Mirador Discusses Digital Lending at KBW Winter Financial Services Conference
How are banks approaching digital lending? How is the importance of customer experience changing the financial industry? What trends are we seeing in credit? How do Fintech partnerships operate from a regulatory perspective? These are some of the questions Rich Heller, VP of Business Development at Mirador answered during “The Future of Digital Lending” panel at the Keefe, Bruyette & Woods (KBW) Winter Financial Services Conference on Feb 8th in Miami, FL. Heller was joined by Jonathan Katz, Senior Bank Solutions Director, Fundation and Hans Zandhuis, Founder and CEO, Health Credit Services on the panel moderated by Nick Grant, Analyst, KBW.
The Small Business Lending Gap
Grant started the discussion off by asking the panel about opportunities in digital lending. The conversation quickly turned to the gap in small business lending, an area that's been ripe with inefficiency for years. As a result, many banks have opted to pump the breaks on small business loans. That's where Mirador saw a great opportunity to partner with banks to help them create a faster and more profitable process. “Our platform has reimagined the small business lending experience for every stage of the ecosystem, from borrower to lender. We've created something simple and dynamic, that adjusts and supports existing processes while enabling lenders to innovate and compete with the existing marketplace and alternative lenders,” Heller explained. Most banks don't have a differentiated process for small business and commercial lending, which has created a gap companies like Mirador are hoping to fill.
Customer Experience is Key
There was a time when most banking experiences were pretty much the same no matter where you chose to go. The branch hours, paperwork and time commitment didn't vary greatly, but times have changed and customer experience is becoming a deciding factor for many. Grant noted how Fintech newcomers are taking advantage of this shift and creating new digital processes that are fast and easy to use, creating competition for traditional banks. While some Fintech companies have chosen to compete with banks, other have opted to partner, believing small banks and credit unions still serve an important purpose for communities and the economy.
Heller responded by explaining to the panel how Mirador works with banks to create an entirely modern small business lending experience at price most small banks and credit unions can easily afford. The partnership is very valuable to lenders who don't have the money or infrastructure to create something from scratch. Heller explained the Mirador application process takes about 10 min vs. the more common 30 hours of confusion. Most lenders see a 70% in time savings and see an increase of up to 50% in loan volume as a result of the better customer experience. With a Net Promoter Score (NPS) of 82 for borrowers and 90 for lenders, Mirador's got industry leading customer satisfaction.
The Changing Credit Model and Creditworthiness
Grant noted that many digital lenders are changing up the traditional credit models used by banks. He asked the panelist what makes these new credit models better. Heller commented that Mirador is able to build upon the already existing credit model of their partner banks, providing new insights and applying best practices based on what our aggregate data is showing. Predictive analytics are also used by Mriador to assess borrower behavior and increase the value of the borrower-banker relationship. Heller added that banks are also becoming more open to a data-focused digital process and some are even moving towards auto, or semi-auto decisioning based on credit only (no documents)
When the conversation moved to other credit trends, the panelists discussed how creditworthiness is changing. More borrowers are aware of the opportunity to get loans quickly and efficiently from lenders outside of the marketplace lending world. Banks are quickly grasping the need to better serve a variety of credit worthiness, and are creating products that encourage bank lending over market place lending. Heller noted that Mirador partners with lenders with the goal of increasing accessibility of credit without the burden of high interest rates.
What Fintech Partnerships Mean for Regulators
Nothing scares a regulator more than new and different technology being inserted into the traditional financial system. When Fintechs choose to partner rather than compete with regulated institutions this adds a layer of red tape. Grant asked the panelists how they are handling this. “We've worked with bank regulators from major lawfirms in DC to develop a due diligence and compliance package that exceeds bank guidelines. We have ongoing updates with any upcoming regulations and work closely with our bank partners to implement solutions that meet their current and future needs,” Heller explained. Ensuring any new risks created by new technology are well vetted is critical as the digital revolution unfolds in the financial industry.
Competing with Big Banks
While many of the big banks have chosen to make Fintech partnerships as well, some have been investing in their own capabilities. Regardless, they have the advantage when it comes to upgrading their digital footprint. Grant asked Heller whether small or mid-sized banks are able to keep up and have a real chance at competing. Heller explained that Mirador was created specifically to level the playing field for these smaller lenders. Banks that partner with Mirador are seeing a 30-50% increase in loan volume. These community institutions also have the advantage of offering a more local and personalized experience. Heller explained that when a small bank can offer the close relationship many of their customers desire along with the speed and technology of a big bank, it's a recipe for success.