How to Innovate in Alternative Lending Through Data Insights

What are the key drivers of innovation in alternative lending? According to a Deloitte report, customer convenience will continue to drive the need to streamline and simplify the lending process. There are three key market trends changing the lending industry: increasing automation and mobility, increasing collaboration between borrowers and lenders, and improving customer centricity in lending products and marketing. Recently I spoke at two events that illuminated these trends: A Future of Credit panel hosted by Herio Capital and Orchard Platform in New York and an Innovation in Alternative Lending panel at Lend360 in Atlanta. On the Future of Credit panel, I answered questions about primary use cases for alternative forms of data in the credit world, and explained the value of credit data, especially to those outside of the underwriting world. The panel included Matt Burton, CEO of Orchard, Sherif Hassan, Co-Founder of Herio, and Brian Korn, Partner at Manatt, Phelps & Phillips, LLP. It was great to hear positive feedback from Herio Capital on how their business has changed by the integration of Yodlee® Interactive API. The focus of Lend360 was the future of alternative data used in credit markets, an area that's continuingly growing in popularity. From consumer, small business and marketplace lenders to service providers including credit bureaus, and payment processors – the entire ecosystem of the online lending industry was at Lend360. Several of our customers and partners spoke at Lend360 and presentation slides are available here. For example:

  • Daniel DeMeo, CEO of CAN Capital, delivered the keynote speech on “What Spells Success in Alternative Business Finance?”
  • James Hobson, COO of OnDeck, presented “The Rise of Fintech: Going Global in Business Finance”
  • Kathryn Petralia, Co-Founder and COO of Kabbage, discussed “The Other Side of the Privacy Coin”

Key questions from our panel at Lend360 included: “How do we look at innovation and plan for it in our businesses? Does innovation come from within or is it based on customer requests?” I stated that both are important – it’s critical to have a strong foundation of data aggregation and fulfill customer needs. The ability to be nimble, react and build to customer needs through robust insights in cash flow or categorization is valuable for small business owners and consumers. We also discussed the critical nature of having products that interact with mobile. If you do not have the ability to plug data into any solution that the end user is going to use, then you will not be successful. Alternative data provides a more holistic view of a person's credit, and conveys a more data sources are able to verify a borrower's creditworthiness. We have several Yodlee Interactive clients that use alternative data to better identify good credit customers and learn more about them. For example, a lender could look at a person's checking account information (with their permission, of course), whereas before, they would have relied on credit bureau information and application data. Now, with Yodlee APIs, we're able to provide several different data points about a person's financial history in a more timely manner. Your checking account and investments can provide a lot of insights into your ability to pay your bills. So the "underbanked" — people without credit cards — can still show a credit history through rent or mortgage, cell phone bills, utilities, etc. to show stability in their payment history. In addition, the credit bureaus don't show the total of someone's worth. They could have a moderate credit score, but have a million dollars in the bank. That really changes their credit risk from a moderate risk to a low risk, which can significantly change the offer, credit line or account management strategies. If you'd like to learn about how Yodlee Interactive is powering nearly 400 fintech innovators such as Kabbage, Biz2Credit, and OnDeck – visit our case studies page with customer success stories.