Compliance, Fintech

Reflections from Lend360: What’s next in online lending?

Earlier this month, I had the opportunity to attend Lend360, a conference that brings together the best and brightest minds in the online lending industry. From regulatory updates and fraud prevention, to fintech disruption and lender pain points, the week was packed with high level discussions about the future of this dynamic industry.

The overall mood at the conference was one of optimism. Virtually every executive I connected with was excited about continued growth and opportunity in the online lending industry. Here at Servicing Solutions, we share that same optimism and firmly believe that online lending will continue to be an important and vibrant part of the global financial services landscape.

However, there were also some current topics and issues that my fellow attendees were cautious—perhaps even concerned—about. This is not surprising given the frantic pace that this industry is evolving at. Throughout the week, I overheard or took part in several discussions about the following topics that, in my view, have created caution in the industry:

  1. Regulatory Developments: The challenges that online lenders face when trying to work within existing regulatory structure has been well-documented, with some going as far as saying that it can be a threat to innovation. From panel discussions focused on state-level regulation to broader discussions about federal policy, what’s next in fintech/online lending regulation was certainly a common question that permeated many of the week’s discussions.
  2. Compliance Concerns: The questions and uncertainly about regulatory developments have most certainly led to practical concerns about compliance. Getting more specific, I was struck by what appears to be a reluctance by many lenders on how—or even if—to pursue collections…whether handling it in house or through a third party. Perhaps they don’t want the exposure or perhaps they’re not confident in their own Compliance Management System, but my conversations at the conference made it clear that collections are among the areas that keep online lenders up at night.
  3. National Fintech Bank Charter: After years of discussion, the Office of the Comptroller of the Currency’s announcement this summer would begin considering applications for special purpose national bank charters from fintech companies was one of the most talked about items at Lend360.  I’d characterize these discussions as being less focused on concern and more on anticipation. The prevailing hope is that it encourages—instead of stifles—innovation for fintechs and online lenders. Of course, much remains to be seen, but I believe this represents one of the most important turning points for the industry in recent years.

Reflecting back on the topics that were discussed most commonly thought the week reaffirms just why Servicing Solutions went into business in the first place. With this unprecedented speed of innovation showing no signs of slowing down, it is absolutely imperative that fintechs and online lenders treat regulatory and compliance issues, along with major industry developments, with the attention and expertise that they demand. While some lenders may have the desire and/or capacity to do this in house, many do not.

However, the lack of a suitable in-house function is not something that should cause lenders to slow down or shy away from innovation. Having the right servicing and compliance partner in place—one that truly knows the complexities of these industries—will allow fintechs and online lenders to focus on what they do best, while having the peace of mind that they are absolutely buttoned up from a compliance and regulatory standpoint.

Anything less could pose a real threat to the future vitality of these important financial services disruptors.