Neither a borrower nor a lender be, the saying goes. Although in a perfect world that might be the way to live life, we live in a world far from that.
Instead, we have many would-be borrowers and like-to-be lenders hamstrung to deliver the services that put money into the hands of borrowers, build loyalty with lenders and deliver the data that helps both make better, smarter, risk-based decisions about future borrowing opportunities.
There’s a card for that, says Marqeta VP Salman Syed – a card that alternative lenders can issue to their borrowers and on which they can deposit loan proceeds immediately. Syed says that helps build loyalty between those borrowers and lenders, who now can be better business partners.
The Power Of Now
Much of what is pushing the progress in alternative lending, Syed noted, is the pervasive power of immediacy. Lengthy underwriting processes that leave customers languishing and waiting for funds aren’t workable in the mobile era, where things – just frankly – move more quickly.
“A major pain point in lending is solved by the ability to issue funds immediately to borrowers via card,” said Syed. “The macro trends of consumers on their phones means that, with Marqeta, a lender can bring a customer on board and we can then instantly issue a virtual card and provision that card right into any digital wallet. So, essentially, we are enabling lenders to make the ‘last mile’ of extending their loan to a borrower seamless and instant.”
Lenders can get real-time information about where the consumer is, what are they are spending and what merchants they are frequenting – something that traditional providers of working lines of credit simply can’t get. With that real-time information, lenders can also implement and monitor controls to make sure money loaned is spent correctly. In fact, online lenders are even able to incent specific spend behaviors with a Marqeta-powered card, all the while reducing their risk of default.
This changes the game for lenders – and it’s all possible because they are receiving a ton of data on borrower spend that they can then analyze and use to adjust their fraud and underwriting algorithms. That input is critical to helping lenders decide whether they will renew or extend additional credit, and how they will price future loans.
The Magic Of The Data
Lending is just one of the use cases that comes to life when any company can in effect become an issuer of a credit, debit or prepaid card. Marqeta’s platform – a full-stack, next-generation processor – makes that possible. And in the case of lending, Syed said, it creates the transparency that lets Marqeta’s lender partners get more – and accurate – data. With that, they can then iterate and refine their products.
“Customers’ needs – particularly small business customer needs – can be particularly volatile,” noted Syed. Borrowers find themselves at a tradeshow facing a massive potential savings to make a “one-shot” deal, but without the ability to respond in the moment, that deal could die if the borrower doesn’t have sufficient credit available.
“We offer lenders the ability to turn that card on for the right amount of funds at the right moment when the customer needs it,” Syed explained.
Expanding The Service Offering
Marqeta’s platform, Syed said, was built to give lenders that capability – the features that help them offer better, tailored experiences that customers expect, but often don’t get.
For example, a common issue for SMB lenders, he noted, is that once a loan is made, the lender doesn’t have access to where the funds are deposited and spent – or much control to make sure the money is going where it is intended to go.
For the protection of the lender, Marqeta’s JIT Funding feature gives them input into whether or not a borrower’s transaction should be authorized. Let’s say that the borrower swipes her card in-store or online – within a fraction of a second, Marqeta unbundles the ISO8583 message and converts it to a message the lender can understand, and then act upon.
Whatever the decision, the message is sent back to Marqeta and the transaction proceeds as instructed. The whole process takes place in a fraction of a second, so it is largely invisible to the merchant or cardholder, but creates a very meaningful experience behind the scenes.