Data Helps De-Stress The Consumer’s Lending, Borrow, Savings Process

“Bank is no longer a place you go — it’s a thing you do,” LendingClub Financial Health Officer Anuj Nayar told PYMNTS in an interview.

And within the realm of banking services lies credit and lending, as well as the possibility for tech-enabled firms to improve the financial health of their customers.

Financial wellness might certainly be considered a timely subject. Joint research from PYMNTS and LendingClub found that 54 percent of U.S. consumers have little or no money left over after they spend what they earn — which translates to roughly 125 million adults.

These are not just lower-income individuals and families who are grappling with financial challenges as the study showed roughly 40 percent of Americans with incomes over $100,000 live paycheck to paycheck too, with 12 percent in that above-average demographic also struggling to pay bills.

Regardless of the income level, Nayar noted, “at the end of the day, beyond looking out for your family and looking after your health, your money is probably the most important thing.”

It is against this beleaguered backdrop of unpaid bills, he said, that the lending industry, with the aid of advanced technologies, can help consumers find better ways to get out of debt. Roughly half of Americans with credit cards revolve their credit cards, which means they don’t pay every month.

“That means essentially they’ve taken out a long-term, high-interest — and pretty bad — personal loan,” said Nayar.

Along those lines, the typical FICO score does not really determine credit worthiness.

The FICO score, he said, is built on an assumption that is not true for many Americans today since an increasing number of borrowers no longer have jobs that provide regular monthly paychecks that come with a fixed dollar amount every time.

It’s also not true that past performance, the history of payments, is a guarantee of future performance.

Nayar noted that in the wake of the Great Recession, firms including LendingClub, disrupted the traditional credit scoring and lending model by creating what he termed “an entirely new system based on using data and other alternative ways to look at consumers’ financial health, and designing new products to serve their needs.”

The declining reliance on banks in the physical branch setting, as well as increasing comfort with mobile banking, married with those alternative data sources, can help connect the dots and close the gaps in helping people get out of debt.

Getting and Staying Out of Debt

“One of the biggest things beyond getting out of debt is building some level of financial wellness that allows you to stay out of debt,” he said.

LendingClub, he said, has gleaned 14 years’ worth of data tied to everything from marketing through to loan pricing and default rates, with roughly 140 billion cells of data gathered since 2017 alone, with 2,000 different attributes that are used throughout the loan process from marketing to loan performance.

That data is helping the firm move beyond simply connecting borrowers and investors toward a fully digital marketplace of financial services. He pointed to the recent acquisition of Radius Bank, an online branchless bank, to move into checking, savings and related services.

“We can create a model that both helps consumers on the lending side of the house and also the ‘other’ side of the house,” he said. “Whether spending money or saving money … we have a new model that brings together the best of both worlds — FinTech and banking.”

He said a recent LendingClub survey showed that 83 percent of LendingClub members want to do more with the firm, and a majority of users would take advantage of checking accounts that would also help them better manage their loans. Also on in the works is the possibility of using continuous underwriting in new ways to seamlessly blend credit and savings.

“The ultimate idea will be to create a one-stop shop for our members that uses AI and deep analytics to help take the pressure away from the consumer as they try to make sure they are making the right financial decisions,” he told PYMNTS.