What advantages do FinTechs really have? If they do have advantages, how can they maintain that edge? D+H is a public global payments and lending technology provider serving nearly 8,000 financial institutions, specialty lenders, community banks, credit unions, governments and corporations, including Canada’s largest banks. They are large and cost-effective at the same time. How do they do it? By focusing on speed and flexibility.
A Unique Offering
While banks and credit unions weren’t early adopters of technology, they have an advantage.
“People don’t want to be online only,” Nina Church-Adams, head of product marketing for the global lending solutions group, said. Church-Adams also leads D+H’s marketing team across the U.S. and Canada. “They still like to go in the branch whether it’s Millennials, Boomers, or a generation in between. Banks still have brick and mortar, but if they’re powered by technology and partnering with D+H, then they’re able to catch up because they have the ease of use, the borrower-facing mobile, and a quicker decision-making apparatus. They then support that by building relationships and servicing their customer base. In terms of compliance, they also have that trust.”
D+H’s history in compliance matched with a bank’s history in managing money creates a strong value proposition for a borrower in terms of considering a bank versus an alternative lender.
“Suddenly, the banks are able to catch up,” Church-Adams said.
Touch points vary per business model, but there are sectors and regions where a physical presence makes a particular entity unique.
“But it’s one among many tools,” John Zepecki said. Zepecki is group head of product management for lending at D+H. “What’s becoming clear is, if you don’t have the digital tools, no one is going to accept the other tools as an alternative. Your ability to innovate and adapt is always going to be an edge.”
D+H provides the tools for quick applications and quick decision-making. Asked which innovations will make a difference in the next few years, Zepecki said, “I think it depends. If you look broadly, the block chain, payments and contracts, and some of the commercial relationships could be quite interesting. Chat bots? I think time will tell. It’s another channel. Does it prove useful or is it preferred, or does it become just one channel of five? Depends how much more intelligence you can put into a chat bot. I think the jury’s out, but it may appeal to a younger audience as an important channel.”
Zepecki said artificial intelligence could lead to more business for a lender if they can make the decision-making process more efficient.
“If your limitation is a knowledgeable person around decision-making and that person can use their knowledge more effectively with automation and you put the right decisions to the right person, you can have fewer rounds of decisioning,” he said. “Then you can do a bigger book of business. Is that a net gain or a net loss? It will probably depend on the situation.”
Church-Adams has seen banks increase their business with technology.
“We’ve seen large credit union clients who with little commercial lending partner with us and adapt our technology,” she said. “They still need the person, but that person is able to grow their commercial business from zero to $1.8 billion in one year because they’re powered by technology. There’s a multiplying factor for the institution.”
How D+H Established Its Credibility
In 1875, D+H began as a Canadian company that manufactured paper checks. As they evolved in the last century, it became obvious the paper check was not the wave of the future. The company pivoted toward technology and acquired a number of businesses specific to the Canadian market: recover & collateral management solutions, student lending, and brokered and networked mortgages.
Ten years ago, they bought some complementary mortgage technology and then bought Harland Financial to get into core banking. Recently, they bought a payments company called Funtech. Now, they cover lending, payments, and financial solutions.
Migrating to SaaS Cloud or Cloud Everywhere
“I have the responsibility of driving product to move from a mix of tech-enabled services to more of a SaaS Cloud product company,” Zepecki said. “If you look at the businesses, there’s lending, which is very much a software business, and SAS with a couple of major product lines in it. There’s also a payment infrastructure with a number of tier-one banks as clients and broadening over a period of time. Then there’s a traditional business built around checks and the financial core, and some Canadian-specific service businesses built around the relationship we have with large banks.”
The lending side of the business makes up about 40% in terms of revenue, Zepecki said. The other 60% is split between the other two big business blocks. Payments is growing much more quickly than the other sides of the business.
“We are truly the only kind of end-to-end FinTech player,” Church-Adams said. “A lot of our competitors just do mortgage or point-of-sale, or they just do loan origination, but we have breadth and depth, which really sets us apart.”
D+H might not be the biggest in terms of revenue, but with more than 5,000 customers, it is among the leaders. They also serve consumer, commercial, mortgage, and small business customers through every step of the loan process.
Interesting Views of the Market
Zepecki said the biggest trends in the market include user experience, making the process easier, shortening collaboration times, and making the decision-making process faster and clearer.
“In some cases, people are behind and need to catch up,” he said. “Technology vendors have a big opportunity to let people change their businesses.”
D+H serves three types of customers. Some are leading edge and figure out they can’t handle mobile, chat bots, and other tech devices with their homegrown system. Others sit out the first few innings of the game on the Internet and lose customers. The third customer sits between those two.
“They’re halfway this way or halfway that way and want to get into the future, starting with one thing and expanding over a period of time,” he said. “That’s where we become attractive. We can start where you want to start on your biggest pain point, but over a period of time, we offer solutions that go together.”
If a customer wants to start with POS and then look at an LOS on mortgage, for example, they want to start with one or the other. D+H is happy to do both.
“Vendor regulation is another trend,” Zepecki said. “Vendor risk goes up, so if you have fewer strategic vendors, that’s appealing. If have solutions that are broader, then you’re better as a vendor, more attractive. Lastly, on compliance, whether it goes up or down, there are going to be changes.”
Those changes in the market create cost. Lenders have to hire somebody who knows what to do, and there are a finite number of people available.
“If everyone is trying to do it themselves, it becomes more prohibitive,” Zepecki said, “That’s where I think we can use our domain expertise and long history around compliance. If you can afford it, which is debatable, and can you find skilled people? I think that is becoming harder and harder.”
For institutions that see compliance and management as difficult, the tendency is to want fewer vendors and outsource compliance, so the focus is on customers, driving the business, or changing to a new business model. That trend serves D+H well because they have a decades-long track record in providing document compliance.
“That is difficult to replicate and makes a great foundation to build off of,” Zepecki said.
Written by Nicki Jacoby.