The Future of Lending: Small Is Beautiful
February 28, 2018
Geezeo CEO Shawn Ward is heading to Nashville, TN to the NAFCU Strategic Growth Conference where he’ll be presenting as well as moderating a panel discussion with Adele Glenn from Credit Human on March 6. Before he left, we had a chance to ask him a few questions on what he sees as the next phase of mobile-first and data enrichment as they start to make real inroads into the digital financial management space.
Here’s what he had to say:
Geezeo: Traditionally, lending was the sole dominion of financial institutions. But that seems to be shifting in a significant way from traditional FIs to fintech firms. Is this the primary danger fintech represent to FIs?
SW: I don’t see this as a danger as much as an opportunity. Fintech may have taken swifter advantage of the technology that is available to them in the short term, but FIs, especially community banks and credit unions, still have important qualities they can use technology to enhance.
The relationship between FIs and fintech can be very synergistic, rather than parasitic.
My point is, fintech is not the enemy of FIs. At Geezeo, for example, we see our role as facilitator, not competitor. As a tech partner, not a challenger. We use our tech strengths to help our partners leverage their fundamental strengths, so they can build a better experience for their customers. We’re not about stealing market share, but growing it for our partners.
As digital lending continues to grow in size, financial institutions are looking for ways to make their services more efficient and profitable for themselves and the borrowers. Data may hold the key to the future of loans.
Success will rely heavily on collecting data, converting data to knowledge, and finding value in that knowledge. In the past, FI’s were concerned with economic scale, they thought more customers in the branches equaled profit. Now, the focus will be on data analysis and getting the “right” customers to create long-lasting, profitable relationships.
Geezeo: It seems that big data, the cloud, and AI are the hot buzzwords these days. What do they really mean from an FI’s perspective?
SW: There’s no doubt that enriched data is one of the most powerful tools available to FIs today. But FIs have been data-driven for some time now. The importance of data isn’t anything new.
It’s the fact that there’s so much more of it available and now relational databases can help find opportunities to increase business. At Geezeo, we see it as our mission to help our partners access and manipulate this data in the most valuable way for each of them.
For example, we have a community bank in Virginia that’s using our tools to target the needs of its customers so well, that last year it landed more mortgages than the Wells Fargo branch in town. Having smaller FIs punch above their weight is how we know we are making a difference.
As for the cloud, we partnered with Amazon Web Services when we and AWS were just starting out. Now, AWS is the biggest cloud player in the world.
Because of our relationship, it allows us to offer our partners and clients unique benefits - security, scale, reliability, accessibility - things we needed to be successful and the tools that help our clients and their customers or members.
As for AI, we are actively engaged in making our solutions ‘smarter’. The buzz around AI and ML (machine learning) are very real, and practical solutions will continually evolve that will require serious thought by financial institutions and their partners.
At the same time, smart data is already here, and getting smarter every day.
Geezeo: How do smaller FIs stay relevant and competitive as Fintechs continue their rise?
SW: The simple answer is, smaller FIs can be as competitive as they want to be. Small has been many successful Fintech firms’ advantage. And it can be the same for FIs.
To compete with emerging, digitally native competitors, FIs need to aggregate all the data, analyze it in real time, and provide front-line employees or channels with information to make the right recommendations for clients at the time of engagement. That can happen online, or in a branch.
Smaller players can be more nimble because their infrastructure is smaller and they can implement new protocols much quicker than big institutions. Plus, players from regional banks to local credit unions can work through core providers who can package a collection of fintech products that best serve them and their customers. The big players generally build out proprietary systems that lack the dynamic, curated assets of core providers.
And because of their size, it takes them longer to roll out comprehensive solutions.
Smaller FIs can have distinct advantages over larger. The real challenge is to get them to believe they have all the tools and help they need to compete against the national and regional FIs, as well as the Fintech flavors of the month.