Fintech and your lending process

“Alexa, tell me the best auto loan rate.”

Advances in artificial intelligence (AI) and voice recognition technology are recent examples of the growing effect fintechs continue to have on credit union lending.

For instance, Square’s decision to file for a bank charter and ongoing partnerships between fintech and financial industry stalwarts are reshaping our industry and how we interact with members today and, more importantly, in the future.

To help assess this dynamic industry, here are a few questions to ask when considering new technology solutions to enhance lending:

1. What type of loan experience do our members want?

Which products and services do members rely on you for—or that you wish they would rely on you for? What are your current member demographics and how are they shifting? How do members define lending convenience?

Answers to this last question are especially critical in determining how to incorporate new technology solutions into your lending processes. Your next steps could vary depending on how members want to interact during the process.

2. What technology is available now to improve our lending process/products, and how could it disrupt—or benefit—our current lending model?

As with all disruptive technology, lending-related fintech solutions focus on changing the model to improve the process and create a better experience for the consumer. These start-ups look at how they can help consumers find and apply for a loan quickly and easily.

The new solutions and technology deliver real-time tools to help underwrite loans, authenticate members, verify income, predict and monitor fraud, and improve servicing and collections.

As you investigate available technology, weigh the possible benefits to your members—like faster loan processing time or reduced fraud—against potential disruptions:

• How might streamlining the underwriting process affect the overall member experience?
• Would speeding up the application process overwhelm your staff?
• Can technology improve interactions and communication with members?

It’s also critical to consider regulatory concerns, including:

• How stable is the regulation around any given aspect of the lending process? Would the new technology help with or hinder required regulatory changes?
• Are there protections or relevant laws that need to be considered when weighing new technology and fintech partner decisions?

3. How much can or should we invest in new technology?

There are three ways to take the fintech leap: build, buy, or partner. Many credit unions look at ways to partner, either directly with start-ups, as a joint effort with other credit unions, or by working with established industry partners.

Even though fintechs can develop new technology and processes more quickly, it is important to review how the solution can deliver a seamless experience, convenience, and better value for the member.

As a partner, credit unions can bring industry expertise, investment dollars, scale, risk controls, operational strength, and regulatory stability. So, a partnership could be a win-win for both as long as you conduct the appropriate due diligence.

4. When do we need to make the leap?

This question is the hardest to answer—and the most critical of all. Adopt a technology too early and the market standard could end up looking very different. Enter too late and you might never catch up.

One place to start is to identify a few areas where technology could help your process for the member. Are there areas that could be better automated by self-service, or deliver more timely communication throughout the lending process?

Start small and add complexity over time. For instance, adding a big-data-fueled loan calculator could be one way to test the waters and navigate the ins-and-outs of managing a fintech partnership.

Another option is to explore the lending process and where technology can accelerate it without creating new steps.

Through CMFG Ventures, companies like MortgageHippo, are working with credit unions today on ways to improve the lending process overall.

Technology will continue to push the boundaries of our industry and bring new ideas to the forefront in new and exciting ways. The first step is to become educated on and seek out potential mutually-beneficial strategic relationships with startups.

It is also important to keep an open mind to the new and sometimes unusual ideas of startups. What seems farfetched now could be the next big thing.

In the end, always use caution when negotiating agreements with eager, young companies, and seek validation from industry experts, startup customers, other credit unions, and CUNA Mutual Group. But there’s no better time to get started than now.

JOHN WALLACE is a senior vice president at CUNA Mutual Group.