Seems like over the last year that the industry buzzword has been “FinTech.”  According to BuiltIn.com “”Fintech” is a portmanteau (combination of two words to create a new one) of financial” and “technology.”  It is the application of new technological advancements to products and services in the financial industry.”

For those of us in business in Texas, “FinTech” is a term that is slowly evolving away from a vague Silcon Valley-esque concept to something that is becoming more clear and accessible by the week.  It seems like that with the conclusion of the Lend360 Conference last week in Dallas that the buzz around the term hit an all time high.  A few weeks ago I shared summary details about the upcoming event, talked about some of the topics, sessions, etc.  Turns out that it was heavily FinTech oriented for sure.  Many of my “google alerts” lit up with FinTech stories and articles after the Conference and it turns out that many friends of CAB Consulting and TOFSC attended as well.  

On September 26th one particular article on Banking Dive.com really hit home and painted a very clear picture of what FinTech is and how it is playing out in the personal loan marketplace.  The article was titled “FinTech leaders have doubled their market share in 4 years” that commented on a recent study done by Experian.  See below for some of the more interesting comments and findings:

• Fintechs are providing 49.4% of unsecured personal loans as of March, according to a study released Tuesday by credit reporting agency Experian, more than twice the 22.4% share they held in 2015.
• In 2019 there were 1.3 million new loan originations through March, compared with 656,000 through March in 2015.
• The loans are getting smaller…the average fintech loan was $5,548 in 2019, less than half the average amount of a fintech loan in 2016, when it was nearly $12,000.
• The loans are also smaller than the $7,383 traditional bank loan averaging.  (Comment: It is very possible that the average was driven down by smaller loan amounts in our CAB sector and in other payday loan State markets…for example we know that 26 out of State CABs (most of which are FinTechs) now own 50% of the entire Texas CAB installment loan market per the OCCC Q2 2019 reports, with an average loan amount of $740.  This is really astounding as it seemed like very recently this was 1/3).
• Customers may be increasingly relying on fintechs because they’re able to approve and fund a loan more quickly than traditional lenders or perhaps because, with a digital lender, borrowers don’t have to leave their house.
• Fintechs were quicker to recognize that consumer lending niche and improve the customer experience with pre-approvals and quicker funding of the loans.
• We’re seeing fintechs create digitally streamlined, customer-focused experiences, which may be the key contributor to their substantial growth in the personal lending space,” “Fintechs may be gaining traction as they are eliminating potential barriers consumers may face and are creating a more convenient experience.”
• Millennial consumers (age 20-37) accounted for 34.9% of fintech loans, compared with 24.9% for traditional lenders.
• Baby boomers (AGE 55-73) accounted for 33.5% of traditional loans, compared with 21.9% for fintechs.”

Here is a link to the article: https://www.bankingdive.com/news/fintech-lenders-double-market-share-in-4-years-experian/563793/

There should be plenty of inspiration here for the forward thinking Texas CAB that is operating in the brick & mortar environment.  How can brick & mortar stores emulate a FinTech?  Of the techniques employed by FinTechs we can do much of the same see below for how you can take one step closer to being a FinTech too by “adding new technological advancements to your products and services.”

• How can you fund loans remotely because borrowers don’t want to leave their house? Do ACH credits and also debit the customer payments from their bank account.
• Do you have e-signature capability? Have customers sign their documents online without coming into your store (also opens up your market to borrowers who would not come in due to privacy concerns).  
• How can you increase processing speed to fund loans quicker? Smart phone app! Send texting with links! Prompt calls from your team to guide the process. What barriers slow your process down?
• What does your website look like? Have it designed professionally and use FinTechs as a creative example fr the look and feel.
• Search Engine Optimization. Are you investing in this every month? Do it.
• Utilize data from Credit Reporting Agencies that allow decision making within seconds.  If you are not with Factor Trust and Microbilt this is them, sign up!
• Access banking activity with instant bank verification tools from Decision Logic and Microbilt.

So there you have it…a road map to becoming a small business FinTech without all that Silicon Valley capital raising and no high dollar public relations firm.  From my perspective we are really all just that close.  The numbers do not lie and as said earlier, the picture is very clear.  The lending market has evolved and if your business has got to evolve too.  

This blog post was written by Michael Brown, President of CAB Consulting and the Texas Organization of Financial Service Centers.  He can be reached at 214-293-8676, or Michael@CreditAccessBusiness.com.