The loan less traveled: To partner or not to partner with alternative lenders?

“Is it worth it weighed against the potential penalties?” a senior banker recently asked. The “it” involves teaming with third-party lenders, commonly termed alternative finance companies (AFCs). AFCs provide digitally enabled lending to borrowers that usually operate outside a bank’s credit comfort zone. More banks are now evaluating whether and how they should partner with AFCs —particularly Read More

By |2020-05-27T17:59:50-05:00January 27th, 2017|Comments Off on The loan less traveled: To partner or not to partner with alternative lenders?

In the new recipe for helpful banking robots, Pepper provides the spice

Enlisting the real-life equivalent of C-3PO, with his true-to-human behavior and unfailingly polite banter, may still be some years away for the world's banks. But in the meantime, the Japanese retail and corporate banking company Mizuho Financial Group has enlisted an innovation as incredible as it is lovable: Pepper the robot. First introduced at Mizuho's flagship branch Read More

By |2020-05-27T17:59:50-05:00January 26th, 2017|Comments Off on In the new recipe for helpful banking robots, Pepper provides the spice

Pressing issues: Four big hot buttons in regulatory credit risk management

The banking industry is in the midst of another good run. Most financial institutions have once again turned profitable, as evidenced by the most recent FDIC quarterly summary: It indicates that in the third quarter of 2016, community banks—which represent 92 percent of insured institutions—reported net income of $5.6 billion. That’s up $592.6 million (or 11.8 percent) Read More

By |2020-05-27T17:59:50-05:00January 23rd, 2017|Comments Off on Pressing issues: Four big hot buttons in regulatory credit risk management

Staying ahead of saturation: Three dimensions of universe expansion for personal loans

Personal unsecured loans have been a remarkable growth story in the past few years. From 2010 to 2016, lenders issuing 10,000 or more of these loans in each year grew from 70 to 121. Many are new FinTech lenders whose online interfaces and rapid underwriting have helped make personal loans a mainstream product. While FinTechs have driven Read More

By |2020-05-27T17:59:51-05:00January 3rd, 2017|Comments Off on Staying ahead of saturation: Three dimensions of universe expansion for personal loans

How lenders can use dynamic pricing to maximize profits

Why would a lender want to offer different prices to different pricing segments? One reason is that different pricing segments have different associated variable costs—and the most important cost difference among segments is risk. Lenders have long practiced risk-based pricing to account for risk differences. Another motivation is that customers value various products in various ways. To Read More

By |2020-05-27T18:00:04-05:00October 26th, 2016|Comments Off on How lenders can use dynamic pricing to maximize profits

Small business lending: Can you compete?

A small business owner doesn’t want to wait weeks for a decision—and today, they know they don’t have to.   When it comes to securing a loan, small businesses today claim no shortage of options. And the proliferation of online and marketplace lenders has led to a significant result: Many bankers now question their competitive posture. Leading Read More

By |2020-05-27T18:00:06-05:00September 6th, 2016|Comments Off on Small business lending: Can you compete?

Compliance challenge of collaborating with online lenders

The success of online marketplace lenders is motivating banks to find ways to partner with these companies, acquire them, or duplicate what they see happening in this new industry. However, as banks look to initiate that collaboration, the task has been made more difficult by last November’s advisory letter from the Federal Deposit Insurance Corp. (FDIC) on Read More

By |2020-05-27T18:00:07-05:00August 22nd, 2016|Comments Off on Compliance challenge of collaborating with online lenders

Mortgage and auto lenders grapple with disparate impact

Mortgage and auto loan providers are caught between a rock and a hard place after a ruling by the U.S. Supreme Court upheld the theory of disparate impact, which says that lenders can be found liable for discrimination against a protected class even if said discrimination was unintended. The ambiguity of the theory, and the lack of Read More

By |2020-05-27T18:00:07-05:00August 12th, 2016|Comments Off on Mortgage and auto lenders grapple with disparate impact

Marketplace lenders face regulatory scrutiny

Online marketplace lending is an industry rooted in the innovative culture of Silicon Valley that may soon have to find its way in the bureaucratic culture of Washington, D.C. As one federal agency after another launches a study of the technology and business practices of non-bank companies that make online consumer and small business loans, the odds Read More

By |2020-05-27T18:00:07-05:00August 8th, 2016|Comments Off on Marketplace lenders face regulatory scrutiny

Success factors for fixing the bank

When channel switching on TV, I always tend to linger on three programs: Kitchen Nightmares with the always-profane Gordon Ramsey, Restaurant: Impossible with Robert Irvine, and Bar Rescue with Jon Taffer. Each host operates as a consultant dealing with booze or food rather than financial issues, but the situations they address, their approach to problem solving and Read More

By |2020-05-27T18:00:08-05:00July 22nd, 2016|Comments Off on Success factors for fixing the bank

Preparing for new credit loss standards

With the recent Financial Accounting Standards Board vote to proceed and the final Accounting Standards Update now published, the Current Expected Credit Loss (CECL) standards remain top of mind for the C-suite in financial institutions. Even though the official adoption deadline has been pushed back to after December 2019, financial institutions should take actions today to help Read More

By |2020-05-27T18:00:08-05:00July 18th, 2016|Comments Off on Preparing for new credit loss standards

Automating loan decisions for small businesses

It’s no secret that small business loans historically offer small profit; in fact, there is little economic difference in funding a $100,000 loan versus a $1 million loan. However, even though these loans may not always be the biggest movers to a bank’s bottom line, this type of lending is essential to establishing and building lasting relationships Read More

By |2020-05-27T18:00:08-05:00July 15th, 2016|Comments Off on Automating loan decisions for small businesses

A closer look at alternative lenders

Over the past year, the alternative lending industry has taken several steps forward and, then, a big leap backward. The most notable step forward centers on the relationship between OnDeck Capital and JPMorgan Chase & Co. Chase now leverages OnDeck’s technology for its small business loans. This relationship, among others, has helped to focus senior bank managers Read More

By |2020-05-27T18:00:10-05:00June 3rd, 2016|Comments Off on A closer look at alternative lenders

Checklist for small business banking success

“Why should we bother with small businesses? Your own numbers say most banks lose money from small business loans.” – Retail bank head, Northeast “We are much more interested in the middle market than small businesses. We can make larger loans at a similar cost base. We are avoiding small business lending.” –Retail bank head, Southeast “We Read More

By |2020-05-27T18:00:12-05:00April 14th, 2016|Comments Off on Checklist for small business banking success

Strategic choices in digital lending

Nearly every industry pundit these days is raising the threat to banks posed by “marketplace lenders” and the adoption of digital online lending technology. Many say banks need to “build, buy or partner” with such lenders or else technology will leave them behind. A better understanding of the landscape shows that some financial institutions (FIs) are already Read More

By |2020-05-27T18:00:14-05:00February 19th, 2016|Comments Off on Strategic choices in digital lending

Seven preparatory steps for new credit loss standard

In December 2012, the Financial Accounting Standard Board (FASB) proposed a new current expected credit loss (CECL) model. With it came a number of changes and controversy, as institutions recognized the potential of an increase in allowance levels as a result of the changes to how losses are estimated. While many institutions, associations and firms submitted comment Read More

By |2020-05-27T18:00:14-05:00January 26th, 2016|Comments Off on Seven preparatory steps for new credit loss standard

What keeps bankers awake at night

It’s no surprise that banking professionals are concerned about their future. From security scandals to regulatory and compliance concerns to heated debates about cloud technology, there are a variety of hot topics being analyzed, disputed and deliberated among bank executives and outside experts. So, what issues are significant enough to keep them up at night? Recently, I Read More

By |2020-05-27T18:00:15-05:00January 11th, 2016|Comments Off on What keeps bankers awake at night

Managing exposure to deposit refinancing

Long-suffering time deposit account holders are hoping for better deals the next time their CDs mature. Bankers anticipate this and model their future interest expense by applying “beta” estimates at the time of deposit maturities in their modeling. “Beta” is the percentage of interest rate changes that must be passed on to the depositors to maintain funding Read More

By |2020-05-27T18:00:16-05:00December 9th, 2015|Comments Off on Managing exposure to deposit refinancing

Serving the underbanked with short term loans

Financial institutions are primarily focused on meeting the needs of Americans that fit into certain demographics. The rest of the population ends up as the underbanked – consumers with needs viewed as too costly, too risky or too difficult to serve. According to the FDIC, the collective population of underbanked Americans is approximately 34.4 million households, more Read More

By |2020-05-27T18:00:31-05:00August 5th, 2015|Comments Off on Serving the underbanked with short term loans

Making small business loans profitably

Many banks are losing money with every small business loan they make. High origination costs and increased processing and infrastructure requirements often mean that loans of less than $100,000 end up being value destroyers for a bank’s bottom line. High costs have also opened the door to alternative lenders, both as competitors to banks and as bank Read More

By |2020-05-27T18:00:32-05:00July 7th, 2015|Comments Off on Making small business loans profitably