By Dusty Wunderlich
We’ve all watched technology upend industry after industry, transforming how we consume media, how we shop and even how we hail a taxi. But one of the fundamental elements of the economy -- the way we borrow and repay loans -- is still tethered to a brick-and-mortar, paper-shuffling past.
But the wait for financing’s future is almost over. Today, new software algorithms -- not some buttoned-up banker in a corner office -- price and rate credit. Paperless processing eliminates the frustrating paper pushing between retailer, borrower and lender. Simple and seamless financing apps offer loan approval and transparent pricing and terms on the spot.
My company works directly in this space and we've been watching things change for some time. Here are four key ways that we believe consumer financing will continue to be transformed by technology in 2015, and opportunities for companies in the space to keep up:
Approval Will Shift to Apps
As we start to see new, innovative startups in consumer lending, we’re also seeing an evolution of the way those startups are thinking about and understanding the customer. Technology is eliminating the burden that was once placed on the customer by making the approval process quick and hassle free. As Millennials age and move into their 30s, they are leveraging technology even more for shopping and large purchasing decisions. With electronic platforms and contracts, we can make things easier. For example, in 2015, our next iteration will include an app for iPhones and Android users, so consumers can get approved in the palm of their hand.
Data Will Dominate
Big data is about more than just the "who." To utilize it to its fullest capabilities, we have to look at the "why." We’re taking data sets that have not been traditionally combined and putting them together to calculate a much more accurate picture of a borrower’s default risk, resulting in a truer lending model. The more data we put in, the better we’re able to price credit for our customers. Traditionally, businesses have relied heavily on credit scores to drive decisions, but very different borrowers who might have been lumped together under the same credit score -- say a college graduate with almost no credit history and a borrower with bad credit -- can now be identified and offered personalized loans through the application of big data.
Documentation Will Become Entirely Paperless
When we launched our company Bristlecone, we realized how important paperless documentation was to both the customer and the retailer. There are so few consumer financing companies that in the past they didn’t have to be customer focused. In the future, and even in the present, that is changing. Businesses that will survive are the ones that are now taking the burden off of the consumer, who no longer has to worry about bringing in pay stubs or printing off and waiting for documents and then waiting for approvals. It’s these additional things that can turn a 30-minute purchase into several hours of work. It’s really about streamlining and knowing your customer. Because typically, if the customer has to leave the store and go home to retrieve a document, they’re probably not going to come back and make the purchase.
Consumers and Retailers Will Demand Almost Real-Time Processing
Lenders that make financing a pleasant and seamless experience for the customer will become the market leaders. For our part, we plan to launch into the auto industry this year. The industry is currently focusing heavily on technology within their vehicles -- with advancements like driverless cars in the works -- but have put very little technology into their processes. We’re excited to go in and find ways we can streamline financing through technology. Financing is currently a major burden to the dealership, carrying major overhead. And it can be a very difficult process to the consumer. Through technology, financing companies have the opportunity to integrate systems, such as the DMV and Kelley Blue Book, and make the process automated and in real time.
What other ways will technology change the financing industry as we know it?
Dusty Wunderlich is the CEO of Bristlecone Holdings, a high-growth network of consumer and business-to-business finance platforms and financial technologies.
