In the Wake of COVID-19, Are Banks and Credit Unions Prepared for Small-Dollar Lending?
Even before the COVID-19 pandemic, regulators have been encouraging banks to offer a “safer” alternative to payday loans: back in 2018, the Comptroller of the Currency testified before Congress that one of their priorities would be working with banks to meet customers’ needs for short-term, small-dollar credit. But such encouragement hasn’t been enough for most banks to act.
That may finally be changing. Shelter-in-place policies intended to contain the spread of the novel strain of coronavirus have forced many employers to close their doors temporarily (and some permanently), putting millions of workers at-risk of significant income loss. Anticipating the growing need for credit to cover household expenses, regulators have been actively soliciting feedback from banks and credit unions on how to facilitate making such small-dollar lending available. A joint statement from 5 federal financial regulatory agencies was released last Thursday, giving more guidance and serving as a regulatory “green light” for banks and credit unions to enter the small-dollar lending space.
But are banks and credit unions prepared for it? Given that the market has dramatically changed in such a short amount of time, traditional credit scores and data typically used for underwriting will not reflect the state of many consumers in the foreseeable future. Banks and credit unions will need to consider far more data and also have the agility to adapt to market changes.
Enova Decisions can help banks navigate these unique and uncertain times and accelerate entry into small-dollar lending. Enova has already been doing this successfully for 15+ years, and Enova Decisions has pre-packaged Enova’s know-how and technology into solutions to help banks do the same. Deployed on our decision management SaaS, Enova Decisions Cloud, our solutions enable business analysts to utilize their existing LOS while giving them more visibility, security, and control over lending decisions — all without additional investment in IT infrastructure. This means banks and credit unions can quickly test and iterate rules.
Over time and after the market stabilizes, Enova Decisions can work with banks and credit unions to develop tailored machine learning models using 1st-party and 3rd-party data sources, including alternative-credit and non-credit data, to more accurately verify identity, detect fraud, and predict a borrower’s ability and willingness to repay. Enova Decisions also makes it easy for business analysts to continuously fine-tune and optimize these predictive models. With Enova Decisions, banks and credit unions can be confident that they’re prepared to not only meet the immediate needs of their customers but also scale small-dollar lending profitably long-term.
Want to learn more? Contact us today!