Starting an online lending business becomes even more accessible

[Editor’s note: This is a blog post from Kontomatik. Kontomatik is a Bronze Sponsor at LendIt Europe 2017, which will take place on October 9-10, 2017 in London.]

For over a decade various fintech companies have been taking little slices out of the banking pie. Transfers, payments, brokerage activities, and lending are being transformed into something completely different when compared to what the banks had been offering. Today we are going to talk mostly about the lending industry and how easy it has become to start up your own successful brand with the help of data delivered through banking APIs and its further analysis.

Online lending has never been tough

Essentially, launching your own online lending company is quite an easy task. You simply need to design a nice website with a fancy slider that lets the visitors select the loan size and the payback period, set up some advertising campaigns, get a little underwriting team, and get some liquidity so you have enough cash to give away. Sounds legit, right? Nope. While the text above could certainly illustrate the state of the online lending industry some ten years ago, today it has become much more competitive and simply giving the money away with the hopes of getting the loans paid back will not get you far.

Data is everything

Online lending is not about giving as many loans as possible. The main task of an online lender nowadays is to keep the acceptance rate as high as possible while keeping the bad debt as low as possible. How do you achieve it? By profiling and scoring customers the right way. And to do so, a company needs to access and analyse the data from as many useful sources as possible.

Today some lending giants integrate with thousands of data sources to bring up their ratios just a few % higher (or lower), and obviously such practices provide a significant impact on the profitability. The main issue is that a new lending company cannot simply afford connecting to all of the sources and employing a whole data science team. So, here comes a logical question – how can a new company (with limited budget) benefit from the data?

Get top-tier data, analysed, categorised and evaluated

Here at Kontomatik we have been supplying raw banking data for almost 10 years. There are many data sources available for analysis, but it is clear that there is no better source than the customer’s financial statements. Our banking APIs have been utilised by the most innovative banks and largest lending companies. However, we noticed that smaller size online lenders had difficulties with leveraging the banking data to its fullest. This is why we have introduced a new line of products, we call them Kontomatik Add-ons. The idea behind these products is quite simple, we are making the lives of online lenders as simple as possible.

Banking API

Kontomatik banking API is easily integrated (see below for yourself), and from the user perspective it is just a little widget that asks a user to login using his online bank account credentials.

As an output, a lending company gets transactional, balance and KYC data sets obtained from the online banking area.

Kontomatik Add-ons are designed to enrich and structure these data sets.

Labelling Data Enrichment

Labels provide a context to the raw transaction data massive. You can use multiple categorized transactions to verify the income and calculate affordability, as well as identify loan applicant’s risky behaviour and red flags, e.g. gambling, other liabilities, late payments.

Financial Health Indicator

Kontomatik applies Machine Learning and Artificial Intelligence to extract predictive financial behaviour factors that are an extra data source for your scorecards. This way you can improve your scoring model accuracy by 5-10 percentage points for new customers.

Insight Zero-Integration Dashboard

Insight is a handy dashboard that gives an overview of a loan applicant based on the banking data. It does not require any additional integrations and thus is very convenient for companies with busy IT teams or outsourced services.

The final thought

While online lending has become much more competitive and becomes very regulated, on a positive side you have got the technology that allows delivering loans quicker and analysing the risks better. Keep in mind that the easiest moment to do online lending is now, because every day it is becoming more difficult. However, starting up your online lending company is easy as never before, simply because you have great technologies to support your operations. Get in touch with Kontomatik to learn more about how to get started.

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