture "How Open Banking is Catalyzing Payments Change" Connect Money demonstrates one of the most fascinating features of Open Banking. Many Open Banking products and services are subject to “network effects”—they become more valuable as more banks participate. If Connect Money allowed customers to track only HSBC accounts, it might have been somewhat useful. The fact that the app connects across many banks is what makes it powerful. This aspect of Open Banking can also make it easier for new entrants to grow and gain purchase in the market since more access to data means more opportunities to create value for customers. In the payments platform, Open Banking is advantageous to small and medium-sized businesses (SMEs). This is because it facilitates account aggregation, better financial management, easier credit checking of customers, and the unification of lending and accounting applications. With Open Banking, SMEs can receive and make payments using different platforms with better clarity and best momentum. Open Banking payments are validated instantly between consumers and their banks. This means the chargebacks that merchants must pay because of fraud or rejected payments becomes zero. This offers plentiful savings for all merchants. Payments powered by Open Banking also give real-time credit transfers, confirming the payment and empowering merchants to ship the product immediately. Cloud-based Processing Services Open Banking also maintains cloud-based processing services- a compelling alternative for decentralizing processing and encouraging payments innovation. The benefit includes: • More economical costs • More regular compliance maintenance • Advanced enterprise agility • The capacity to flex volumes quickly The new payment option, called IATA Pay, provides customers more extensive selection of payment methods when buying airline tickets. The most popular services that are being worked in 2020 covers Request to Pay and P2P payments services. We can anticipate seeing many more in the following years. Conclusion Open Banking scales to opportunities preferably, then threats. Done perfectly, banks can flourish, encouraging their customer franchises and brand, securing a defined culture, and fostering business through open collaboration with the world beyond financial services. We are witnessing the initial stages of a seismic industry migration that will come into full power over the next five years. The evolution of innovations with the potential to force simplicity and enhance flexibility is turning a once complicated web of financial institutions into centralized tools to maximize value creation. Open Banking scales to opportunities preferably, then threats. Done perfectly, banks can flourish, encouraging their customer franchises and brand, securing a defined culture, and fostering business through open collaboration with the world beyond financial services. Consequently, any bank that needs to stay consistent in 2030 must begin to design their Open Banking strategy immediately.

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Effective Use of Intent Data for Financial Institutions

Article | April 27, 2020

The world began its course to become a digital open book after the internet came into existence. With almost everything available for purchase, the internet has brought the world to the buyer's doorstep. With the purchase, comes the data, and with effective use of the data collected within a period, any industry can speculate the buyer’s journey and take compelling steps to attract the buyer. Looking at the facts, around 93% of purchases start with internet research. Intent data is the name of the collection of the behavioral signals that a user shows while purchasing anything. This data helps businesses be available at the right time and the right place to pitch their product to the customer who is already interested in buying what they are selling. Businesses can analyze these signals, accurately understand where the prospect is in its buying journey and can give a solution to the problem. With intent data, even financial institutions can up their game and generate greater ROI while accurately predicting the buyer’s position in its purchase journey, and provide the best value to attract him/her. With over terabytes of intent data available for use, financial institutions can use it to flourish in this pandemic hit economy, using fewer resources and marketing their services to ready to buy consumers. Since its inception, intent data is on the top priority of every marketer’s to-do list, with its usage in advertising campaigns, outreach campaigns, content creation, SEO, etc. This article covers how financial institutions can use intent data to their advantage, provide value to the user, and draw massive attention to their platform to reach their ultimate goal and generate more revenue. Before going further, let’s understand the basic concept of intent data and its type that comes into the use for financial institutions. WHAT IS INTENT DATA? Intent data refers to collecting information on online behavioral insights of internet users or prospects, allowing you to better focus on the audience that has more chances of buying your products or services. To put it simply, intent data will help you display your product or services to those already searching for it. For example, your financial department is facing challenges to keep the accounting on track, checking the organization’s financial status, etc. While, you look for the solutions online, you Google “best financial tool for in-house accounting.” Out of millions of search results, your search concludes with some of the top tools like Robotic Press Automation (RPA) in accounting kept aside. Now, your search would be more specific and according to the selected tools. Now, for comparing and selecting the best tools, you may Google- “How RPA keeps track on accounting?” “What is the ROI of RPA in accounting for small enterprises?” “What is the role of RPA in accounting?” And so on. Notice how your search query got specified after some informative searches. Imagine having the power of intent data of your customers and satisfying them with your content. Intent data helps you nurture a highly targeted audience and eventually convert them into your clients. When prospects face challenges, they search for the solution online. While providing the solution for any specific query, websites ask the prospects to accept their cookies. These cookies monitor their intent of searching and this data is then pushed to the marketers to mold their campaigns suited better for these targeted customers. Let’s look at how financial institutions can focus their campaigns on highly targeted prospects with types of intent data. TYPES/SOURCES OF INTENT DATA The types of intent data divide the vast information of intent into three types - first party, second party, and third party. First-party The data you now gather on known contacts and anonymous visitors is first-party intent data. It can also involve prospective website connections, newsletters, emails, and social media. You can use the first-party intent data to segment messages, build workflows, and get more leads. You can assist your marketing and sales team in determining how to approach and convert a prospect. Second-party Second-party data refers to data collected by another company. It is like gaining insights into your prospects from the shops they have visited earlier. The second-party intent data includes review websites and publishing networks. And all this information is voluntarily provided by the user. Sometimes, the user may also share the contact details and their business email id. Third-party While some systems only track a network of pages, third-party intent data is gathered from all across the web. In several cases, this intent data is extracted using one of 3 techniques: reverse IP lookup, Bidstream data from ad networks and widgets, and media exchange/publishing participants. Third-party intent data can show the user’s intent that is relevant to your campaign. STEPS TO BUILD GREATER ROI FROM INTENT DATA How can a financial institution decide whether a particular lead is worth its investment? Answer: By lead qualification. By segregating each lead into three types, you can decide whether the prospect is an active buyer or someone who wants some information over the web. It allows the marketing team to use their time efficiently and target the leads which are likely to convert. For significant ROI from intent data, financial institutions should gather intent data and segregate it into three types of B2B data- Fit data, Intent data, and Opportunity data. Fit data Fit data shows how well your product or services fit the need of the customers. Imagine if a financial institution provides loans on a low credit score, and a user searches for loans on a low credit score, we can call this collection of information as fit data. With this information, you can efficiently use your time and investment to target a specific prospect. This information collection may include the prospect’s age, sex, job level, job function, and the residing location. Fit data is generally the data that won’t change quickly. It may give you a right fit of prospects for your campaign but cannot tell you the right time or context of search intent. Opportunity data Opportunity data is event-based data on particular prospects. Suppose, you are a financial institution providing a car loan on reduced interest rates, and you come to know that a specific company is crediting bonus salary to its employees. If you market your car loan services to their employees, you can have more leads as you know they have a bonus salary in their account. This is called an opportunity data, which sometimes is also referred to as data scoops that give you information about favorable conditions for sale. As the name suggests, the opportunity data gives you the data of a perfect opportunity to market your services to targeted prospects. Intent data Intent data indicates that the time has come to engage with folks who actively express a desire to acquire a solution. When the intent data is integrated with other signals and a solid fit, the chances of conversion increase dramatically. It's helpful to know when there's movement at a company, but if you don't know who to connect with and don't have a phone number or email address for them, it's only informative. You need actionable data along with intent data to perform a perfect marketing campaign. COMMON USE OF INTENT DATA A Segment to sort out active prospects With the use of intent data, B2B marketers find companies actively looking for products or services they are serving. Intent data solutions provide segmentation tools that you can utilize to sort out active prospects that fit perfectly with your services. This segmentation tool can help you filter your prospect with an unlimited combination of the type of company, contact details, location, industry, and technology they use. Intent data for Account-Based Marketing Leading B2B marketers use intent data to drive their ABM campaigns as it naturally fits these campaigns. ABM and intent data are the two sides of the same coin, as ABM delivers results through specific account’s interest and intent data provides timely opportunities to initiate the contact. Integrating both helps you elevate your marketing reach. Intent Data for marketing campaign Optimization Integrated marketing strategies help financial institutions because marketers can pump useful insights to drive effective and relevant demands. The sales team of financial institutions get into the conversation with the buyer while having more information on their pain points and what solutions they are looking for, giving them an upper hand in exchange. SIGNIFICANT FINANCIAL MARKETING TREND Insight-driven marketing With the help of effective machine learning and artificial intelligence, insight-driven marketing helps financial institutions to offer financial assistance to the right fit of customers. Marketers can further collect the right type of customers that fits the services and not the other way around. Prospects with other financial needs can be routed to more appropriate services you offer. Awareness of the customer journey Intent data helps financial institutions optimize and understand the customer journey and correctly map customer interactions. It enables to influence the end-to-end experience of the customer. By having a perfect understanding of where the customer stands in the customer journey, financial institutions can market their services according to their needs. Increased personalization Intent data allows the marketers to look further into the minds of their prospects. It enables them to read the customers as an open book while segmenting them on their thought process. For example, which customer is more savings-oriented? Which one is planning for their retirement? With these insights, marketers can match the right customers to their services with the relevant type of marketing to compel the audience. TYPES OF MARKETING SIGNAL AVAILABLE Signals are the hints prospects resonate, showing financial institutions they are ready for being potential customers. These signals are everyday actions like Googling stuff they need orLike hard searching online, clicking on financial institution ads, applying for any loans, and paying off debts. Financial institutions can use these signals to run highly specific marketing campaigns. Let’s look into these marketing signals further. Most marketing signal falls into three major categories, such as: Behavior-based The behavior-based marketing signal includes hard searching like credit inquiries and online searches that signal intent to look for services. It may also include some minor changes that indicate future requirements like a change of residence or buying intent of large purchases like automobiles and real estate. Event-based Event-based marketing signals include automobile lease expiring, mortgage rate settings, or child passing the high school. These are the hints that indicate the prospect is going to have a requirement for your services. These signs show that the customer is about to have a significant financial shift, and financial institutions can use this opportunity to market their services. Predictive Predictive signals are passive hints that prospects show. It may not be as obvious as behavior-based, but it can set a boundary to your targeted customers. Some of the predictive marketing signals could have data of savings, debit consolidation, and mortgage refining. Predictive marketing signal can give low fidelity and can assure you the maximum coverage of your marketing campaign. CONCLUSION Using signals to attract and retain consumers is an effective component of a well-thought-out marketing strategy. Moving to a signals-based strategy, on the other hand, does not have to be a huge overhaul of your current procedures. Continue to use your tried-and-true strategy, but experiment with new ways of analyzing and responding to signals. Worried about how much money you'll need to set aside to fund the signal-based marketing strategies? You can assess the ROI of the marketing strategy before expanding your program if you start with a scalable service with no commitments. Traditional signals continue to be relevant and form the basis for customer-focused marketing. Combining them with potentially powerful signals that indicate purchase intent will enable proactive communication and elevate financial marketing initiatives to the next level.

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How Lending-as-a-Service Can Impact Small Businesses in Need

Article | April 27, 2020

One of the brutal facts of the COVID-19 outbreak is that it will be difficult for small businesses to survive. The self-distancing and shelter-in-place orders, while temporary, are taxing for already cash-strapped merchants. Adding to the hardship, small businesses may find it especially difficult to get a much-needed loan from their local bank or credit union since many have closed physical branches to encourage social distancing. And while banks offer many services online, only 1% are capable of extending a loan digitally.

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Covid-19 and the rush to Digital banks

Article | April 27, 2020

Umberto Eco once wrote “Everything is repeated, in a circle. History is a master because it teaches us that it doesn't exist. It's the permutations that matter.” In addition to the effects on the supply and demand side, COVID-19 has jolted financial markets across the globe as oil, bond yields, and equity prices fall, and trillions of dollars, across all asset classes seek safety. As we career towards another global financial crisis, which banks have learnt the hard lessons of 2008?

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Spotlight

Wall Street Ren

The Wall Street Ren is a leading nonprofit, independent, nonpartisan organization of Chinese American leaders in finance, business and economic. Our mission is to provide an open forum for the promotion of sound capital market standards and practices. Each member has achieved positions of leadership on Wall Street in a broad range of professions. As a financial market leader, we has cultivated relations with China, advocated for opening the country’s financial markets and encouraged its integration into the global financial community .

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