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MonJa’s Digital Banking and Lending Monthly Roundup – Why Subscribe?

Digital banking and lending is evolving rapidly. Recent fintech-banking partnerships and innovation in technology with the introduction of AI, ML and blockchain herald a new era in lending. Fintech’s are changing the competitive ecosystem,  empowering lenders to process loans faster and smarter.  In a world full of noise, understanding how the technologies and developments may impact your financial institution’s credit decisions and credit portfolio is of critical importance. With MonJa’s Digital Banking and Lending Monthly Roundup, it’s easy to stay up to date on what’s happening in the space. Get the latest updates, analysis and commentary on digital banking and lending segment!


[/vc_column_text][vc_single_image image=”11423″ img_size=”large” alignment=”center”][vc_column_text]04/28/2020 Consumer lenders enter the fog of uncertainty (The Wall Street Journal)

Consumer lenders like Ally Financial and Synchrony Financial do not believe that the current crisis will be on similar lines to the financial crisis of 2008-2009. Ally stated its loan-loss reserves for net-charge off on retail auto loans will be around1.8% to 2.1% indicating 30% improvement than the previous crisis. Synchrony Financial also trusts that the charge off rate will not cross the 11% in 2009, as the lenders have stronger loan books than in 2008 and the government’s immediate response to the crisis has stemmed the flow to a certain extent. About half of the economists surveyed by the Wall Street Journal believed that there will be a “U” shaped recovery in the economy. As per Ally Financial, around 25 % of accounts have asked for forbearance out of which around 70 % of those accounts have never missed a payment before.

04/23/2020 Monzo applies for US banking license (Finextra)

The UK bank Monzo has applied for a US banking license for entering the American market by opening an office in San Francisco. On getting the full license, Monzo can offer fully insured deposit accounts and lending products to Americans. The outbreak of the COVID-19 pandemic did not hinder the expansion plans to the U.S.

04/23/2020 House passes $484 Billion relief bill to replenish PPP (American Banker)

The House passed the $484 billion Coronavirus aid package to replenish the Paycheck Protection Program (PPP) for small businesses and provide another round of spending for hospitals and virus testing. $320 billion will be used to make new loans under the PPP in order to provide forgivable loans to small businesses so that they can keep employees on payroll for eight weeks. The bill sets aside $30 billion of the loans for banks and credit unions with $10 billion to $50 billion in assets, and another $30 billion for even smaller institutions. The measure sets aside $60 billion in loans and grants under a separate Economic Injury Disaster Loan program. Also, $75 billion are allotted to hospitals (with special emphasis on rural areas) and $25 billion for virus testing.

04/22/2020 Industry chatter indicates many online lenders are laying off employees, some Fintechs may never recover (Crowdfund Insider)

The largest US fintech consumer lender, the Lending Club has recently laid off 471 employees due to the outbreak of the COVID-19 pandemic. The pandemic has hit the fintech lender hard and there are rumors for further lay-offs. It is estimated that only 20% to 30% of fintech lenders will be able to survive the pandemic. Banks are expected to be backed by government stimulus and are likely to survive the economic downturn as they did during the great depression.

04/21/2020 Fifth Third rethinks new-branch designs in light of coronavirus (American Banker)

Amidst the coronavirus pandemic, Fifth Third Bank is still planning to open 100 branches across the southeast in the next few years. However, due to the pandemic, there will be alterations to the design and a longer timetable for setting up the branches. The bank has kept 99% of branches open but served its customers through drive-up windows or by-appointment-only in branch lobbies. The branch traffic has fallen to 30%-40% of the normal levels but 100,000 branch transactions are taking place daily during the crisis.

04/09/2020 Buy now and pay later startups are having a moment (Business Insider)

Buy now pay later startups are the biggest gainers amidst the pandemic. Consumers are switching towards such alternatives to buy essential items. The service charges for the per transaction are between 3 to 6%. When a purchase is made by debit or credit card retailers normally pay up to 1 to 2% on interchange fees. In order to boost consumer spending, merchants are willing to pay higher prices. Companies like Split and Afterpay have seen 78% and 22% increase in cart conversion respectively. Affirm and Klarna have seen an increase in average order values by 85% and 45% respectively.

04/07/2020 SoFi to acquire Galileo Financial technologies in $1.2 Bilion Deal (American Banker)

SoFi announced its plans to acquire Galileo Financial Technologies for $1.2 billion in cash and stock. Galileo offers financial services to both consumers and businesses like checking and savings accounts, direct deposits, ACH transfers, and bill payments. SoFi is a customer of Galileo, which powers SoFi Money among other offerings. American Banker article reveals that the current customers of Galileo also include Chime, Robinhood, Transferwise, and Varo Money. The acquisition may also allow SoFi to access international markets through current Galileo partners. Galileo will operate as a standalone business and the existing CEO, Clay Wilkes will continue to lead the company. 

Monevo, a loan comparison service provider in a release indicated that the market for consumer credit is witnessing a reduction in the demand for personal loans by 30-40%. Job insecurity and economic uncertainty are plunging consumer confidence and contributing to a fall in demand. COVID-19 has severely impacted almost all the territories where the company operates but more specifically, the UK and the US. Many lenders have either stopped lending completely or are restricting lending to a great extent. The pandemic has portrayed two scenarios, reduction in demand for personal loans and contraction in the supply of credit by most of the lenders. Greg Cox, founder and CEO of both Monevo and Quint, states that the pandemic is escalating the problems for both lenders and consumers. Australia seems to be least affected as the lenders are still operational and have just begun tightening the lending policies. 

The pandemic has revealed the key areas where the financial services industry falls short off. First is KYC i.e. Know your customer until now falls into compliance bucket but it needs to be reconsidered and customers needs to be understood in a deeper way in order to have a competitive edge and providing better services. As banks are closing branches to keep employees and customers safe, there is a dire need for providing digital support. Secondly, earlier digital customer interactions took place in a transactional way and this needs to change to a fundamental reworking of how digital banking should function. Thirdly, the adaption of telefinance by introducing on-demand chat, voice, and video-based services along with other digital self-services will provide better customer experiences and cost-cutting with respect to maintaining physical branch networks. 

As per a study conducted by J.D. Energy, online-only banks have a satisfaction rate of 864 out of 1,000, whereas conventional banks have earned a rating of 807 in a separate survey. For digital-only-banks, the call center was considered as a major weak spot as the digital bank customers reach out to call centers at twice the rate of traditional bank customers and 40 % wait on the call for more than five minutes. According to Bob Neuhaus, vice chairman of economic companies at J.D. Energy, these challenges are going to hit every financial institution whether it is traditional or digital banks. The changes will also impact other firms that have call centers involved in providing their services. Charles Schwab Bank and E-Trade Bank ranked the highest in both traditional and digital banks category.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][vc_custom_heading text=”Learn about MonJa’s Statement Spreading Automation for bankers & lenders.” font_container=”tag:h4|font_size:16|text_align:left|color:%23000000″ google_fonts=”font_family:Raleway%3A100%2C200%2C300%2Cregular%2C500%2C600%2C700%2C800%2C900|font_style:700%20bold%20regular%3A700%3Anormal”][vc_custom_heading text=”Request Free Demo Today!” font_container=”tag:p|font_size:22|text_align:left|color:%23000000″ google_fonts=”font_family:Raleway%3A100%2C200%2C300%2Cregular%2C500%2C600%2C700%2C800%2C900|font_style:700%20bold%20regular%3A700%3Anormal”][/vc_column][vc_column width=”1/2″][vc_column_text][yikes-mailchimp form=”10″ submit=”Schedule a Demo Today”][/vc_column_text][/vc_column][/vc_row]

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