BankersLab Staff Picks!
Looking back at 2021 and forward to 2022, what do you think are the most impactful trends in lending?
- Digital Transformation
- BNPL (Buy Now Pay Later)
- Advanced Analytics.
What are our staff picks?
Digital Transformation? Agree.
We did witness incumbent lenders ‘up their game’ in the last 12 to 18 months. For example, the loan approval processes are fundamentally transforming as they go fully digital. We see more process automation to support the digital format, as well as beefed up fraud checks. The other enabler for digital transformation has been partnerships between lenders, e-commerce, and super-apps.
BNPL? Sort of.
It’s true that BNPL may have taken up more column inches than most topics this year, with the exception of Crypto and DeFi. However, we notice that BNPL is a subset of an even larger trend, which is embedded finance. It’s easy to talk about BNPL – increased cart check-out rates, ballooning receivables and the like. Embedded finance? The topic is broad-ranging, and often requires some imagination to consider the many use cases. It might not be as suited to ‘click-bait’ for headlines, but our view is that BNPL is just a subset of this broader trend. BNPL is the O.G. of Embedded Finance, which is just getting started.
Advanced Analytics. Sort of.
We witnessed lenders getting inundated with new data sources – open banking data, API data feeds from various places, internal data now becoming available across product lines thanks to cloud computing. While the need for advanced analytics is growing exponentially as a result of this data, the skill sets and implementation capabilities don’t seem to have caught up yet.
Looking Forward to 2022
Jim Marous of The Financial Brand shared his ideas about the top 6 trends:
1. Intelligent Decisioning and Communication
2. Expansion of Open Banking APIs
3. The Move to the Cloud
4. Intelligent Process Automation
5. From Embedded Banking to Embedded Finance
6. Increased Focus on Cybersecurity
Of these, our staff picks for the top three trends for 2022 are:
Intelligent Decisioning and Communication.
We are seeing lenders modernize their communications through data-driven, omni-channel strategies. This requires a first step of advanced analytics, then test-and-learn strategies, and finally operational excellence to conduct and continuously improve the communication strategies. This year, our clients were keen to “upskill” on the cross-section of big data, experimental design (A/B testing) and data storytelling.
Expansion of Open Banking APIs.
We weren’t sure about this area, and to find out more, we attended to MX Summit to learn more. Customer-permission API data is a thing – and customers do give permission. However, the product experience and benefits to the customer need to ‘pop’ for the customer. Challenges do remain – a talent shortage and the need for more product design imagination are on the list.
From Embedded Banking to Embedded Finance.
We are at the beginning of an exciting journey here. We’ve been saying for a few years, “the future of finance is invisible.” When the finance part of an activity has so little friction that it nearly becomes invisible, we’ve succeeded.
In our view, the other three trends are well under way, and “table stakes”, aka the cost of doing business in this day and age:
- Intelligent Process Automation
- The Move to the Cloud
- Increased Focus on Cybersecurity