Traditional Financial Services Firms Adapting To The Changing Lending Marketplace
TRADITIONAL FINANCIAL SERVICES FIRMS
ADAPTING TO THE CHANGING LENDING MARKETPLACE
TRADITIONAL FINANCIAL SERVICES FIRMS
ADAPTING TO THE CHANGING LENDING MARKETPLACE
TRADITIONAL FINANCIAL SERVICES FIRMS
ADAPTING TO THE CHANGING LENDING MARKETPLACE
Read The Case Study
Looking at how banks and credit unions can respond to alternative lending’s growing market share
Looking at how banks and credit unions can respond to alternative lending’s growing market share
Looking at how banks and credit unions can respond to alternative lending’s growing market share
Introduction
Alternative lending has become a hot button issue over the past few years, with lenders offering direct loans, peer-to-peer (P2P) loans or personal loans to reach customers who, traditionally, have shied away from traditional financial services firms.
This has led to groups ranging from consumers to small to medium-sized businesses turning to alternative lenders when they need funds. The result has been a dwindling customer base for traditional financial services firms. Banks and credit unions don’t have to take these developments lying down. Instead, the innovation taking place in alternative lending can be implemented in other settings, opening up new opportunities for revenue creation.ALTERNATIVE LENDING IN A NUTSHELL -
IT’S A FINTECH INNOVATION
Fintech startups have been disrupting the financial services sectors as IT innovation, particularly developments around data analytics, have created new opportunities for market growth. This is evident in the alternative lending sector, where organizations are using technology in creative ways to fill gaps in the market and eventually take market share from banks and credit unions.
These developments are not happening because alternative lenders are accepting risk that banks and credit unions can’t handle. They are not taking place because alternative lenders aren’t worried about regulatory pressure. Instead, they are occurring because alternative lenders saw an opportunity to gain a broader view of customer risk to broaden their lending opportunities
Essentially, where traditional scorecards and decision-making tools are still fairly dominant in many banks and credit unions, alternative lenders are bringing more data into scorecards, making adjustments to how they measure risk in near real time and giving decision-makers the data they need in line with the processes they are completing.
This creates an operational climate in which:
Initial risk assessment processes are automated so risk managers can focus on the data or transactions that raise red flags.
Analytics platforms use a wider range of data, including social media information and other publicly accessible unstructured data, to gain a more complete picture of a loan applicant’s situation.
This background work is completed at the software level, with key insights then delivered to risk assessment professionals so they can make decisions as efficiently as possible.
TWO WAYS TO RESPOND TO ALTERNATIVE LENDING
1. Develop a Partnership
Financial services firms can respond to the rise of alternative lending by partnering with an alternative lender and bringing its services under their umbrella. This allows firms to take advantage of the kinds of analytics platforms that are fueling innovation without internal IT investment, creating a new service that reaches a wide range of customer types. The abovementioned Prosper Marketplace, for example, has developed a partnership with Radius Bank, offering personal loan options through the Prosper platform.
Akouba is another prime example of how banks can take advantage of the growing move toward modern analytics in loan processing. The white-label software system gives organizations a cloud-based option for the origination and underwriting processes within small business lending. Akouba shows how far this fintech innovation has come, as it is fully endorsed by the American Banking Association.
2. Deploy an Analytics-Driven Risk Management Platform
The types of analytics solutions in use among alternative lending startups are available in the marketplace. Financial services firms that commit to technological innovation can internalize the functionality that is setting fintech startups apart in the market.
GDS Link’s Risk Management Platform combines big data capabilities with decision engines and advanced scorecard tools to fuel the kind of operational efficiency that reduces lending overhead.Conclusion With so much disruption happening in the financial services sector, the World Economic Forum has responded by analyzing the core attributes of innovation.
One of its key findings was that traditional firms will use parallel strategies to compete with the startups that are changing the market.
GDS Link offers the analytics tools banks and credit unions need to compete alongside startups, freeing traditional financial services organizations to leverage their legacy assets and capabilities to gain an edge in the alternative lending marketplace.
About GDS Link:
GDS Link is a global leader in credit risk management, providing tailored software solutions, analytical and consulting services. Our customer-centric risk management and process automation platforms are designed for the modern lender in their pursuit to capitalize on the entire credit lifecycle. By providing a personal, consultative approach and leveraging our own industry-leading knowledge and expertise, GDS Link’s solutions and services deliver exceptional value and proven results.
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From loan originations and decisioning, to customer management and beyond, GDS Link helps thousands of clients manage risk while driving growth.
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