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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, while also you can improve your finance by learning online trading, as there are resources like trade fx that help you with this. 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!

08/25/22 Spike in Credit Union Auto Share Confirmed by Experian Data (Credit Union Times)  

According to Experian reports, credit union established records for both new and used car financing, while the prior records were set during the first quarter of this year. On the basis of balances, credit unions accounted for 33.7% of all auto loans in the country during the second quarter. Experian also reported that while inventory shortages persist, all lenders shift towards used cars. Credit unions, who have always held a dominant position in the market, benefited from the trend, which was also brought on by increased monthly payments and average car loans for both new and used cars.

08/25/22 Resist the Siren Song of 40-Year Mortgage Loans (Credit Union Times)  

The typical US home’s monthly mortgage payment has increased 62% over the past 12 months due to rising interest rates and home values. Therefore, it makes sense if you are finding a solution to reduce expenses. But if you’re borrowing money to purchase a home and believe the key to a less expensive mortgage is a lengthier loan, think again. Additionally, a 30-year mortgage is a somewhat misleading term these days because very few people keep their mortgage for that long. So why not simply commit to 40 years? However, the most significant warning sign with a 40-year mortgage is how slowly you’ll be able to increase your home’s equity due to the higher proportion of interest payments compared to principal payments in a shorter-term loan. Also, neither Fannie Mae nor Freddie Mac provides a guarantee for 40-year mortgages. This implies that they are not necessarily subject to the same consumer protections as conforming loans, such as a cap on excessive fees.

08/23/22 Rocket Mortgage to Woo Small Credit Unions (Credit Union Times) 

Rocket Mortgage will soon have the opportunity to originate loans on credit union websites thanks to a collaboration with Austin, Texas-based fintech Q2 Holdings. Rocket Mortgage will be able to sell its offerings to credit union members on the credit union’s websites in exchange for a fee. The online platform used by Q2, referred to as the Q2 Partner Marketplace Program enables the Rocket Mortgage opportunity. The agreement provides credit unions with a reasonable option to offer mortgages, which is a critical need for every retail financial institution. By becoming originating partners, the credit unions get the entire fee income, without increasing the balance sheet size.

08/22/22 CUNA cautions CFPB against “overly restrictive” standards for customer service (Credit Union National Association)

In a letter of comment in response to a request for information (RFI) from the Consumer Financial Protection Bureau (CFPB) regarding relationship banking and customer services, CUNA points out that section 1034(c) does not specify how to comply with this provision other than by providing information immediately. Although providing the best possible customer service is a key component of any successful financial institution, the CFPB’s interpretation that Section 1034(c) permits it to interfere with customer-financial institution relationships and establish explicit standards for “customer service” in a broad sense is legally questionable. The letter also adds that imposing uniform customer service standards risks taxing credit unions’ limited resources.

08/18/22 Rising Interest Rates Put the Squeeze on Fintech Lenders (The Wall Street Journal)

High-flying consumer lenders have been dragged to the ground by rising interest rates. Bad loans are increasing in tandem with rising borrowing rates. More consumers are starting to fall behind on payments as a result of the rent and food price increases brought on by the raging inflation. When markets shot up last year, the lenders’ use of artificial intelligence to approve “underserved” borrowers made them investor darlings. However, they are currently out of favor. another illustration of how the Fed’s rate-hiking strategy impacts the entire economy is the financing crunch. Also, consumer loan originator Upstart was compelled to reduce lending in the second quarter due to tighter financing conditions, which contributed to the company’s quarterly deficit.

08/17/22 Consumer Fintech Returns to the Trend Line (a16z Fintech Newsletter)

The U.S. government probably had no idea that the enormous Covid stimulus plan it initially pursued in the spring of 2020 would have such a significant impact on the development of consumer fintech. Millions of consumers having tested fintech platforms in the past two years; it is believed that the $2 trillion U.S. banking market cap, will drastically shift to digitally native players. The Bipartisan Credit Card Competition Act was also presented in July by U.S. Senators Dick Durbin and Roger Marshall. If the legislation goes into effect, large credit card-issuing banks with assets of more than $100 billion would have to give businesses the option to route transactions to a third card network in addition to Visa and Mastercard. However, given the current state of the credit market, it appears that such legislation would have a less significant effect on lowering merchant costs, at least in the short term. 

08/16/22 How Apple Will Revolutionize The Checking Account (Forbes)

Apple Card and Apple Pay are already financial services provided by Apple, but if the Big Tech business introduced a bank account, what would it look like? An analyst predicted that an Apple bank account would use an automatic savings system that combines bank and high-yield savings. For larger purchases, it would include built-in BNPL financing and a physical debit card with virtual one-time and subscription token capabilities. It would only feature finite PFM functionality and reimburse all out-of-network ATM fees (modeled after the Apple Card UI). Itai Damti, CEO of Unit, also predicted that Apple’s other banking products would be offered through interest-earning, FDIC-insured checking accounts and have a seamless integration between its banking suite and Apple Pay, along with providing fee-free ATM access. Damti also speculated that an Apple bank account would offer more financing alternatives, allow customers to have numerous accounts, offer cash back benefits, offer on-demand virtual debit cards, and provide access to earned revenue. Although the actual banks play a fundamentally different role in a banking sector that has undergone digital transformation, the new perspective reflected by Apple, Google, or Amazon as likely banking providers raises questions about who is the bank and who has access to our accounts.

08/15/22 Federal Reserve Finalizes Guidelines for Access to Its Payment Systems (The Wall Street Journal)

The Fed received numerous comment letters from bank lobbyists, cryptocurrency companies, and consumer protection organizations after putting forth a clearer set of rules for allowing access to its payment systems last year. And now, the Federal Reserve has indicated that cryptocurrency companies would be subject to a higher level of assessment and would employ a tiered approach when deciding whether to provide financial institutions access to its payment systems. Under the tiered approach the Fed chose to use, applications from financial institutions with state charters would be scrutinized more closely than those from institutions covered by the Federal Deposit Insurance Corp. or under federal supervision. The regulations reflect the suspicion that Fed officials and representatives from other regulatory bodies have regarding the unregulated crypto industry.

Crypto Is Taking a Few Small Banks on a Wild Ride (The Wall Street Journal)

A few tiny lenders actively supported the emerging crypto businesses when big banks avoided them, and now they are currently coping with a crisis. As a result of this year’s collapse in cryptocurrency values, banks like Silvergate Capital Corp., Signature Bank, and Customers Bancorp Inc. have been on a wild ride. Deposits of commercial real estate lender Silvergate fluctuated by $5 billion in the second quarter—almost unheard of for a bank of its size—before ending the quarter essentially unchanged at $13.5 billion. Signature also reported its second quarterly loss in deposits in the previous ten years. However, when the market surged last year, Silvergate and Signature’s shares doubled, while the price of Customers stock more than tripled.

08/03/22 Rising household debt has more Americans struggling: NY Fed (Fintech Nexus News)

Executives in the fintech sector feel that rising household debt is evidence that more families are finding it difficult to make ends meet. Despite a decline from 788 to 773, the median credit score for recently created mortgages is still strong and reflects ongoingly strict lending conditions. Even after taking into account seasonal variations, credit card balances increased by $46 billion, or 13%, the most in more than 20 years. In the face of ongoing economic uncertainty, more people are expected to turn to credit cards to help pay for essential needs to handle their cash flow. It is clear that few people are making financial plans as Americans continue to spend more than they save. Hence, it’s crucial to make sure that loan loads are manageable and offered at reasonable rates as Americans struggle with a probable recession and an inflationary environment.

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