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Mythbusting Digital Lending

What’s true, what’s not and what’s next.

By Alaina Webster, Managing Editor

Chris Rentner, director of digital lending for Velocity Solutions, LLC and founder and former CEO of Akouba, remembers a time when digital lending for banks seemed like a pipe dream.

“If I look back at 2015 when the company [Akouba] wasn’t really even being promoted, everyone was telling us that we were crazy,” he said. “Digital lending at banks? No, OnDeck and Kabbage are going to do that.”

Having since had his start-up endorsed by the American Bankers Association, then acquired by Velocity, Rentner believes the era of digital lending and true bank/fintech partnerships has finally arrived.

“When Akouba was endorsed by the ABA … there were less than 50 banks using some sort of digital lending strategy in the United States,” he said. “I think in 2019, we’re going to see multiples of that take place … the momentum just feels like it’s there.”

The combined companies’ digital lending offering targets community and regional banks, reducing processing costs by 70 to 80 percent and time spent handling renewals and interim reviews by roughly 50 percent, according to Rentner. However, he doesn’t see these solutions as pushing relationship-based banks into a transactional space.

“We’re huge, huge believers in the idea that technology does not make you a transactional bank,” Rentner said. “We believe that it makes you a better relationship-based bank.”

For similar reasons, he quickly shut down the idea that some of the cost savings associated with digital lending could be achieved via staff reductions. Instead, banks are automating data collection, freeing up time to more critically examine loans with red flags, injecting more of that human element that differentiates community and regional banks from impersonal Goliaths.

Efficiency increases, too, Rentner said. “Back office individuals doing these reviews could do six to eight per month. We’re seeing that they can now do 12-15. It’s giving the bank the ability to scale up without more hiring.”

But what about the idea that digital lending is only appealing to the younger generations — you know the broke ones, living with their parents or struggling to repay their student loans? Rentner dismisses that notion, too, saying he firmly believes digital lending can be made to appeal to all generations of business owners.

“The millennials — I’m in that category, so I can talk about them — their businesses that they’ve started are not mature enough to need a larger-dollar commercial loan,” he explained. “With this renewal capacity that we launched this year, it’s going to bring it upstream even more to the boomers generation.

“Most of those businesses are definitely owned by the earlier generations,” he continued. “It’s the workflow stuff that’s going to be really exciting over the next couple years, and it will absolutely trend upward in terms of age of the individual who’s using that solution.”

Making older generations comfortable with digital lending is just a matter of marketing, Rentner suggests. After all, they have the same constraints on their time as any other business owner, regardless of age.

“It’s really coming up with the different features that are attractive to each generation, making them comfortable with it,” he said. “Providing them with more attestations of trust.”

For example, banks could give customers the option of filling in a few pieces of information and allowing the bank to contact the IRS for tax returns. Or, if that made the customer somewhat uncomfortable, he/she could upload returns to the bank directly.

“It’s about that customer engagement,” Rentner finished. “If you want to have a great relationship with your customers going forward, it’s going to have to be in a digital manner, so that’s where we’ve started to broaden our focus on the lending process for financial institutions.”

Alaina Webster, Managing Editor, awebster@banknew.com

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