Fintech Revolution 1.1 - Deposits and Lending
Fintech Revolution 1.1 - Deposits and Lending
Understanding the disruption of Financial Institutions by Fintech startups is made simple by considering the WEF Framework.
The are 6 basic areas - I consider Lending in this video.
The big questions about what it takes to disrupt in each area are:
a) Resources required - such as technology, market reach
b) Regulatory barriers - are different in each of the six areas
c) Competition from other startups
b) Development of Hybrid models, whereby traditional institutions partner with startups to innovate in this space.
In this video on Lending I explain that the biggest challenge created by startups was the use of a broader range of data to predict loan failure, or someone not paying you back. Capital One for example was one of the first companies to do this, to go outside of the FICO scoring model when evaluating customers for a loan request. The innovation in this lending space is to seek out other features of the customer that may better predict their ability to repay a loan, such as personality, particular responses to open ended questions - Why do you want a loan? and even Facebook behavior such as what the potential customer likes. All of this additional data is fed into a big data model to better predict ability to repay.