How Data, Speed and Simplicity Can Drive Loan Growth

Jim Marous:
Hello, and welcome to another Banking Transformed Solutions podcast. I'm your host, Jim Marous, owner and CEO of the Digital Banking Report and co-publisher of The Financial Brand. In lending, the best offer usually wins. While some consumers still make the decision based on rate, an increasing number base their borrowing decision on the speed and simplicity of the process. S & P Global Market Intelligence expects the US digital lender origination volumes to grow at a compound annual rate of 26% between 2021 and 2025. This is driven mostly by FinTech lenders that are making the borrowing process easy and fast. We're fortunate to have Deepak Polamarasetty co-founder and CEO of CreditSnap and Tom Allman, chief strategy officer of NASA Federal Credit Union on the Banking Transformed podcast.

Jim Marous:
We'll discuss how the advances in advanced technologies, coupled with strategic deployment of the latest technologies, has disrupted the lending process. The digital lending market and new account opening process is primarily driven by the need for better customer experiences, banks and non-traditional financial institutions are moving to advance digital lending and digital account process that are flexible and scalable to meet the challenges of technologies, regulations, and consumer demand.

Jim Marous:
The digital lending platform provides a comprehensive and omnichannel credit management solution to meet the ever-changing needs of the borrowers, as well as the finance institutions. For both the consumer and the banking organization, speed and simplicity is a win-win.

Jim Marous:
As mentioned, we have two guests on the show today. First off we have Deepak Polamarasetty, co-founder and CEO of CreditSnap and Tom Allman, chief strategy officer of NASA Federal Credit Union. So to start us off today, can you both introduce yourselves and give people a quick overview of your role and your respective organizations? Deepak, we're going to start with you. Sure.

Deepak Polamarasetty:
My name is Deepak Polamarasetty. I started off my career as a technologist working at big banks, and I pivoted to becoming a product owner, primarily in credit cards with programs like Household Bank, General Motors credit card, et cetera. But when I was working at big banks, it always made me think, "You know what? I can do whatever we want to do if I had access to engineers and determination to make it happen." So, when I started working with my co-founder actually, and he happens to work with a lot of mid-size banks and credit unions, I realized, you know what? That's not exactly true. A lot of main street financial institutions look to third-party providers for digital innovation and banking transformation. There's a huge gap in what is delivered as innovation, especially in the lending and account opening categories. So, that's how CreditSnap came together is to fill those gaps. And here we are.

Jim Marous:
And Tom, how about you at NASA Federal Credit Union? Give us a little background about yourself and also your role at NASA Federal.

Tom Allman:
Yep. Tom Allman, I'm the chief strategy officer at NASA Credit Union. I've been here, I think its running on 27 years now. So a little bit of tenure, held multiple positions, but right now, strategy officer, my primary responsibilities are developing strategies to expand our market share, focused also on growing the balance sheet, both sides of the balance sheet, deposits and loans, product profitability's another area that I focus on and then the high level marketing strategies.

Jim Marous:
So Deepak, as I mentioned in my intro in a digital world, speed is a key determinate in the decision process, especially in lending, as is simplicity. Can you elaborate a little bit on how instant offers play into this narrative and why it's so important?

Deepak Polamarasetty:
Yeah, I mean it's so important, right? So let me start with the stat to put this in perspective. So FinTech lenders, when I say FinTech lenders I mean digital lenders that are not credit unions and not banks, so like marcus.com, SoFi and these FinTech lenders, went from 5% market share in personal loans across the country, so national personal loan market share, 5% in 2013 to a staggering 49% in 2019. So, this is personal loans, high margin loans and losing market share in high margin loans is painful. Now it's not stopping there and the challenge is the same phenomena playing out in auto loans also, car loan are good examples, and these market share erosions are not driven by rates. Oftentimes we think, "Okay, lower rates. So they went away, took the market share." That's not true. In fact, FinTech lenders actually charge more rates.

Deepak Polamarasetty:
So the question is how is these erosion happening and what's driving this erosion? The simple answer is instant offers. So that whole, what you can call instant culture, I mean, borrowers want to see something right away. So that, and together with what we call soft inquiry technology, is driving a lot of these erosions and we don't want that to happen. And that's where CreditSnap is coming in and saying, "Look, we want to make the same technology affordable for, the institutions of all size," and our customer portfolio ranges from, a hundred million local bank, all the way to 25 billion credit union actually. The feedback is consistent across all our customers. Customers love it when you present an instant offer, especially in this day and age 2021, instant offers, and without that, there is no gratification in the digital journey. When we talk about digital journey, customer are not looking for just a digital form, they want instant offers and we have to add up that kind of a digital innovation.

Jim Marous:
So, it's interesting, you talk about how so much of the business has moved to the digital lending. As I said in my intro before the actual interview, what we have seen also is there's 26% compounded annual growth also plays into. So it's not just that the FinTech organizations have taken a larger and larger share of the overall lending marketplace, but it's also growing. So, sticking with you Deepak, how important are soft inquiries and intuitive automation? How do they rank in the order prioritization?

Deepak Polamarasetty:
Sure. I think earlier we talked about instant offers. So instant offers is like a quarterback of the system. Then when it comes to the soft inquiry technology, it's like the wide receiver. So, you need these two and more to work together. So, what happens is when you add soft inquiry-based experience into the journey, and by the way, what soft inquiry means is for a customer to engage in the lending journey without actually taking a hard inquiry hit. So, it lets you evaluate the options, what you have and if you really like the loan offer, then you can proceed with the lending application towards the finish line.

Deepak Polamarasetty:
So, this soft inquiry technology makes the instant offers, complements the instant offers, and gives it a magical aura and makes it very easy to literally ... to get to the touchdown faster and close the deal and close that loan but because the customer is happy that they're able to see the rates without the credit impact.

Jim Marous:
It's interesting Deepak, just sticking with you again, is that one of the beauties of this process is on a mobile app, you could actually offer me something as part of my mobile banking experience that says, "By the way you've been pre-approved you have a pre-approval or a pre-determination on what a lending process may be." And then you can move from there. As you said, if you get the consumer engaged on the front end, if you get them engaged from the standpoint of, "Geez, this sounds good to me, let me look deeper." This is how all the digital lenders are really moving forward, aren't they?

Deepak Polamarasetty:
Exactly, and that's exactly ... I mean, that kind of an experience, instant and make it easy, which is friction-free. So these two, hand-in-hand and the results speak. The market share erosion speak, actually. I always wondered, why are the mainstream institutions not able to do it? It's not to blame them actually, it's for the solution to be blamed. When there's no solution out there and you can't really adopt that technology. That's where I think it's very important to adopt these technologies, not just to grow actually, even to defend your market share over the next few years. It's very important to adopt digital innovation way beyond just talking about, mobile layouts and customizing experience for mobile devices. I mean, that's what digital innovation is positioned as these days. But digital innovation is a lot more than that.

Jim Marous:
You know, it's interesting, Tom, we see in many cases, when you're looking at innovation, especially in the credit marketplace or in the digital new account opening process, it really gets down to a movement from, let's say risk avoidance to risk management, that organizations really have to rethink how they view credit, how they view customer inquiries, how they view the use of data to provide types of offers that we're talking about here. So, Tom, what has your experience with soft inquiry technology been at NASA Federal Credit Union and how have you used this advanced technology data and advanced analytics to improve the overall lending process and drive growth at your firm?

Tom Allman:
Sure, yeah. Following on what Deepak was talking about, with there was really nobody in the marketplace that brought all the tools together for the institution. So, you're saying it wasn't on the institution, it was on the providers. So, we've looked at several of the providers over the years in the marketplace. In fact, we tested one for a short time, probably three years ago, but it wasn't driving the results we were looking for. So again, most of them don't seem to have everything in one package, or all or most of the pieces to the puzzle. So, when I'm talking about pieces to the puzzle, it's that front end experience that's already built, front end consumer experience that's already built out, so we don't have to spend the resources to develop that. So, that was a big drawback from some of the others that we had evaluated in marketplace, they didn't have that.

Tom Allman:
Then you had the custom decision engine, which a lot of times affords you additional capabilities over what your existing loan origination system may be doing. Then the instant offer is obviously a very big piece of the puzzle as well, but then not just the instant offer, but giving the consumer the option to customize that offer. They want a different term, different loan amount, being able to customize it during that process.

Tom Allman:
Then one of the real big pieces as well was the integration to our existing loan origination system. So, as you know, there'll be a lot of vendors that say they have integrations in their sales pitch, but when you dig into it, the integrations aren't there.

Tom Allman:
Then the last piece we were looking for was a communication strategy, follow-up communication strategy after, say, the consumer applies for soft inquiry, they see their instant offer, but they choose not to go forward. So, having the tools in place to be able to reach back out to of those consumers, whether it be via email or text, to see if we can recapture those opportunities.

Jim Marous:
You know, it's interesting, Tom, when you're talking about this, again it gets down to legacy leadership that's willing to look beyond what was the norm. We always used to say, "Geez, we want to avoid risk, so we're really cautious about these type of inquiries or we're really cautious about instant offers." I think what we have seen organization-wise, that those organizations that can get out of their legacy mindset and can look at the potential here, can realize that we're not maybe talking about instant offers that are huge.

Jim Marous:
Again, you simply want to get them engaged and say, "Oh, by the way, if you want more than this, simply push here," and then you have them because you have the engagement starting. The engagement doesn't break off immediately but when you start to look at this in the context of overall lending process, it really is a move forward. Are you surprised that more organizations don't do this and what do you think stands in their way?

Tom Allman:
Yeah, I am surprised, particularly in the credit union space and the bank space as well, that they don't have these tools. I mean, as Deepak mentioned, it's really those non-traditional players in the market that have had this technology out there for years and just the changing expectations of the consumer, when it comes to the experience and what they're being presented. So, I think it's just being able to find that right provider in the marketplace that can to bring all the pieces to the puzzle together to implement it.

Jim Marous:
You know, it's interesting, Tom too, because we talk about on any of these podcasts, the importance of speed and simplicity, and the importance of partnering with a third-party provider that can get you there quicker. Is that one of the decisions you made also, that instead of building it internally all by yourself, you decide that the way to do this at the speed of digital, as I like to refer to it, the ability to actually implement and get on the road without a 24 month period, was really the importance of why you would work with a third-party provider such as CreditSnap?

Tom Allman:
Yeah, absolutely. That was a big factor in our decision. Years ago, we developed our own custom front end to our loan origination system. With that came a lot of tech resources and upkeep to keep that going. But CreditSnap had it built from the ground up, it was ready to implement, we were able to ... Again, they had the integrations to our loan origination system, so we didn't have to change anything on the back end, so it was minimal impact staff. So, it was really customizing a few screens, setting up the decision engine, but it was a really, fast speed to market.

Jim Marous:
So Deepak, from your experience, can data, AI and intuitive automation be used in areas beyond lending. Can what we are discussing here improve the speed and simplicity of other areas of banking?

Deepak Polamarasetty:
Oh, for sure. I think there's probably several areas where similar intuitive experiences can be deployed and optimized for. Where we decided to focus on is origination, so the first touch. So, when the customer is interacting to start that new relationship, so that's where we've decided to focus. When we really think about it, there's really two reasons a customer might come to a bank or a credit union to begin with, which is either a deposit account or lending. We talked about lending a lot and deposit account opening is another area where there's a huge gap and I'll take an example.

Deepak Polamarasetty:
Deposit account opening usually involves, these four or five major milestones. Data collection, which is application, making sure is this customer eligible to open a bank account, because there is a anti-terrorist matching, et cetera behind the scenes. KYC, know your customer process, which is taking your driving license or an ID and making sure that you do have a valid ID and it's your ID. Signature process, number four, and then accepting that first $25, $50, $300, $500 deposit.

Deepak Polamarasetty:
So, five milestones and I don't know if any of us experienced going all the way till the fifth milestone in a single, digital journey. Unfortunately not. Well, you can actually see that at the challenger banks today, it's not unknown, but challenger banks probably have a small market share and they're making a lot of progress. The question is how can this entire five milestones can be automated in a single digital session? That is exactly where CreditSnap got to right now, is a fully automated platform where a customer can go through those milestones instantly, under usually 10 to 12 minutes and be done with it. All they need is now that plastic that comes in the mail three days from then and done, done. So absolutely, I think the entire ... all these core components are deployed in account opening as well and that's driving a lot of membership growth for our customers.

Jim Marous:
So Deepak, I mean, what you're discussing here sounds ultimately logical. It seems like a no-brainer, a mom and apple pie type thing as we talk about sometimes, but not everybody buys. When you're working with financial institutions, what have you seen to be the hurdles that organizations has got to get through to say yes. What are the hesitations that organizations have? Or what are the pushbacks you get sometimes? Because I'm sure there's people that listen to the podcasts that go, "Yeah. But maybe not me." What have you seen out there?

Deepak Polamarasetty:
Yeah, it's very interesting, Jim. So when I talk about those five milestones, it's not like there's no technology there. Let's take signatures example, I mean, e-signatures have been there forever. So, if I talk to credit union executor, I'll probably hear, "Oh, we all actually use DocuSign. We actually use eDOC Innovations." But the question is not about technology. I mean, right now credit unions, I mean the biggest challenge with credit unions and banks is they have access to a lot of solutions and the lot is the keyword, and that is the problem. Every single solution operates in a silo. So, how can a credit union or bank take these 20, or for example, 25 solutions, and deliver a [inaudible 00:19:09] automated experience to the customer? They are not equipped to do that and there's nothing out there that can bring these five, six things together, forget about 20.

Deepak Polamarasetty:
So, I think that's where the gap is right now. It's not the technology it's pulling all these technologies together from a customer perspective and how do we make it easy to the customer? I think that there's a lot of room there for banks and unions to come in, adopt the technology, deliver that awesomeness to the customers and not let their customers go to the challenger banks. The digital challenger banks are out there active with this construct.

Jim Marous:
Yeah and, you know what's interesting too Deepak, is that when we do research around account opening and lending, I have not quite figured out what the rationale is, but when we say, what are the hurdles, why do consumers have to come into a branch to finish a process? One of the first things that they say is e-signatures, and I haven't quite figured out where that logic is, that they have e-signatures, but that's the reason why you have to come in the branch. It may be that they have e-signatures, but they don't trust them or whatever it may be. So, you also talk about the ability to bundle products and you talk about how [inaudible 00:20:30] technology and analytics, can help you deploy against a broad array of services. Can you elaborate a little bit on this capability?

Deepak Polamarasetty:
Absolutely, absolutely. So, when a customer again, I'll take the deposit account opening experience as a starting point here, when you walk into the branch and usually, like you said, people walk into the branch because they think, "Okay, I can't do everything digitally. I have to go to the branch anyways, let me just be there, get done with everything." So, the goal is how can we change that by taking everything digital? But to focus on your question about what is product bundling? It's all about a customer comes in for a checking account and giving them the ability to not only open the checking account and probably behind the scenes savings account that's required with their checking account, all the time, but to tell the customer, "Hey, you know what? We also have a money market account for you." Or, "We also have this high yield savings. Instead of the regular savings, you can get a higher rate on the high yield savings."

Deepak Polamarasetty:
And how do you do that without an employee sitting in front of the customer? I mean, that's the heavy lifting we talk about in product bundling, is how do you educate the customers? How do you make it easy for the customers to take not just one product, but multiple products and make that journey easy, by once they select multiple products, the rest of the process is as easy as if they sell to just one product. So, that product bundling makes a huge difference in account opening and even at the end of the account opening by saying, "Hey, by the way, looks like you have a car loan. Why don't you DFI and save $50 on their car loan?" So, it's about the ability to talk to multiple products in one conversation, in a very personalized and relevant way, and not making it look like sales, but make it very relevant and technology can do that.

Jim Marous:
So Tom, we've talked about why organizations don't buy. So, from your organizations, when you're looking at ways to simplify the customer journey, ways to enhance the customer experience, not just in lending but in all the internal processes and improving the experience for members. When you look for a technology partner or a solutions partner, what do you look for? Is it speed? Is it simplicity? Is it cost? Is it all the above? And how do you rate how you select the partner that you need? I've been working with a lot of institutions one-on-one lately, and almost everyone says, "I am just buried by my everyday. And it's hard to even get done what I have to do to keep pace." When you're looking for a partner and you're looking for a technology partner that you're going to bring on board and onboard, what do you look for as a partner?

Tom Allman:
I'd probably say just that, a true partner in the process that can grow with us, and willing to make their solution work for how we do business. So we, as most others maybe, we tend to customize things quite a bit. So, we find a lot of off the shelf solutions don't fit or work to how we do business, so it's probably not always going with the biggest player in the space. Sometimes it's taking that player that you can partner with and you can help shape their offering to make it better. So, you get in early and then it's a win-win for both parties.

Jim Marous:
You know, it's interesting too, you're in the marketing area and I often use the saying, just because you bill it doesn't mean they'll come, using the Field Of Dreams analogy. So, when you've deployed some of the solutions you've discussed at NASA Federal Credit Union, how did you market them to your members and what has been their response?

Tom Allman:
Yeah, with any of these new programs like this, we take a test and learn approach with it. So, we start rolling it out slow to a small subset of our member base. So, that way if something blows up, we've not harmed the members or the business process. Specifically with CreditSnap, we started with just one product. We could have rolled it out with all of our consumer loan products, started with just our credit card product, again, to very small subset of our member base. Then from there, we expanded a little bit further. Then we added advertising on our homepage as another touch point. And then eventually, we got to a point to where we were changing all of our URLs that were on our website, all pointing over to the CreditSnap solution. We'll add one of the other selling points on their CreditSnap solution, it's a separate platform. So, we're able to run the CreditSnap solution on our website, as well as our existing front end solution on our website. So, it's really a matter of directing the members to which channel we want to go to. We can evaluate them one against the other and just really opens up a lot of possibilities, having that separate solution.

Jim Marous:
You know it's interesting, that's a great concept, is not having to blow up what's already there in order to implement something new. I was in Shenzhen China about a year and a half ago in January of 2020, before everything changed in the world. But one of the things we saw was organizations running multiple cloud universes to test things and being able to test things at the same time they're running their normal processes, and not implementing them until they know they work. What you're talking about is just a version of this, that the ability not to destruct what we already have and reorganize the whole process does two things.

Jim Marous:
Number one, it makes us have a better success ratio, but just as importantly, it doesn't disrupt the organization internally for things that people are comfortable for. Because part of this whole process is you have to change the culture of credit people, which are legacy if nothing else. And to be able to show them how something works to have buy in, is a cultural issue that's pretty important. So Deepak, how does CreditSnap help organizations not only with their marketing of the tools that we discussed, but also with analytics and measurement of the results?

Deepak Polamarasetty:
Sure. So, from when it comes to analytics, I think as I said in my introduction, I come from credit cards background, and in credit cards there treasure trove of data. When you run a credit card product, you live and breathe data and I've been fortunate to have that experience. So, when we were building CreditSnap grounds up, we were very mindful of this because oftentimes we talk to executive teams and they'll say, "Hey, we have this awesome SaaS solution, but by the way, getting data out of that SaaS is like pulling my hair." So, we've definitely kept that on our mind as we build that out.

Deepak Polamarasetty:
So, when we talk to a customer, we make sure they know that they have access to an awesome CRM. They also have access to awesome summarized data reports, already that they can go to on demand, and they actually come to your mailbox on a weekly basis with summarized data trends, but more importantly, we actually created a data pipeline that, like for example Tom's team has been working, on a way to get data real time from us so that they can build their data warehouse and they can actually own the data and analyze the data whenever they want to, as if you have built the system grounds up yourself.

Deepak Polamarasetty:
So, when you build a system yourself, you actually have access to every single data detail and that is exactly possible with CreditSnap, by tapping into what we call our data pipeline APIs, and get that data over onto your side. Pretty much you can do everything and this data comes real time too. So, there's a different layers of data analysis capabilities built into the platform for different sizes of institutions, so that you'll never feel that you don't have data at your fingertips.

Jim Marous:
That's great. Another important question to ask Tom is NASA Federal is not the largest financial institution in the marketplace. Is a solution like this disruptive to your organization, expensive either from a financial or a human resource perspective, or it's just scalable, I'll say downstream to small organizations. I would say it has to be otherwise you wouldn't have it, but how would you look at it from the perspective of saying, both with regard to CreditSnap, with all your partners, and the ability to develop a solution that makes it so you can do what the big boys are doing to make a scene?

Tom Allman:
Sure. Yeah, on the point you had there about not disrupting the backend solutions, that was one of the key selling points on CreditSnap. So, it's really just layering the front end consumer experience, making that better, so that was upfront. Then that information just flows or integrates into our back office loan origination system. So, there was really no impact to our current lending business. Lending employees didn't have to make any changes. Technology department didn't have to do any heavy lifting. It was all with CreditSnap and how they built the solution.

Tom Allman:
From an expense standpoint, not overly expensive. It's a paper-funded loan model. You do have the cost associated with a soft inquiry, that that fee goes to the credit bureau. But from a human perspective, like I mentioned, CreditSnap does most of the heavy lifting and allows us to stay focused on our day-to-day operations.

Jim Marous:
So finally, if you had to give one piece of advice to our listeners who are keen to take action on improving digital lending process or new account opening process at their organizations, what would this be and where should they start? I'll start with you, Tom.

Tom Allman:
Sure, obviously many areas to focus on, but I think the big one in today's environment is the consumer experience. The experience that the non-traditional players have been able to deliver, as well as the expectations from the consumer, those things have changed a lot here recently. It's really those non-traditional players that are starting to grab a lot of the market share and that's the competition you're up against. So, I think you need to focus on that area as a primary responsibility.

Jim Marous:
So Deepak, from your perspective, what would be the area where an organization should start and how do they improve the process?

Deepak Polamarasetty:
Absolutely. So, I think, since COVID, especially, there's a lot of banks and credit unions that have started on this digital transformation angle. You are putting a lot of money into it, but when you're putting a lot of money into it, you need to figure out, am I just doing this for mobile layouts of the application, or am I truly disrupting and then delivering true digital transformation? I call it true digitalization, actually. So, everything we talked about today might seem impossible and it seems impossible that a lot of customers that we talk to, but believe me, it is possible. You just need to find the right players out there and partner with them, like exactly how Tom and Tim did it. So, I think you I would like for most institutions out there to think out of the box and believe that they can actually deliver the same experiences that the FinTech providers and the challenger banks are able to deliver. It is possible today than before.

Jim Marous:
Tom, Deepak, thank you so much for being on the show today and sharing your examples of how organizations can really turbocharge their lending process for personal loans, for car loans, and even improve the customer experience from a digital transformation perspective, with regard to new account openings. I really appreciate the time you took to share some of your insights and to give our listeners an idea for how they may, as I said, triple-charge their lending process in 2022. Thank you.

Deepak Polamarasetty:
Been a pleasure, Jim. Thank you so much.

Tom Allman:
Thank you.

Deepak Polamarasetty:
Thanks Tom.

Tom Allman:
Thank you.

Jim Marous:
Thanks for listening to Banking Transformed Solutions, a new banking podcast that focuses on innovative solutions for the financial institution. We would like to thank CreditSnap, the sponsor of today's show. If you're a solution provider, why don't you discuss how you can help bankers and credit unions solve the major marketplace challenges? Drop me an email, we'd love to help. This has been a production of Evergreen Podcasts, a special thank you to our producer, Leah Longbrake, audio engineer, Sean Rule Hoffman and video producer, Will Prince. I'm your host, Jim Marous. Until next time, remember, consumers are increasingly changing the basis of decisions in banking, placing greater emphasis on speed, simplicity and empathy.