Contemporary borrowers want to be able to price, decide. and act on loans from their phones. Make no mistake: Quicken Loans’ 2018 Super Bowl commercials with Keegan-Michael Key had its sights on lenders who might be a lot like you. Quicken Loans wants to peel away young, affluent customers who judge the aptitude of lenders […]
Contemporary borrowers want to be able to price, decide. and act on loans from their phones.
Make no mistake: Quicken Loans’ 2018 Super Bowl commercials with Keegan-Michael Key had its sights on lenders who might be a lot like you.
Quicken Loans wants to peel away young, affluent customers who judge the aptitude of lenders based on their ability to answer their questions and deliver a product through a language of graphics and swipes.
The ads have a young couple sitting in an office across the desk from a bald, middle-aged loan officer. “Yeah,” he says, “you can get a mortgage that avoids PMI, but there’s no way to avoid MIP on an FHA. Now there’s—“
Mr. Key rolls out on a desk chair from behind the couple and shows them a cell phone. “Hey, this will help.”
The next frame shows the Rocket Mortgage home page, as the narrator intones, “Rocket Mortgage by Quicken Loans makes the complex, simple. Understand the details and get approved in less than 8 minutes.” The message here is clear, your competition understands that borrowers want clarity and convenience, and your challenge is to be sure that you are meeting those expectations.
The reality for some credit unions and community banks is that they can’t afford to adapt their processes to fit into the palm of a smart phone user’s hand. But the costs of avoiding the expense can be even greater than a line item in an operations budget. Lenders risk their reputation. A bad mobile experience tells your customers that their needs aren’t your priority. How many of those customers can you afford to lose?
Technology is not about being trendy. It’s a requirement to stay ahead of the market and meet your customers expectations. Lenders with online lending programs optimized for mobile phones are following advice their grandparents might have given: Meet people where they are—not where you want them to be. Does your loan origination system maximize your customers’ online experience, allowing you to lend anywhere and at any time? This is something you need to consider when starting or improving your online lending experience.
Mobile Lending and Smart Phone Usage
Mobile lending has become the method of choice for many young affluent customers who will soon be the backbone of your portfolio. A Federal Reserve Study found that 38% of all bank customers in 2015 were using mobile phones to at least get information about their accounts. The base for that comparison included customers who didn’t even own a phone, and other Fed studies indicate that number surpassed 50% in 2018.
A 2018 study by the Pew Research Center found more than three quarters of adults have a smart phone. While distribution is roughly even between men and women, and among racial and ethnic groups, the distribution by age, income, and education shows wide gaps. Smartphone ownership is:
94% of ages 18-29
89% of ages 30-49
73% of ages 50-64
46% of ages 64 and over
Those with college degrees or annual incomes over $75,000 have smartphone ownership rates exceeding 90%, while those without any college education or incomes below $30,000 have ownership rates below 70%.
A 2018 study by the University of Southern California’s Center for the Digital Future found that more than one in three bank customers under age 45 would switch their primary bank for “better online/mobile services.”
Among most age groups, interest rates and fees were by far the biggest reason to switch, but among those ages 25 to 34, the gap was narrow: 47% would switch for online/mobile services, compared with 54% for lower fees and rates. If you require a driver’s license as a stipulation for a loan, these borrowers expect to be able to take a picture of it with their phone and send it to you within a few seconds. It would not be wise to expect them to stop by your branch or even scan-and-email stipulated documents.
Maximizing customer convenience is just as important as advertising low rates and fees. And while age matters, these studies are also showing that mobile usage is increasing sharply among all age categories and incomes, including older consumers. Your institution’s future is at stake if you’re not keeping up with the convenience borrowers expect, and providing that level of service requires advanced technology. You want to meet your customers where they live. And if they’re moving, you want to be the first to greet them.
These trends are clear. How are you addressing them?
News Comments Today’s main news: Square plans to apply for an ILC banking license. Laplanche boosts volumes at Upgrade. SoFi CEO pulls out of Goldman fintech conference due to recent sexual harassment allegations. RealtyMogul launches MogulREIT II. Today’s main analysis: Why broker-dealer robo-advisors miss the point. Today’s thought-provoking articles: Why broker-dealer robo-advisors miss the point. RateSetter says even a millionaire couldn’t […]
Square to apply for industrial bank license. AT: “New technologies often change the landscape of entire industries. It is certainly the case that online technologies are changing banking. If there was ever a case to be made that non-banking institutions have the right ingredients for acquiring an ILC, this is it. Forcing startups into a particular business model in order to protect incumbents is not only unfair to startups, but it hurts the consumer. I’d like to see more alternative lenders apply for an ILC.”
Why broker-dealer robo-advisors miss the fintech point. AT: “This is an excellent read. Brokers may not like robo-advisors, but it’s hard to imagine that they aren’t here to stay even if they exist only as hybrids. A financial advisor is a financial advisor. Its make up doesn’t change its face.”
RealtyMogul launches MogulReit II. AT: “Where MogulREIT I is more diversified, investing in multifamily, retail, office buildings, industrial, and even self-storage, MogulREIT II appears focused only on multifamily. Considering that renting is a hot sector right now, this should be a good thing for investors for the time being, but you’ll want to keep an eye on the market. If the market tips to buyers again and renting goes south, so too could this REIT.”
Payment processor Square is seeking an industrial loan company, according to several sources familiar with the matter, further sparking debate over whether fintech companies should be allowed to use the controversial charter.
“ICBA’s feeling about Square applying for an ILC is the same about SoFi,” said Camden Fine, the president and CEO of the Independent Community Bankers of America. “If these entities want to be banks, they should apply for banking charters and come under full and unified banking supervision.”
Square’s main purpose for the charter will be to extend its small-business lending business, the spokesperson said. Though it also intends to take deposits, which would provide some amount of funding for its on-balance-sheet loans, the lion share of the company’s loans would still be sold off to third parties.
Square also felt the ILC charter was best suited to its structure, as the company owns a point-of-sales hardware appliance business and even a food delivery service called Caviar.
Renaud Laplanche, the former Lending Club chief ousted over a governance scandal last year, is stepping up lending at his new venture, determined to re-impose himself on the market for refinancing more than $1tn of credit card debt.
Mr Laplanche launched his firm, Upgrade, in April, having raised $60m in Series-A funding from a group of investors including Union Square Ventures, Ribbit Capital and CreditEase, China’s leading online lender. As at Lending Club, he is homing in on consumers struggling with big balances on credit cards — offering to swap a floating rate of, say, 17 per cent for a fixed rate about 5 percentage points less.
While Mr Laplanche declines to say how much business he has done so far, he has begun to boost volumes, responding to steady demand from consumers and also for high-quality assets from half a dozen core institutional investors. That new cadre of investors is unfazed by the scandal which erupted in May 2016, he said.
Social Finance Inc. Chief Executive Officer Mike Cagney was supposed to take the stage at the Goldman Sachs FinTech Conference in New York City on Thursday, but he backed out amid a lawsuit and internal investigation at the firm.
Launching a robo advisor does hold appeal among broker-dealers. Many of their reps are asking for it, either because it’s an easier way to handle smaller clients, or just to have a robo advisor option for millennial clients. Who wouldn’t want a button for the advisor’s website that young people can click to open up small accounts that will grow with time? And from the broker-dealer’s perspective, ideally, this helps them address the coming generational shift of assets from baby boomers down to millennials.
But for a broker-dealer that in the aggregate is losing 3% to 5% a year in asset outflows a decade from now, it’s a crisis, because a broker-dealer still has a multi-decade open-ended timeframe as an ongoing business entity. This is why we see broker-dealers, as well as RIA custodians, so obsessively beating the drum about advisors needing to focus more on younger clients. It’s not actually because advisors desperately need younger clients for our businesses to survive. It’s because they, the broker-dealers and RIA custodians, need us to get younger clients for them so their businesses survive and so they have younger clients after we’re gone and retired!
And so from the broker-dealer’s perspective, if millennials are pursuing robo advisor solutions, then the broker-dealer wants to roll out a robo advisor to get those younger clients and solve its own long-term generational issue. But here’s the problem with the strategy: robo advisors live and die by their ability to get clients online, and that’s not easy for anyone, especially a large base of independent registered representatives.
DOOMED TO FAIL
Betterment is just over $10 billion in total assets after six years. Wealthfront is just over $7 billion AUM in that same duration. Schwab made news for $15 billion dollars of assets, but has actually noted only a third of that total was new assets. Vanguard is now over $80 billion, but remember they had much of their assets already as well. Vanguard is direct-to-consumer through the Internet already; those in Vanguard’s Personal Advisor Services were predominantly existing Vanguard investors, simply upsold to human advice. Even Edelman online, which launched in early 2013, has accumulated barely 1,000 clients and just $62M of AUM after four years (and their average robo client is actually a baby boomer anyway.)
RealtyMogul.com, the online marketplace for commercial real estate investing, today announced the launch of the company’s second real estate investment trust or “REIT,” MogulREIT II.
MogulREIT II aims to invest in multifamily apartment communities across the United States that have demonstrated consistently high occupancy and income levels across market cycles. MogulREIT II also plans to invest in multifamily properties that offer value add opportunities with appropriate risk-adjusted returns and potential for appreciation objectives.
MogulREIT II plans to only consist of properties that satisfy RealtyMogul’s rigorous zero-based underwriting process, which analyzes each potential deal from scratch through a combination of proprietary in-house analytics and underwriting. RealtyMogul also spends over $1 million annually for the use of third-party data and technology to vet each deal. The process is so intensive, fewer than 1% of the requests reviewed by RealtyMogul pass its high underwriting standards. Keep in mind there are risks to investing, including loss of capital, so one should evaluate the full offering materials.
RealtyMogul MogulREIT II Survey Data (RealtyMogul Email), Rated: A
RealtyMogul recently commissioned Harris Poll to conduct an online survey among over 2,000 U.S. adults to better understand the reasons people choose to rent over buying a house.
Americans have shifting priorities and owning a home might not be at the top of the list
Roughly 7 in 10 Americans (71%) believe the home buying process is overwhelming
70% of Americans believe people these days will need to rent well into their 30’s in order to save enough money to buy a home
Over a third of Americans (35%) would prefer renting over owning a home to maintain a flexible lifestyle
Roughly a third of Americans (34%) would rather save their money to spend on traveling than to put it towards buying a home
A third of Americans (33%) would prefer to rent than own a home if it meant they could still afford small luxuries (e.g. eating out, fancy coffee, avocado toast) in their everyday life
Emmanuel Marot has left LendingRobot, the peer-to-peer lending company he co-founded in 2013. He served as CEO of the startup for the past four years, navigating LendingRobot through a merger with NSR Invest in August.
Marot isn’t sure what his next career move will be but remains General Manager of Zenvestment.com, according to LinkedIn.
Legislative Update 162 (Experian Email), Rated: A
Highlights this issue:
On September 7, the House Subcommittee on Financial Institutions and Consumer Credit has scheduled a hearing to review “Legislative Proposals for a More Efficient Federal Financial Regulatory Regime.” The Subcommittee has not released the full agenda, but it is expected that the hearing will focus on several bills affecting consumer credit.
Congress continues to consider legislation that would repeal the CFPB’s Arbitration Rule using an expedited legislative process under the Congressional Review Act (CRA). The House of Representatives passed a resolution of disapproval on July 25. The Senate is expected to take up the measure upon their return from the August recess, although there is uncertainty when a vote will take place given other priorities that Congress must pass by September 30, which is the end of the US Fiscal Year.
On August 30, three Democrats on the House Energy and Commerce Committee sent a letter to the Government Accountability Office (GAO) requesting that GAO further evaluate post-breach identity protection products used by government agencies.
Legislators in California continue to debate legislation that would enact a broadband privacy law in the state, similar to the one first issued by the FCC and then overturned by Congress. A.B. 375 would prohibit an internet service provider from using, disclosing, selling or permitting access to customer personal information.
The actual listing is not yet live on the StartEngine platform. The filing indicates that up to an additional 100,000 shares may be issued as “bonus shares”. There are no selling shareholders and the entire proceeds will go to the company. According to the filing, the minimum investment is $500.
The bureau imposed a $100,000 fine on California company Zero Parallel LLC, which as a “lead aggregator” identifies potential borrowers and then sells their information. The action shows the agency has its eye on the online side of the industry, which crosses state lines and has grown in recent years. Potential borrowers fill out web forms and then are immediately sent to a lender’s site to take out the debt.
According to a CFPB statement, Zero Parallel sold applications to lenders it knew did not follow states’ usury laws, interest-rate restrictions and prohibitions on who can make the loans, and kept borrowers in the dark about risks and costs.
Zero Parallel simply sold leads to the highest bidders, according to the CFPB, and borrowers did not know they were taking out illegal loans.
Zero Parallel will pay the fine without admitting or denying the allegations, the CFPB said. The agency also said it had reached an agreement with Zero Parallel’s owner, Davit Gasparyan, to resolve similar charges filed last year against his previous company, T3Leads, with a $250,000 fine.
Global Payout, Inc. (OTC: GOHE) makes payment solutions available to clients around the world, serving the needs of everything from commercial enterprises to government institutions. Its Global Reserve Platform is a web-based banking platform that includes everything domestic, foreign exchange, and international payment service providers need to conduct financial transactions. It handles online banking, compliance, mobile wallets, card management, biometric payments, authentication, merchant payment processing, bill payments and more, while also offering core and traditional banking products. Global Payout’s primary focus in this area is logistics, in addition to small to medium size companies, banking, and travel firms.
Yesterday, the CEO of Able Lending, Will Davis, reached out to me to clear the air. Here is his unedited statement:
We believe this story originated by the fact that we’ve been in active discussions with a number of originators to acquire Able, and there’s a non-zero chance this story was placed in order to throw an interested party off the trail.
This anonymous source doesn’t seem to be anyone close to Able, because Able does not own a portfolio of loans (it originates and distributes loans to direct lenders, who then hold those loans on their balance sheet) and therefore has no portfolio to sell. In any event, we have no plans to go out of business and no plans to declare bankruptcy.
The wealth of new crowd-funding opportunities in CRE is just the latest addition to a long line of traditional equity funds, REITs and ETFs already offering investors the chance to invest without the high upfront cost traditionally associated with a direct CRE investment. It sounds easy, right? But how truly “passive” are these opportunities?
The only problem with passive investing in CRE? Pure 100 percent passive investing doesn’t exist.
ROCK-BOTTOM interest rates are now challenging the convention that someone with £1m in savings could live off the interest, RateSetter claims.
The peer-to-peer platform’s latest savings tracker found on average UK adults think they would need an income of £26,140 per year to live comfortably, but £1m in an average savings account would pay just 0.14 per cent interest, equating to £12,500 each year.
£1m invested in a one-year bank bond with an average rate of 0.79 per cent would earn just £7,900, while the same amount could earn £45,000 in a RateSetter account earning 4.5 per cent interest.
Investors opting to put their £1m into FTSE 100-listed stocks would have earned £80,000 in interest over the 12 months to the end of August, the research found.
The challenge was to find an emotional positioning that resonated with Funding Circle customers while instilling trust and confidence as a financial services company. Rooster Punk helped Funding Circle to identify a common thread that connects small business owners, investors and the people who work at Funding Circle. Results revealed they share a uniquely driven yet positive attitude to work and life, a restless determination to succeed and the tenacity to get there. The agency called this ‘Made to do More’.
Rooster Punk’s founder, Paul Cash, commented: “Developing Funding Circle’s new position and identity had to go deeper than a product message around faster business loans. We set out with the ambition that we didn’t just want people to buy from Funding Circle, instead we wanted them to buy into them.
This warning comes from Tony Duggan, chief executive of fintech firm Crossflow Payments, a company which acts like a cog between corporations, their suppliers, and funding providers – ensuring that suppliers don’t have to wait for a month or more to get paid.
Duggan’s warning is not just a reference to Brexit, but centres on the introduction of new payment practice laws, which will make it a criminal offence for a corporation not to make public whether it is paying suppliers according to the terms of the contract.
The code looks to stamp out problems with late payments. Ultimately it aims to improve the cashflow of businesses – largely suppliers – by making sure they are paid by their corporate customers on time.
Crossflow is a no frills sort of business; it’s basically a B2B version of peer-to-peer lending, and one that is currently pretty unique in the UK arena.
Zopa has recently moved to a system of self-organising teams and that is helping them to achieve more and deliver more on their customer promise.
In the first quarter of 2016 they delivered more than they had in the whole of 2015 with the same number of people.
Ultimately, it’s all about creating an environment where you find and allow great people to go and solve problems.
Andrew’s role is all about ensuring they have the right people in the right tribes solving the right problems. It’s not about him being able to come up with all the answers as that just doesn’t scale.
In terms of mistakes, initially they found that their tribes went too tribal and it was difficult seeing what was going on within the tribes. That was a problem particularly given the level of technical and strategic dependencies that exist between tribes.
On a day to basis, their teams work in a way that is akin to a modern agile environment and are able to pick the right model (1 week sprints, 2 week sprints, kanban etc) depending on their context and preferences.
As is the nature of agile working, they are constantly tweaking and looking for ways to improve.
Other challenges they have faced include the management of people from different backgrounds, skillsets and with different experiences.
Given that they are now 250 people in London, the next big challenge for them will be how do they move this system into a remote context.
The heart of their success has been in creating those relationships where there weren’t relationships before i.e. between business people and tech people. It’s easy when you sit next to them or are in the same office but more difficult when you are in different locations, time zones or even speaking different languages.
They embraced a lot of Spotify’s approach as there are lots of things written about them and by them on how they organise themselves (videos, talks, blog posts, slide shows etc). Google ‘Spotify and Tribes’ to find more.
Don’t make assumptions around customers needs. Go and ask then as you will almost certainly be wrong.