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MonJa’s Digital Banking and Lending Monthly Roundup – Why Subscribe?

Digital banking and lending is 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!

2/18/2021 Consumer Credit Picked Up in Q4, as TransUnion Report Reveals Number of Trends (CUtoday)

After a prolonged dip in the consumers’ credit activity due to the COVID-19 pandemic, the credit origination and products activity has lifted up, finally, as revealed by TransUnion’s new Q4 2020 report. The performance of loan mortgages has been an exception in the consumer credit market. Though delinquency levels are close to the lows, the credit origination and balance has picked up in Q4. Both the credit marketplace and consumers will see the actual impact of mortgage accounts in shaping the consumer’s credit image. Also, Q4 2020 has been a turning point for credit cards as delinquencies are expected to increase in the coming months. Mortgage originations, according to TransUnion, surged in Q3, and the consumer delinquency rates dropped consistently in Q4 2020.

2/18/2021 CUNA Tells NCUA It Supports New Overdraft Policy (CUtoday)

The new overdraft policy passed by the NCUA (National Credit Union Administration) has gained the support of CUNA, too. The agency had sent a comment letter, lauding the latter on ensuring that the credit unions can keep up with the changing needs and requirements of the consumers. The amended policy will remove the 45-day limit imposed on a member for curing each overdraft, and has established a specific time limit agreed upon by all members. This time limit will be more than 45-days and will be set by the federal credit union. Even though Todd Harper had cast the dissenting vote, CUNA has welcomed the new change, especially since the pandemic has pushed more and more consumers to look for help with their local credit unions. It has also been confirmed that the new proposal has kept its policies per the 2005 interagency guidance on overdraft protection programs.

 2/17/2021 Household Debt Climbs to Record in U.S. Amid Surge in Mortgages (Credit Union Times)

In a recent report by the Federal Reserve Bank of New York, it has been revealed that U.S. credit-card balances hit a new low last year, even when U.S. households increased their debts by signing on new mortgages to their names. The total debt increased by $206 billion in the last quarter of 2020 which led to an overall increase of 3%, setting the record at $14.56 trillion. The changing patterns in the household debts consolidated the uncertainty that was brought by the year 2020. Even record-low interest rates led to the well-off families paying off their existing loans. Such activities boggled the minds of the investors and the lenders, too.  However, the other half of society faced joblessness and hunger. Instead of credit cards, the majority chose their debit cards to get rid of their unsecured debts. When Congress and the lenders allowed more breathing space to the borrowers, the delinquency rates dropped to 3.17%. These policies also made other households, who had not drawn equity on their homes, reduce their monthly payments by a mean of $200.

2/17/2021 PayPal Wants To Become The Banking World’s Next ‘Super App’ (The Financial Brand)

The recent announcement made by Dan Schulman, CEO of PayPal, has concerned traditional banking organizations. The year 2020 had seen exponential growth in the number of users turning to digital mode of payment. PayPal will integrate payments, shopping, savings, investments as well as cryptocurrency transactions, thus, eliminating the need for users to have separate applications for different requirements. This expansion of services will benefit both the customer as well as the organization, as PayPal has forecasted that the platform will reach 750 million users by 2025, almost double the present customer base. It will also lead to a growth rate of 20% annually, with two-thirds of it contributed by the current users and one-third by the new users. PayPal’s dream of becoming a ‘super app’ is further brought to reality as Schulman has confirmed PayPal’s intentions of partnering with other organizations for the seamless integration of high-yield saving accounts, direct deposit, check-cashing and investing. Its recent update of the ‘Buy Now, Pay later’ feature has helped its users to have access to funds in trying times, such as the pandemic. PayPal is surely taking on the Fintech industry with a renewed vigour.

2/16/2021 Credit Union Margins Remain Under Pressure (Credit Union Times)

According to CUNA’s economic and credit union forecast released on March 12, the credit union earnings are expected to remain under pressure over the next two years because of low interest rates and reduced non-interest income. On the other hand, the report seems optimistic for the economy. It is expected to improve much faster than what was forecast in November. CUNA also cited signs of hope in decreasing COVID-19 cases, more than half of the population getting vaccinated and President Biden’s plan for an additional $1.9 trillion stimulus package that will expand unemployment benefits, support for schools and hospitals, and additional direct payments to households. “For credit unions, the additional stimulus will dramatically increase savings growth and help maintain relatively healthy portfolio quality, and the recovery and low interest rates will support modest loan and membership growth,” according to Jordan van Rijn of CUNA. “However, low interest rates will squeeze earnings and the loan to share and net worth ratios will continue to fall.

2/11/2021 Survey Reveals a Hidden Customer Exodus in Banking (The Financial Brand)

A global survey by Bain & Company has revealed the growing preference of customers for digital banking products. The onset of the pandemic in 2020, had forced customers to resort to digital financial services, which led them to become more comfortable, online. A quarter to half of the banking purchases made by 56,000 consumers across 11 countries have gone to financial institutions which are not the customers’ primary banks. The U.K., has the highest rate at 51%, while the U.S. is at 38%. The major reason for this change in buying patterns is affordability. The consumers also supported their decisions with responses like “Better digital tools”, “Simpler purchase process” and “More convenient”. The younger generation gave importance to the convenience, branding and security of digital tools. Bain emphasized the marketing efforts put forth by banks and credit unions to slow the flow of defection, as the primary banks have the additional edge of using the personal information of the customers for customized offers. However, any delay in the sales funnel is compelling the buyer to move on to a more seamless opportunity.

 2/10/2021 CUs Must Prepare for Wave of Post-Pandemic Synthetic Fraud (Credit Union Times)

 A superfluous benefit of the pandemic was the reduction in instances of synthetic identity fraud. In synthetic identity fraud, a criminal puts together bits and pieces of real and fake personal information to open fraudulent accounts or lines of credit to steal money or movement money. With most of the payment deadlines pushed back due to the pandemic, many financial institutions had heaved a sigh of relief. However, with the situation getting back to normal, it is time to be alert again. Organizations like the Aite Group and TransUnion have recommended these institutions to check for patterns that might resemble such activities, especially during the onboarding of new customers and clients. They should also analyze their existing credit write-offs for potential synthetic fraud. The updated security frameworks with better protocols in place should be availed for higher protection.

2/02/2021 PPP loans reach $72.7 billion in new round with big lenders (American Banker) 

Even though the Paycheck Protection Program had a slow start since its opening in January, the number of loans have doubled in the third week. As a measure of the pandemic relief aid, Bank of America and JPMorgan Chase have processed more than $1 billion, individually. The Small Business Administration has approved 490,464 more loans than the prior weeks, which has brought the total to $72.7 billion. However, it should be noted that about three-quarters of the loans approved by SBA are for users who have a prior borrowing history. Quite unexpectedly, smaller lenders and fintech companies like Zions Bancorp NA and Itria Ventures, have ‘outlent’ the bigger banks, like PNC Financial Services Group and Wells Fargo. Out of the 77,000 applications, Wells Fargo has already approved 18,272 loans.  According to the new law passed by Congress in December 2020, only companies with proof of their revenue loss, are eligible for second loans. The second-time borrowers received an average loan of $102,228 while the first-timers received $21,157.

2/01/2021 It’s Official: LendingClub Has Acquired Radius Bank (LendIt Fintech News)

Within less than a year of its announcement, LendingClub has released an official statement, confirming that the acquisition process of Radius Bank has been completed. This announcement came as a surprise to many as it normally takes 12-15 months for the whole process to be completed. Initial assumptions of the delay to 18 months because of the pandemic were crushed when the final piece of the requisite government approvals came through in late January 2021. With this acquisition, all eyes are now on LendingClub, as it now, has the opportunity to scale up significantly in the digital banking sector.

2/01/2021 The GameStop Stock Frenzy Is Turning Into A Cautionary Tale For Fintech. (Forbes)

According to the Edelman Trust Barometer, the trust of people in businesses, government, non-governmental organizations and media is at record low. Which could be seen when a crusading group of retail traders empowered by Reddit and the commission-free trades of Robinhood’s online trading app, decided to bid up the price of GameStop  shares, to put a squeeze on the hedge funds that had shorted GameStop. Consequently, Robinhood blocked trading of GameStop stock while it scrambled to raise additional capital from its venture capital backers. The irate customers of the commission free trading app took to app stores to drag down the company’s rating. While Robinhood chose a name that refers to the thief of English legend who stole from the rich and gave to the poor, their actions were a bit suspicious to say the least and resulted in people losing trust in the company. This shows that Fintechs that operate transparently and follow a customer-centric approach will be best positioned to gain trust and marketshare.

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