What’s true about fintechs today that wasn’t true five years ago?
If you look at the level of investment capital currently allocated to fintechs and their associated valuations versus five years ago, it’s clear that they have been able to create sustainable value in the marketplace. Part of this growth is the increase in interconnection between financial institutions and startups. Where there was initially a purely disruptive model in which startups sought to go it alone, I’ve seen the model evolve into one more aligned to partnerships.
I especially see the benefits of this alignment in the mortgage industry, where fintechs bring a consumer-focused POV and fresh thinking to the table. Digitization shouldn’t be done just for the sake of being done: it should lead to lower costs, efficiencies, and consumer benefits. I’ve seen first-hand how fintechs like Blend can play an important and unique role between lenders and financial institutions to create consumer experiences that delight users and deliver value back to all parties. It’s a big reason that I’ve emphasized partnering with both fintechs and lenders through our alliances program and our customer-centric strategy.
What’s something fintechs will be able to do in five years that they aren’t able to do today?
As data and the governance of data are standardized, broader use of emerging technology like machine learning that helps us better analyze consumer data can have major impact. I can see machine learning helping us get closer to the hyper-customization of financial products, for one.
Another future opportunity is providing “t-shaped” service profiles with deeper integration with financial institutions and creating end-to-end solutions for borrowers (e.g., providing approval for a lending need vs providing approval and automating the fulfillment and disbursement process). With their customer focus, fintechs can help us all pivot from digitizing pieces of analog customer journeys to creating holistic, digitally-native experiences.
What do you believe fintechs can do that no one thinks is possible?
They can help the housing finance industry eliminate paper in mortgage, for one! Maybe they will even help create “supply” in the US housing market. No one seems to know how to efficiently do this yet. But we all know supply is a problem, and someone will shine a light on this problem and solve for it. Why not fintechs?
What are your top three predictions for fintechs and lenders in 2020?
I think technology improvements will continue to alter long-established and entrenched lending workflows. Agility will be important for lenders to pivot their operations and be able to ride the wave alongside the fintechs.
I wouldn’t be surprised to see a consolidation of some players in the marketplace to create scale value and establish leverage.
Finally, next year and beyond, integration and ecosystem plays become increasingly relevant. No one financial institution/lender/fintech can do it all. Partnerships and value exchanges will become the norm.
What does it take to create a financial product that consumers trust and love?
Consumer trust and love happens at the intersection of execution, security, and context. A product must have been created with a maniacal focus on execution. Simple and intuitive wins every time.
And trust is paramount. Trust is gained through transparency, iron-clad security and always-on service/resiliency.
Finally, context matters — meeting the consumer where they are. The offering must be relevant to a specific user and his/her specific needs at that specific moment.
Disclaimer: The views expressed are my own and do not necessarily reflect those of Fannie Mae, Blend, or either party’s management.