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MonJa’s Digital Banking and Lending Monthly Roundup – Why Subscribe?
Digital banking and lending are 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!
10/26/21 What Gen Z’s crypto fascination means for credit unions (CUInsight)
Gen Z are adopting cryptocurrency investments in record numbers. It has become crucial for credit unions to understand their interests in alternative modes of investments like crypto. More than half of Gen Z (54%) would want to see their credit union develop more programs and incentives to steer their investment experience. Although it requires significant resources to develop programs, empowering them with financial literacy is expected to increase net promoter score in a meaningful manner.
10/26/21 CUNA calls on President Biden to withdraw IRS reporting proposal (CUInsight)
CUNA and other organizations wrote to President Joe Biden to withdraw the Internal Revenue Service (IRS) reporting proposal and anticipate more targeted tax enforcement measures. Despite reducing the account criteria, the proposal remains unfavorable to both financial institutions and customers as it will record a substantial number of routine and completely innocent transactions by consumers and small enterprises. The institutions also express worry about the proposal’s compliance obligations and privacy issues.
Credit Union leaders’ confidence in the economy and their own CUs improved in September, and the largest improvement was seen in the growth component as stated by NAFCU’s Credit Union Sentiment Index (CUSI). Moreover, NAFCU’s latest Economic & CU Monitor, which is dived into the NCUA’s examination trends and focus areas, remained consistent compared with observations from last year. The pandemic-related issues continue to impact significantly on exam trends and objectives. Despite that, NAFCU stands up for a range of recent exam enhancements, which will provide credit unions with greater freedom and ensure that examinations are fair, streamlined, and adequately suited to manage risk within the credit union system.
10/22/21 Credit Card Spending Returns for Credit Unions (Credit Union Times)
According to PSCU’s payment index, credit card transactions at member credit unions in September were 22% higher than in September 2020 and 28% higher than in September 2019. Likewise, debit transactions were 14% and 34% higher than 2020 and 2019, respectively. This is so because consumers are adapting to the changing environment. Also, seasonal balance rises are expected to begin in October, with the early start of the holiday shopping season, and will be driven further by supply chain issues. Jeremy Barnum, CFO for JPMorgan Chase, said that the bank is hopeful about the potential expansion of revolving card balances. However, the bank anticipates that it will take a little bit of time for revolving credit card balances to restore to pre-pandemic levels.
10/20/21 Financial Health Pulse 2021: two-thirds of the U.S. could benefit from fintech support (LendIt Fintech)
As per the Financial Health Pulse U.S. trends report 2021, 34% of Americans are classified financially healthy, up 2% from the previous year, leaving out 187 million Americans who are still financially struggling or in unstable territory. Financial health increased most among Black, Latinx, Asian Americans, and Americans with less than $30,000 household income. The gender disparity, on the other hand, widened. The report also found that the most likely cause for the resurgence in more vulnerable groups was government intervention programs like PPP and stimulus checks, which helped individuals get back on their feet. Although the report indicated that each of those groups improved the most since Pulse began collecting data in 2018, overall individual financial health has declined. The collaborators concluded that there is lots of potential for fintech businesses to innovate and enhance the lives of Americans.
10/18/21 Mortgage Originations Expected to Fall in 2022 (Credit Union Times)
The Mortgage Bankers Association (MBA) forecast that overall mortgage originations will decline by 33% next year as interest rates increase, causing refinances to fall substantially while purchases rise marginally. The estimates presented by MBA’s economic team revealed that originations of $2.58 trillion in 2022 will reduce 2% to $2.56 trillion in 2023 and stay near that level in 2024. According to MBA Chief Economist Mike Fratantoni, lower refinancing activity is being driven by higher mortgage rates and fewer eligible homeowners. Also, more freshly constructed homes and homeowners listing their homes for sale might result in a slowdown of home-price increase next year. Marina Walsh, vice president of industry analysis, believes that competition will heat up as purchase mortgages become a greater portion of a smaller pool.
10/14/21 Bank reports 60 percent more loan approvals by using alternative data (LendIt Fintech)
When a panel of industry experts assembled to examine the use of alternative data in credit underwriting, Peter Renton of LendIt questioned how alt data might widen the “credit box” or bring more financial inclusion to lending. Marc Butterfield, SVP of Innovation and Disruption at First National Bank of Omaha, said alternative data helped process 60% more applications than the previous strategy. Butterfield, who represents a 165-year-old bank, also said his statistics revealed that creditworthy clients were being neglected. Bence Jendruszak, COO of SEON, summed it up by saying that using alt data to enhance approvals benefits the bottom line.
10/13/21 Bank Dora: The First Neo-Credit Union in the U.S. (The Financial Brand)
Neobanks are extremely popular in today’s banking sector, but these digital rivals have so far only been established by fintech entrepreneurs and a few banks. USALLIANCE Financial, a federal credit union located in Rye, New York, along with three other credit unions, launched their own version of a neobank: Bank Dora Financial. Launched in late September 2021, the bank has garnered over 1,000 installations on Google Play within two weeks. But, financial institutions of all kinds are wondering whether the word “bank” in Bank Dora Financial will be problematic, considering the legal predicament Chime encountered in late April 2021.
There are swarms of neobanks invading the banking sector, many of which claim to be more able to deliver financial products than major industry players. Dora’s team believes it has lots of ways to stand out from the rest. Full bilingual integration is one of the major characteristics. While four separate institutions are actively investing in Dora, the accounts opened through Dora will be primarily handled by USALLIANCE.
10/13/21 Industry scrambles to prepare for CFPB debt collection rules (American Banker)
Banks, credit card companies, and debt collectors lobbied for amendments to federal debt collection standards, and they tend to benefit from extensive communication with customers via email and text messages. Although the laws do not apply particularly to banks and other lenders attempting to collect debts, they do need technological upgrades and information exchange in order for third-party debt collectors to benefit from certain “safe harbors” that safeguard them from legal liability. However, creditors are concerned about what would be required in terms of continued management and monitoring of third-party vendors under these new rules. Consumers can choose to opt out of such mailings, but reformers are sceptical whether the correct individual will be contacted. From start to finish, the CFPB spent around eight years establishing laws governing contemporary communications. But, the real process of implementing the adjustments has only just begun.
10/11/21 To Navigate A Complex Future, Banks Need To Become Far More ‘Adaptive’ (Forbes)
Banks, venture-backed companies, and tech giants are scrambling to reduce costs, offer sign-up bonuses, and supply consumers with unique products and services. However, the outlook is a little less bright for those in charge of the world’s top institutions. At the same time, their most valuable assets — massive balance sheets, complicated product suites, branch networks, and legions of loan officers — are increasingly seen as anachronisms by competing tech companies and Wall Street investors. Transformation is an overused term that refers to a transition from the sedate, conservative realm of traditional banking to the promised land of digital. However, as banks seek to comprehend and respond to the changing environment in which they operate, the biological idea of adaptation to a new context is significantly more appropriate. Adaptive fintechs are valued at more than 19 times revenues, compared to 13 times for traditional vertically integrated fintechs. With more financial transactions taking place on digital platforms, banks have an opportunity to drive this shift. It will need them to put established business lines at risk, develop technology that allows them to be flexible, and collaborate with challengers and other partners they may have previously overlooked.
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