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Metrics M onthly November 2020 | UK EDITION
In this issue DIGITAL DELAY
Consumers lose patience with mortgage lenders who force them down analogue application routes
In this issue Welcome Page 03
In the news Page 04
The next logical step Page 06
Spotlight on: virtual events Page 08
Cost effective origination Page 10
Awards nominations Page 11
Digital delay Page 12
Case study Page 14
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November 2020 | UK Edition
Welcome
Welcome back to another issue of Metrics Monthly! With Lockdown 2.0 in full effect in the UK, there’s still plenty of news and insights to keep your time occupied in this issue of Metrics Monthly. The prospect of a vaccine for COVID- 19 potentially being ready before the end of the year has our hopes high this month, but with increased fintech usage during the pandemic, regulators have higher expectations for banks and other organisations, which you can read about on page 4. Also in the news this month is the huge surge in house price growth , despite the current circumstances, and what financiers expect to happen next. Fur - thermore, we’re sharing the news that BOX Processing have integrated with LendingMetrics to provide clients with a first class service.
Our headline thinkpiece looks at why consumers are losing patience with mortgage lenders who force them down analogue application routes, and why lenders need to adapt to digital applications or run the risk of becom- ing irrelevant as the world moves on without them. Read the full Digital Delay article here. We’re also shining the spotlight on virtual events, as many virtual confer- ences have made the transition to being hosted online, but will this new adoption be here to stay? Find out in our article on page 8. If you enjoy this issue of Metrics Monthly, and want to stay up-to-date with industry news and highlights, make sure you subscribe on our website to get issues sent directly to your inbox.
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Metrics Monthly | 03
In the news
Increased fintech usage during the pandemic leads to higher expectations from regulators
A new survey by the World Bank and the Cambridge Centre for Alternative Finance shows that 45% of banks and financial regulators have prioritised their fintech work, and many are intro - ducing new measures as a result of the growth in the sector. The pandemic has resulted in an increase in the adoption of fintechs, which also comes with new risks for the regulators to address. During the first national lockdown, we saw a huge shift to more consumers using digital finan - cial services, and now banks are finding the need to create digital banking frameworks. According to the Fintech Times, 57% of consumers now prefer to use online banking tools and access their finances
digitally, largely as a result of the social distancing measures brought in. But with 90% of survey respondents citing that cybersecurity is the main chal- lenge for them, regulators are having to act fast to launch digital initiatives and adapt to the new circumstances. As regulatory expectations increase, fintech organisations may need to upgrade their internal compliance procedures, for example by using AI to monitor their fraud and anti-mon- ey-laundering processes. By rising to meet these expectations, fintechs could better solidify their position with regu- lators, becoming more involved in the conversations that essentially govern everything they do.
The LendingMetrics team returns to working from home
Following the announcement of a national lockdown, the team have once again returned to fully working from home.
Having successfully been operating with a limited number of staff in the new office, which allowed for adequate social distancing and COVID-secure measures, the company again closed its doors so staff could follow the new lockdown measures appropriately. LendingMetrics was well prepared for the first lockdown in March, and made the decision for staff to work remote- ly before the original announcement even took place. This time is not much different, as the company’s plans for business continuity were well prepared and audited ahead of the government’s decision. LendingMetrics were able to implement the remote working plan
easily and efficiently, allowing the team to continue to deliver high standards to customers. With the lockdown expected to last a month, but the possibility of it being longer, it was important for the company to put staff wellbeing first. Regular com - pany-wide calls were re-introduced, to ensure any issues are raised and responded to, as well as keep staff up-to-date with any changes or devel- opments in the company. The virtual meetings create a sense of camarade- rie amongst employees, further uniting the team in a difficult and uncertain time.
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November 2020 | UK Edition
LendingMetrics are delighted to announce their integration with BOX Processing LendingMetrics are delighted to be working with BOX, a forward-thinking partner in the credit solution market.
House price growth surges
Despite the country entering a second lockdown, house prices are rising rapidly as economic growth slows and uncertainty looms.
This new relationship will see the range of LendingMetrics products - including the multi-award-winning ADP product - integrated with the BOX platform to provide clients with a first class experience. The LendingMetrics and BOX open- ly-connected API suites allow for an efficient and seamless assimilation to a tested solution, providing clients with the confidence that they will be able to launch quickly and without the teething issues that are often associated with new integrations. About the integration, LendingMetrics’ Managing Director David Wylie said: “This new integration with BOX Process- ing allows us to provide our clients with more options for their lending proposi- tions. We’re delighted to be working with such a progressive company that have set themselves apart in their sector and we look forward to seeing the relation- ship continue to grow.“ Rob Macmillan, Director BOX Process- ing, added: “We’re excited to be working with LendingMetrics on this new collab- oration. We often find that our clients love our solution, but are also keen to find a supplier who can provide credit information and a decisioning solu- tion. This partnership allows us to fulfil our clients’ needs, without us breaking away from our core business.”
About BOX Processing BOX provides an API driven credit platform enabling neobanks and fintechs to generate revenue by providing innovative lending solu- tions to their consumer and SME customers. Combining conveni- ence of card transactions with flex - ibility of instalment loans enables customers to make purchases when needed but spread cost of repayment to suit budgets and income. API integration coupled with a simple product configuration mean new payment solutions can be created days rather than months. The BOX platform supports Visa and Mastercard cards through integration with card processors such as Tribe, payment providers such as GoCardless and Lending- Metrics for real-time credit risk assessment.
House price growth has accelerated across Europe, even amidst a global recession caused by the COVID- 19 pandemic. The annual rate of increase across OECD countries has risen to almost 4 per cent, with even faster rises in some European coun- tries, in particular Germany. Prices reached record highs in October in the UK, possibly due to government support schemes and tax breaks on housing sales. Govern- ment schemes, such as the stamp duty suspension, have meant that the usual economic models have been largely defied. Senior Econo - mist at HSBC Chris Hare said: ‘We had been expecting house prices to fall, [so] we’ve all had to increase our forecasts’. The surge comes with concerns however, as some financiers wonder if it’s only a matter of time before the economic fallout catches up with the soaring market. Unless an economic recovery begins soon, we could see a sudden tightening of the mortgage market, which could drastically drag down house prices.
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The next logical step
Propensio Finance have selected LendingMetrics’ Auto Decision Platform for their assisted decisioning
Propensio Finance , the specialist lender in the aspirational lifestyle sector, have adopted Lendingmet- rics’ Auto Decision Platform (ADP) to augment their credit decisioning process. Having used OpenBankVision (OBV) by the same provider since 2019, Propen- sio are now implementing automated decisioning to leverage the bank trans- action data as the next step in develop- ing their affordability strategy. The key motive behind this adoption was the lender’s desire to make their underwriting process more consistent, robust and scalable and LendingMet- rics’ ADP was the perfect fit. The next generation private-cloud-based solu- tion delivers comprehensive, automat- ed decisions through direct interaction with customers, and allows lenders to decision in a compliant manner. Following a swift requirements gather - ing stage, LendingMetrics have already begun the configuration phase into Pro -
pensio’s UAT environment, which will allow them to test the building, editing and maintaining of multiple decision engines without the need for technical or IT-qualified personnel. They will also be able to use the UAT environment to run real-time champion/challenge scenarios and retro analysis without affecting the consumer experience. Following UAT and acceptance testing will come the last stage of the imple- mentation process: the production environment, which will complete the delivery of the project. Propensio will be able to use ADP to create complex, powerful or simple policies, and include proprietary scoring algorithms and complex affordability matrices in order to provide the best possible service to their customers. Commenting on the news, Dave Hindle (Chief Executive Officer at Propensio) said: “We established a relationship with LendingMetrics last year and quickly recognised the enabling ben - efits of tools like OBV to enhance our
proposition by speeding up our deci- sion making. We felt it was time to take the next logical step and the ADP plat- form gives us an immediate increase in capacity whilst, more importantly, making our affordability and sustain- ability assessments more robust and consistent. The ease with which we can edit the decision engines ourselves is the real cherry on the cake and means we can remain dynamic and agile. The project team there have been fantastic in helping us build the core engines and we’re really looking forward to working with them going forward”. David Wylie (Commercial Director at LendingMetrics) added: “We’re delight- ed to continue working with Propensio after successfully launching our OBV platform with them last year. We’re pleased that by choosing ADP to assist their decisioning, Propensio will be able to construct a highly consistent under- writing process and we look forward to a prosperous partnership.”
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November 2020 | UK Edition
Auto Decision Platform
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Spotlight on: virtual events Amidst the COVID-19 pandemic, many virtual conferences and events have made the transition to being hosted online
According to the Events Industry Council, business events contribut- ed over £1.15trillion to the worldwide economy. As a result, we are seeing many B2B companies adapting to the current restrictions and choosing to hold their events digitally. With a plethora of corporate events and conferences now being held using digital event platforms, could this become the new normal or will in-per- son events make a dramatic comeback when businesses eventually return to normality?
Whilst virtual events may seem popular at the moment, this is perhaps not out of choice but necessity. When the country begins to return to normality - which is looking evermore possible due to the recent announcements regard- ing a COVID-19 vaccine being well on its way - a return to in-person events may be the first move for many compa - nies, however the advantages of virtual events mean they could still be used in some form across the industry. What’s more, many larger corporations have already announced a long-term or
even permanent working from home strategy, wherein many employees will continue to work almost entirely remotely. Businesses recognised the advantages of this method of working during the first national UK lockdown, with reduced spending on office spaces and a better work-life balance for employees. This shift to remote working could mean virtual conferences are here to stay. Stacy Nawrocki, Head of Global Product Marketing at IBM Watson Media said, “as consumption habits
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November 2020 | UK Edition
change, video streaming technology not only allows businesses to reach wider audiences, it also meets them where they are, across platforms and devices.” True, globalisation is a key player in this, as companies see their business- es stretch across seas and timezones. However, face-to-face meetings still allow for a more personal interaction. With digital communication comes channel limitations, meaning body lan- guage and context is harder to under- stand. These are important factors in networking, as well as the fact that attendees at a conference are a more “captive” audience, whereas attendees at a digital event can easily leave a con- versation with the click of a mouse. Regardless, the value of virtual events is proving high, particularly with people who have increased workloads and do not feel they can spare the time to travel to an in-person event. Virtual
conferences are more convenient for most and could therefore prove to have better results. Earlier this month LendingMetrics attended its first virtual conference as sponsors and found the new expe- rience enriching yet very different to in-person conferences. The 2020 Credit Summit, hosted by Credit Strategy, was originally due to be held in March but was postponed due to the pandemic. Credit Strategy adapted to the new cir- cumstances by hosting the conference entirely online using conferencing plat- form Brella from the 3rd to the 6th of November, as part of their Credit Festi - val which was also held digitally. The conference consisted of various virtual exhibitions, for which sponsors could include videos and documents about their services. In addition, a series of talks was scheduled for each day, addressing popular topics ranging
from affordability to credit risk. Attend- ees could watch the live stream as and when they chose, network with other attendees and stop by the virtual booths to speak to exhibitors through the online platform. Included in the live stream was a video presentation about LendingMetrics’ multi-award-winning products, recorded in advance at the Credit Strategy studio in London by Head of Sales, Claire Januszczak. About the conference, Januszczak said: “The Credit Summit was an enlighten- ing experience for myself and my team. Whilst it was a new way of working for most of us, we thoroughly enjoyed the conference and once we understood our way around the platform, were able to network with new people that we might not have had the chance to meet otherwise. That being said, I very much hope that we will return to in-person events as soon as possible.”
Above: Head of Sales Claire Januszczak visited the Credit Strategy studio before the second national lockdown to record a video for the conference
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Metrics Monthly | 09
Cost effective origination You can increase lending volume and decrease head count with Auto Decision Platform (ADP) . Watch our brand new video below to find out how.
Frequently Asked Questions What if I want to retain that human touch to my underwriting? The degree of automation is totally within your control. You can provide fully binding decisions or simply an approval in principle. You can even give binding answers to people above a certain credit threshold and an AIP to others requir - ing more in-depth investigation. The choice is yours. Isn’t this type of software expensive?
Why is ADP different to other credit decisioning products? Unlike nearly every other product out there, ADP puts you in total control of changes to your decisioning; how you want to change it and when you change it. No more lengthy IT delays and no more charges for technical changes. The simple UI enables your operational staff/credit-risk officers to make changes at a user level (subject to permissions). Can I use ADP for champion/ challenge and retro analysis? ADP has several novel and unique tools to enable real time “what-if” and “champion/challenge” of your client’s data. This enables your business to test several possible improvements to your credit policy all at once, without impacting on your live lending activities.
Generally yes! However, ADP by LendingMetrics is a posi- tively disruptive force in the market and prices are tailored to your business. Affordable entry level pricing right up to enterprise. Put it this way: we think you’ll be pleasantly sur- prised when we show you what you get for your money.
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November 2020 | UK Edition
Awards nominations With awards season well underway, LendingMetrics are proud to announce being shortlisted for awards at both the Lending Awards and Car Finance Awards
It’s been a busy season for Lending- Metrics so far, having been recently announced as finalists for five acco - lades at the Credit Awards, including Credit Information Provider of the Year. What’s more, in September the financial technology specialist was shortlisted for five awards for the Credit and Col- lections Technology Awards, including Credit Risk Solution and Innovation in Credit, in partnership with log book loan company Loans 2 Go . This year’s Lending Awards, hosted by Credit Strategy, aims to celebrate and recognise excellence across the entire lending market, and is taking place during Lending Week as part of the Credit Festival. Having previously won
both Best Credit Information Provid- er and Best Technology Partner at the 2019 Lending Awards, LendingMetrics is hoping another award will be on the cards this year and is looking forward to the digital broadcast event which will be held on the 17 th November. The awards that LendingMetrics is nominated for this year are: • Best Credit Information Provider • Best Technology Partner In addition, LendingMetrics have been shortlisted for two awards at the 2020
The company previously won the Inno- vation Award at the 2019 event, and is looking forward to another evening of awards, entertainment and networking. Established in 2016, the Car Finance Awards has become the only awards program to connect car dealers, lenders and brokers. Much like the other events hosted by Credit Strategy, the awards will be a digital broadcast event taking place on 19 th November 2020 as part of Lending Week. One of LendingMetrics’ very own team members will be presenting an award as part of the event – tune in on the day to see how they get on!
Car Finance Awards, namely: • Best Technology Partner • Best Use of Technology
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Digital delay Consumers lose patience with mortgage lenders who force them down analogue application routes, says David Wylie Digital is King as far as consumers are concerned. They really can’t get enough of it. shift as the end of ‘learned helpless- ness’ for the consumer. Why should they put up with a negative application experience, when they know there are much better ones out there?
be in exactly this position. They basical- ly know that they will have to revamp their application processes, but would rather do it later. They’ll get around to it, but not quite yet. They have largely failed to modernise. The danger though is that consumers, used to getting things on their mobiles, are migrating to digital application inter- faces in their droves. Increasingly, they do not have the patience for the appli- cation processes that some mortgage lenders present to them. A report out this month said that 69% of consumers had ditched a financial product applica - tion midway in 2020, up from 40% in 2019. The same report found that 69% thought mobile-first providers were superior to traditional operators. The early adopters in this space are moving further on and are focused on digitally ‘delighting the consumer’ with ease-of-use and time-to-decision being their mantra. They will admit that it is not them that is driving the change, but the consumer.
They are used to digital channels and prefer them - when booking a holiday, buying a car, selecting insurance, shop- ping for clothing or food. They like the easy interface of a phone or laptop screen, automated decisioning, and increasingly dislike analogue routes to these products. In our age of instant gratification, they want a seamless and rapid route from A to B. According to a recent report, more than 30% will abandon an online form if they are forced to supply information ‘out of channel’. They want intelligent interfaces that make the application process easy and which provide them with a definitive answer at the end. In most product areas, if they look they already have this, including the personal loan sector. Pundits are increasingly referring to this
So what is happening with mortgag- es? Of all financial service products, it is the least digital and most “old school”. It seems largely to be stuck in a timewarp. The mortgage application process is substantially still a relic of a bygone era - a drawn-out business of paper-based proofs, faxes, last-minute product adjustments, and, all in pursuit of a non-definitive decision-in-principal. The answer to why this is still happen- ing, is that like so many legacy systems that have gone before, lenders are reluc- tant to move with the times when they have procedures and infrastructures that work and have, until now, served them well. I have to say that from what I see the great majority of mortgage lenders can to a greater or lesser extent be said to
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The ship is sailing on this revolution and those not on it are going to find the future tough going. Those who do not invest time and money in automat- ing and accessing the Open Banking revolution, are going to run the risk of becoming irrelevant as the world moves on without them. There are lenders moving in the right direction, and I am pleased to say that LendingMetrics has helped many make the transition. But there need to be more, far more. What should be obvious is that not only are consumers wanting an easier app process, but also demand is now coming from brokers fed-up with the cumbersome decision-in-principal regime. They can see - if some lenders can’t - that automation will lead to more con- sistent decisions (not dependent on the variables that come with manual underwriting) and a relatively rapid ‘yes/ no’ that cuts the need for shopping around and ultimately leads to a greater conversion rate. They can see the effi - ciency savings it will bring to their own business. They can also appreciate that it means a new era of consistency for
lender decision making and much less uncertainty on their part when present- ing applications. Knocked sideways by the no win/no fee ‘mis-selling’ bandwagon, they can also see the regulatory gain of having a digital system in place where every single automatic decision is support- ed by a comprehensive audit output, where every bit of data on which a deci- sion is based is recorded, and where every calculation made against that data is logged. For example, an income calculation is made at a precisely logged moment in time and comes with a never-before-possible level of granu- larity thanks to Open Banking. At last, a solution to the tidal wave of spurious mis-selling cases that they have had to deal with and a robust electronic audit trail that will stand up to the scrutiny of any regulator. For the lender, the upsides are unde - niable. Certainly an ability to increase the scale of lending, where the under- writing has been automated and manual involvement limited to getting a minority of cases over the line. Instead of the labour and time-inten- sive decision-in-principal process with
information and proofs collated man- ually, there is a consistent automated result in minutes based on real-time data backed up by credit referencing. A much easier to obtain decision with less, if any, paper, and more electronic execution. I admit, it will not be an overnight silver bullet. Initially, there will still be a fair degree of paper in their processes. But it is a long overdue journey that they will have embarked upon that will benefit them and their brokers massively in the immediate as well as the longer term.
Above: LendingMetrics Managing Director David Wylie
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Metrics Monthly | 13
Case study Specialist mortgage provider Foundation Home Loans implements Auto Decision Platform by LendingMetrics
Through various guises, Foundation Home Loans has been involved in the mortgage market since the early 2000s, and made the final transition to becoming a lender and servicer in 2015. The specialist mortgage provider offers a range of Buy-to-Let mortgag- es for those ranging from one proper- ty through to a large portfolio. In 2019, Foundation Home Loans expanded their offering to also include residential mortgages. Foundation Home Loans use an inter - mediary business model and 100% of business is derived from brokers who use a sophisticated broker portal to introduce the business. The highly
experienced team specialise in the mortgage market and can cater for those with more complex requirements or circumstances. Choosing LendingMetrics In a specialist and competitive market, a number of factors and components used for credit risk are subject to con- stant changes. Without a solution that allowed for agile changes to the credit risk strategy, Foundation Home Loans were finding that they were too slow to market and any change to the system could take a number of months to be completed. Foundation Home Loans were seeking a new and improved system that was efficient, flexible and quick to change. The specialist nature of their offering also meant that manual
intervention was often a possibility and made for an inefficient process; it was important for Foundation Home Loans to negate the need for any manual pro- cessing or workarounds, which were too risky for the business. Foundation Home Loans approached two credit reference agencies to discuss tendering for a new system, but found that they were either prohibitably expensive, the timescales for imple- mentation were too long, or the system didn’t quite meet their requirements. Having met with LendingMetrics at a conference, Foundation Home Loans felt that LendingMetrics’ Auto Decision Platform (ADP) ticked all of their boxes and the implementation project was swiftly initiated.
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Approach Itwasagreed that LendingMetricswould focus on implementing the affordability calculator as the first step of moving Foundation Home Loans’ decision tree to ADP. During the implementation process, Foundation Home Loans were conscious that they had a lack of credit risk resources to support the project and with a multi-layered calculator with multiple applicants, the specification process was complex. LendingMetrics were hugely supportive and held regular sessions with the client to understand the detailed requirements as part of the initial requirements gathering phase of the project. In order to include the regulatory changes required, LendingMetrics were able to build and deliver the UAT envi- ronment within a short time window. With the support of LendingMetrics, Foundation Home Loans were able to thoroughly test the system to ensure that the affordability calculator had
been replicated. Through a combina- tion of IT testing, front-end credit risk testing and bulk testing via third party consultants Vestigo, Foundation Home Loans felt confident that the solution was fully integrated with their produc- tion environment. Result The team at Foundation Home Loans feel very comfortable with the system and are confident that ADP is now enabling them to be highly agile in the marketplace. The business is keen to start designing their roadmap for future use of ADP and see this as the start of a journey to move over their entire decision tree, including their third party integrations. Neil Williams, Managing Director of LendingMetrics, said “We’re delighted to be working with Foundation Home Loans and it has been particularly inter- esting to implement such a complex affordability strategy.”
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We love ADP and have never had any doubts about the product. This is no longer about regulatory re- quirements – we see ADP as a way of being more competitive in the specialist mort- gage market. Robert Lawlor Head of Credit Risk at Foundation Home Loans
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