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Unsecured lending is increasing. And everyone wants in. Not only are the number of personal loans increasing, but the share of those loans originated by fintech companies is increasing. According to Experian statistics, in August 2015, 890 new trades were originated by fintechs (or 21% of all personal loans). Two years later, in August 2017, 1.1 million trades belonged to fintechs (making up 36% of trades). This increase is consistent over time even though the spread of average loan amount between traditional loans and fintech is tightening. While convenience and the ability to apply online are key, interest rates are the number one factor in choosing a lender. Although average interest rates for traditional loans have stabilized, fintech interest rates continue to shift higher – and yet, the upward momentum in fintech loan origination continues. So, who are the consumers taking these loans? A common misconception about fintechs is that their association with market disruption, innovation and technology means that they appeal vastly to the Millennial masses. But that’s not necessarily the case. Boomers represent the second largest group utilizing fintech Marketplace loans and, interestingly, Boomers’ average loan amount is higher than any other generational group – 85.9% higher, in fact, from their Millennial counterparts. The reality is the personal loan market is fast-paced and consumers across the generational spectrum appear eager to adopt convenience-based, technology-driven online lending methods – something to the tune of $35.7 million in trades. For more lending insights and statistics, download Experian’s Q2 2018 Personal Loans Infographic here.   Learn More About Online Marketplace Lending Download Lending Insights

The concept of the credit card was originally envisioned by utopian novelist Edmond Bellamy in 1887 in his utopian novel “Looking Backward.” And ever since the first credit card was introduced almost 70 years ago, people have been absolutely crazy for them. The average American has roughly three of them in her wallet, each with an average balance of $6354 ($1841 for retail cards). Total US credit card debt tipped over $1 trillion in 2017 and continues to climb at around 5% a year. With all of that consumer enthusiasm, you’d be right to assume that it’s a fantastic business to be in. But the credit card industry of today is nothing if not competitive and, with literally thousands of credit card products out there, it’s exceptionally hard to stand out. Our wallets are overflowing with cards and our mailboxes are awash with card offers, yet few people could explain the differences between them. In addition, the industry has lost ground to an ever-proliferating list of alternative payment methods, including mobile peer-to-peer payment services and prepaid debit cards. Furthermore, the advent of big data and alternative underwriting models could allow some tech upstarts to refinance balances at lower interest rates – especially if they’re willing to accept slightly lower returns than credit card companies have become accustomed to. So while the industry as a whole appears to be quite healthy, it’s clear that in order to differentiate credit card companies need to be more innovative than they are today. And the first step towards coming up with new, innovative ideas is acknowledging your vulnerabilities. Six vulnerabilities in the credit card industry Credit card companies face threats on many sides, making it hard to know where to start initiating change. Here are some of the top vulnerabilities that face the credit card industry today. 1. Retailers are starting to balk at high fees In 2016, Costco concluded its exclusive partnership with American Express in favor of Visa and Citibank. While that transition was painful at times, analysts from BMO Capital Markets estimated that switch would save the retailer between $110 million and $220 million in interchange fees. Later that year, Walmart Canada announced that it intended to stop accepting Visa credit cards in its 400 stores, citing high transaction fees. The two companies resolved the dispute after six months, and neither company disclosed the new terms. But it wouldn’t be the last time it happened. Foods Co., a California-based Kroger family company, stopped accepting Visa credit cards in its 21 stores and five gas stations in August 2018 over a fee dispute. Its parent company stated that it’s considering following suit. When large retailers stop accepting certain payment networks or changing their preferred payment network over fee disputes, it’s not just the payment networks that suffer. Credit card issuers also miss out when their cardholders can no longer use certain cards at their favorite retailer. 2. Fintech companies competing for loyalty Fintech companies are providing many services that credit cardholders can’t always get with their card issuer. Some, for example, provide credit monitoring services that help consumers build or rebuild their credit. Other fintech companies are using alternative and trended credit data in their underwriting process. Earnest, for example, not only checks applicants’ credit scores but also looks at savings patterns, investment balances, and employment growth potential. Fannie Mae, the largest source of funding for mortgage lenders, began using trended credit data, which provides a deeper look at a borrower’s credit history, for single-family mortgage applications in 2016. By using alternative and trended credit data to evaluate prospective borrowers, these and other companies can find new customer markets and achieve more predictive decisions than the traditional way of measuring risk. 3. Mobile payment services bypassing credit card companies Apple Pay, Samsung Pay and Google Pay make it easier and safer for cardholders to use their credit cards when shopping online and at retail stores. That said, these services could start using their own payment infrastructure in the future, bypassing credit cards entirely. Peer-to-peer mobile payment services including PayPal, Venmo and Square, already do this. In fact, they charge a fee for credit card payments, which effectively forces most users to use a debit card or checking account instead. 4. Increased use of debit cards undercuts credit cards Consumers made 73.8 billion payments with a debit card in 2016, according to the Federal Reserve, with a value of $2.7 trillion. That’s roughly three times the volume and value of debit card payments a decade earlier. During that same time, the volume and value of credit card payments increased by closer to 1.5 times. While that’s still an upward trend, debit cards use is gaining more steam. Younger consumers are likely driving this trend toward debit instead of credit. A study conducted by Harris Poll recently found that Millennials carry fewer credit cards than older generations and appear far more debt warry. Also, according to a TD Bank survey, Millennials spend more than twice as much using cash, debit cards and checks than the average American. Some banks including Discover and American Express, have begun offering cash-back rewards to their debit and prepaid debit cardholders. These rewards programs may start to catch on with other banks, making debit cards a reasonable alternative to credit card holders who prefer debit but don’t want to miss out on cash back. 5. Challenger brands are targeting underserved customers Many major credit card issuers focus more on the prime and near-prime market, opening up the way for challenger brands to capture market share among consumers who are new to credit or looking to rebuild. Deserve, for instance, has raised more than $78 million to provide a credit card to international students with no Social Security number requirement. It also offers an unsecured credit card designed for consumers with no credit history. Another example is Petal, which has raised close to $17 million from investors to provide a no-fee, unsecured credit card to help consumers build credit — all with no credit score requirement. 6. A persistent lack of security in credit card transactions Credit card fraud was the most common form of identity theft reported to the Federal Trade Commission in 2017, according to a report by Experian. And while credit card companies have made strides to prevent fraudsters from accessing credit card information, perpetrators are getting smarter and more sophisticated, making it hard for card issuers to keep up. With consumer credit card debt rapidly growing and APR’s on the rise, the current credit card boon simply can’t last forever. The market will eventually shrink and a game of “Survivor” will ensue. So it would be wise for credit card companies to take stock of their vulnerabilities now and start getting ahead of the pack. Visit our website for more information on identity protection products you can offer your customers.

If your company is like many financial institutions, it’s likely the discussion around big data and financial analytics has been an ongoing conversation. For many financial institutions, data isn’t the problem, but rather what could or should be done with it. Research has shown that only about 30% of financial institutions are successfully leveraging their data to generate actionable insights, and customers are noticing. According to a recent study from Capgemini,  30% of US customers and 26% of UK customers feel like their financial institutions understand their needs. No matter how much data you have, it’s essentially just ones and zeroes if you’re not using it. So how do banks, credit unions, and other financial institutions who capture and consume vast amounts of data use that data to innovate, improve the customer experience and stay competitive? The answer, you could say, is written in the sand. The most forward-thinking financial institutions are turning to analytical environments, also known as a sandbox, to solve the business problem of big data. Like the name suggests, a sandbox is an environment that contains all the materials and tools one might need to create, build, and collaborate around their data. A sandbox gives data-savvy banks, credit unions and FinTechs access to depersonalized credit data from across the country. Using custom dashboards and data visualization tools, they can manipulate the data with predictive models for different micro and macro-level scenarios. The added value of a sandbox is that it becomes a one-stop shop data tool for the entire enterprise. This saves the time normally required in the back and forth of acquiring data for a specific to a project or particular data sets. The best systems utilize the latest open source technology in artificial intelligence and machine learning to deliver intelligence that can inform regional trends, consumer insights and highlight market opportunities. From industry benchmarking to market entry and expansion research and campaign performance to vintage analysis, reject inferencing and much more. An analytical sandbox gives you the data to create actionable analytics and insights across the enterprise right when you need it, not months later. The result is the ability to empower your customers to make financial decisions when, where and how they want. Keeping them happy keeps your financial institution relevant and competitive. Isn’t it time to put your data to work for you? Learn more about how Experian can solve your big data problems. >> Interested to see a live demo of the Ascend Sandbox? Register today for our webinar “Big Data Can Lead to Even Bigger ROI with the Ascend Sandbox.”