Divergent Thinking in the Lending Industry

Written by Di Princell

January 28, 2021

Knowledge and human power are synonymous.
~ Francis Bacon

Inspired by an insightful WSJ article about the lending industry, Flying Blind Into a Credit Storm, by AnnaMaria Andriotis, I am reminded how the term business as usual should be shelved for a more appropriate term like, business as divergent. Throw away the rule book- ‘cause what worked yesterday in business ain’t gonna work today.

Divergent thinking embraces an array of ideas and information, often resulting in a set of diverse solutions feeding into one revolutionary answer.

Perhaps it’s the modern name for brainstorming except the end goal is to arrive with a definitive action plan. The virus has opened unexpected doors to unimaginable possibilities so change has never been more relevant, and if businesses don’t evolve with creative, futuristic strategies, doors will close while forward thinkers will already be maneuvering.

Unthinkable, inconceivable, improbable, absurd, impossible, unimaginable – sound familiar? A year ago, these adjectives would have described the new world order that we are now experiencing. Not a lot of preparation time for businesses to adjust so they must disrupt their mindset and reinvent themselves quickly before money runs out. Unfortunately, business foreclosures are rampant around the country and the second wave of the virus will dig the holes deeper.

Let’s look at the lending industry that suddenly can’t distinguish who is credit worthy. This is a cautionary tale for the lending industry as loan originations decrease, loan requirements tighten, personal debts skyrocket, and bank losses from loans soar. The hastily legislated programs that help consumers defer their debts and stay afloat during this financial catastrophe is a mass of confusion for banks, credit unions, and everyday lenders. The credit scores paint a hazy unreliable picture, financial information is sketchy, and there are no virus algorithms to predict the economic future.

In her WSJ article, AnnaMaria observes that a staggering number of consumers around the U.S are in deferral or other repayment programs, leading banks to question whether the credit scores and reports they have relied on for decades are reflecting applicants’ true level of risk. Unemployment expected to remain over 10%, has motivated J.P Morgan ($10.47B), Wells Fargo ($9.57B) and Citigroup ($7.9B) to set aside billions of dollars to cover coronavirus loan losses. Many analysts are expecting a recession down the road when the government stops its stimulus programs. The result is banks and lenders, holding onto their tightly fisted funds, need a divergent, smarter measurement system that reflects a panoramic view of a consumer’s credit worthiness rather than a cropped, single picture frame.

The team at RIBBIT.ai, a groundbreaking predictive analytics company, recognizing the inherent weaknesses in the credit industry long before the virus hit, developed a divergent, comprehensive decisioning machine that will change the lending industry forever. This advanced technology relies on bank transaction data by turning the banking attributes of consumers into evaluated information for assessing risk and approving loans. Analyzing thousands of financial data points presents a more authentic, holistic picture of a person’s ability to manage a loan rather than relying only on inflexible credit bureau scores often rejecting loans based on irrelevant information. The scientific RIBBIT process will always be to the consumers’ and lenders’ advantages opening doors to more loans with a higher success rate for paybacks. Utilizing credit scores alongside the Ribbit analytical process creates a powerful, real-time decisioning tool for fintechs, lenders, banks, and retailers.

 

Stay tuned . . .

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