TransUnion supports the innovative and consumer first approach of today’s FinTechs. Continuing our “Five questions on FinTech” series, I sat down with Ronnie Momen, Chief Lending Officer of peer-to-peer lending company LendingClub.
Ronnie Momen: I think the key factors in the personal-loan FinTech space are probably three-fold. One involves where we are in the life cycle. FinTech lenders are only at about a 10-year maturity, so I think lenders are dealing with trying to stabilize losses.
At the same time, they’re trying to figure out how to grow from one billion to two billion, and so on. Many lenders may not yet have the technology to get to 10 billion, so they are struggling to scale. What created speed initially may not be enabling them to go forward.
The third issue we are seeing play out is whether the lender should be a monoline or multiline. Some are sticking to products they know, while others are branching out into other lending or deposit products.
Ronnie Momen: I think one of the most important things is that they have proven they can grow and offer products to a broadening suite of customers. It is becoming about long-term sustainability and profitability. I believe everyone is waiting to see how the FinTechs perform through the next downturn – that will be the asset test.
Ronnie Momen: The use of trended or alternative data takes different forms. I think people immediately think of it as third-party data you can buy, but our approach is a little different.
We use our own internal data that we then marry back to third-party providers to revalidate or verify. That helps us to reconfigure whether the risk or the propensity of a consumer has increased. We use data from third parties, but much more important to us is to consider the data signals providers are giving us and ensure we act on that information.
Ronnie Momen: We’ve been in this space for some time, and data analytics was a crying call some time ago to ensure you could differentiate your product from competitors. I think that will forever play out. The fact that data analytics and data science is permeating not just the financial services industry but industries that never used it before is proof that it has a long way to run.
Data helps us with everything from understanding the customer at the front end to thinking about the lifecycle. However, I believe that FinTech is overly indexed around front-end data analytics. I believe we must be thinking more through the lifecycle – all the way to collections – and ensuring we’re creating operational feedback loops.
That is where I think a new chapter is to be written. For LendingClub in particular, if we are going to go down this path of migrating from being a loan originations company to a financial health company, data analytics becomes another point of differentiation as we interact with consumers and move them along.
Ronnie Momen: I think openness, the receptivity to listen to our issues, and the willingness to adapt the various data assets and analytical platforms to service us are critical. It’s that indication that you want to become an extension of our organization that creates a solid partnership, in my opinion.
TransUnion is that partner for us. TransUnion was with LendingClub at its inception, so we have a special relationship, specifically in the data analytics environment.