Maximize Value Across the Entire Customer Lifecycle
T ECHNOLOGY AND THE DEMOCRAT I ZAT ION OF L END ING
NO T ECHNOLOGY
PAWNBROKERS
ANCIENT GREECE AND ANCIENT ROME
One of the oldest money lending practices and a form of secured lending with items held as collateral keeping risk down for the lender.
THE MERCHANT OF VENICE
MIDDLE AGES
Christians were forbidden from lending money with interest while Jews could lend with interest to non-Jews. Traders in Venice at this time had access to money lending services from Jewish lenders.
THE BENCHES WHERE MONEY LENDERS DID THEIR BUSINESS FROM, GIVING RISE TO THE WORD ‘BANK.’ WHEN A LENDER CEASED TRADING HE WOULD SMASH HIS BENCH – ‘BANCA RUPTA,’ HENCE ‘BANKRUPT’
‘ BANCA’
INDENTURED LOANS
MIDDLE AGES THROUGH 1800s
The rich lent to those without means and in return the borrower worked off their debt by working on the lender’s estate.
ROTHSCHILD AND INTERNATIONAL BANKING
18TH CENTURY
Mayer Amschel Rothschild ‘invented’ international banking when he placed his sons in five European cities, creating a network for transferring money. Within a century, the Rothschilds were among the wealthiest families in the world.
The fixing of the daily gold price took place at Rothschild Bank offices for 85 years (1919-2004). Proceedings were paused by participants raising a small Union Jack flag
BUILDING SOCIETIES
LATE 18th CENTURY
Building societies first began in Birmingham in the UK in taverns and coffee houses. Ketley’s Building Society was founded in 1775 by the landlord of an inn. Monthly member subscriptions financed the building of member houses.
US congress created the Federal Home Loan Bank system to support residential mortgage lending.
A NEW ERA IN LENDING
EARLY 1800s
The Philadelphia Savings Fund Society was started so that average Americans could get access to loans and a means of saving.
MORTGAGE FINANCE
1932
US congress created the Federal Home Loan Bank system to support residential mortgage lending by local financial institutions, ushering in a new era of mortgage financing.
THE BEGINNING OF T ECHNOLOGY
1950s – 70s
CREDIT CARDS AND COMPUTERIZATION
Businessman Frank McNamara paid a restaurant bill with a small cardboard card, known today as a Diners Club ® Card.
1950
Bank of America launched the BankAmericard, later to become Visa, in Fresno, California where 45% of the residents were its customers. A card was sent to 60,000 residents and so the bank was able to convince merchants to accept it.
1958
Barclaycard was the UK’s first credit card.
1966
In 1973 Dee Hock, CEO of Visa computerized the credit card system reducing transaction time to less than a minute.
1973
FROM EARLY BEGINNINGS, THE CREDIT CARD GOES ON TO BECOME A POPULAR METHOD OF PAYMENT. BEFORE COMPUTERIZATION, PAYMENT WAS SLOW AND MANUAL WITH PHONE CALLS BETWEEN MERCHANTS, BANKS AND CREDIT CARD ISSUERS TO CHECK CREDIT BALANCES, AND LISTS OF STOLEN CARD NUMBERS TO CHECK AGAINST.
@
DATA IN CREDIT DECISIONS
1959
Lenders first start using FICO scores to make informed credit decisions.
The reverse mortgage is born. The very first is written to Nellie Young in Portland, Maine by Nelson Haynes of Deering Savings & Loan to help the widowed wife of his high school football coach stay in her home after losing her husband.
1961
BUT QUITE A BIT HAS CHANGED SINCE LENDERS FIRST STARTED USING FICO ® SCORES IN 1989.
The Federal Home Loan Mortgage Corporation (known as Freddie Mac) is chartered by Congress, creating the secondary market for conventional home loans.
1970
1980s & 90s
INTERNET AND E-COMMERCE Opportunities grow for online lending specialists
Detroit-based mortgage lender Quicken Loans launches with much of the application and review process conducted online. In the first five months of 2015 it lent out $24.3 billion of the application and review process conducted online.
1985
In the first five months of 2015 Quicken Loans lent out $24.3 billion.
First Internet Bank pioneered online-only banking, offering home mortgage loans and banking services.
1999
SOPH I S T ICAT ED T ECHNOLOGY
1990s
CLOUD; ANALYTICS; DECISIONING; BUSINESS PROCESS MANAGEMENT; BEHAVIOURAL ANALYTICS Companies start focusing more on processes – compared to functions and procedures – to maximise productivity, looking at chains of events and modelling cross-functional activities.
In the US, the Federal National Mortgage Association (known as Fannie Mae) and Freddie Mac recommended FICO scores for evaluating mortgage loans.
1995
Predictive Model Markup Language (PMML) provides a standard language for predictive models. Predictive analytics develops as a risk mitigation tool.
1997
EARLY 21st CENTURY
MARKETPLACE LENDING; PEER-TO-PEER
The industry is rocked as Lending Club reveals a violation of the company’s business practice and the resignation of its CEO. Commentators
Zopa begins offering peer-to-peer loans in the UK. Since 2005 Zopa has lent over £1.45 billion to UK consumers and identifies the top three loan reasons as car, home improvements and paying off credit cards.
2005
Prosper kicked off the modern peer-to-peer lending industry in the US, followed by Lending Club and other lending platforms soon after.
2006
call into question the future of the industry.
FINANCIAL CRISIS
2007 – 08
From January 2008 to April 2011, the FDIC closed 356 banks that failed to manage the risks building up in their commercial and residential mortgage exposures.
2016
THE DIGITAL AGE
The first generation iPhone was released. Mobile banking, shopping and payments later gain popularity with the dominance of smart phones.
OF US HOMEOWNERS SHOPPED ONLINE FIRST FOR MORTGAGE RATES 21%
2007
LendingTree survey reveals 21% of US homeowners shopped online first for mortgage rates.
2010
Lenders compete to meet customer expectations of digital services. In 2015, BBVA saw an increase in consumer loans through digital channels with mobile users up 45%.
2015
Throughout history, the basic premise behind lending and the extension of credit hasn’t changed, however, the way lending happens has changed fundamentally. This change will only continue, driven by two fundamental factors – the progression of technology and the need for innovation to meet evolving customer expectations. Customers expect rapid response times and a hassle-free experience. Institutions that embrace the possibilities brought about by the internet, cloud, predictive analytics and future innovations that haven’t even been thought of yet, stand to benefit.
PAUL THOMAS, MANAGING DIRECTOR, PROVENIR
References: http://www.thecalculatorsite.com/articles/finance/history-of-loans.php, http://gettingmoneywise.com/2013/01/history-of-money-lending-2.html, http://www.jewish- history.org/the-rothschilds/, http://www.forbes.com/sites/valleyvoices /2016/03/10/the-short-history-and-long-future-of-the-online-lending-industry/#2d8bd8e84874, https://en.wikipedia.org/wiki/FICO, http://www.forbes.com/sites/scottbeyer/2016/01/15/the-future-of-mortgage-lending-could-be-online/#39b640ef4bea, http://www.f- hlb-of.com/ofweb_userWeb/pageBuilder/mission--history-29, https://www.rothschildarchive.org/contact/faqs/rothschild_and_gold, https://www.dinersclu- bus.com/home/about/dinersclub/story, http://www.creditcards.com/credit-card-news/credit-cards-history-1264.php, http://priceonomics.com/how-credit-cards-tax-america/, https://usa.visa.com/about-visa/our_business/history-of-visa.html, http://www.theukcardsassociation.org.uk/history_of_cards/index.asp, http://www.myfico.com/CreditEduca- tion/FICO-Score-Versions.aspx, http://www.fico.com/en/about-us, https://www.directlendingsolutions.com/history_of_lending.htm, http://philadelphiaencyclopedia.org/ar- chive/savings-societies/, https://www.firstib.com/first-internet-bank-launches-real-time-internet-banking-services-nationwide/, http://www.zopa.com/about#press, https://www.prosper.com/plp/about/, http://realtormag.realtor.org/news-and-commentary/feature/article/1999/12/milestones-residential-real-estate-1900-1999, https://ww- w.lendingclub.com/public/press-room.action, http://news.bbc.co.uk/1/hi/business/7521250.stm, https://www.aag.com/news/history-reverse-mortgage, https://www.finex- tra.com/news/fullstory.aspx?newsitemid=28421&utm_medium=NewsFlash&utm_source=2016-2-, https://www.lendingtree.com/press-release/consumers-compari- son-shop-for-everything-except-their-mortgage, https://en.wikipedia.org/wiki/Business_process_modeling, http://www.predictive-analytics.info/2012/01/pm- ml-41-is-here-mature-standard-for.html, http://www.predictiveanalyt, csworld.com/patimes/mitigating-risk-with-predictive-modeling-061715/5548/, http://www.gen- pact.com/docs/resource-/credit-analytics-in-commercial-banking---improved-compliance-and-decisions-making
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