By: Jer Trihouse. Sub-prime underwriting techniques have evolved dramatically with the entrance of Silicon Valley financed lenders “LendUp,” “ZestFinance,” “Wonga,” and “Think Finance.” Heavy hitters like PayPal founder Peter Thiel, Douglas Merrill and venture firms Sequoia Capital and Google Ventures are making inroads with the 60M+ borrowers seeking payday loan styled products.
Back in 1998, when I opened my first payday loan store in California, our only option was Teletrack. Teletrack focused on aggregating data submitted by brick-n-mortars. If all your local competitors used their service, Teletrack was effective for evaluating your risks and collecting on your defaults down the road.
Today, we have CoreLogic, Clarity, DataX, Microbuilt, Factor Trust… all providing payday loan lenders with tools to evaluate our loan applicants and collecting our money. Add to this tool arsenal, “Big Data.”
Lenders are evaluating a borrower’s Tweets, Facebook updates, Pinterest activities, LinkedIn profile, how much time a borrower spends on a lender’s application page, does a borrower use all CAPS to fill it out, does the borrower jump directly to the $5000 loan principal vs. the $500 loan without reading the “T & C’s” and more.
A few payday loan lenders offer better loan rates to borrowers who sign in to a lender’s website with their Facebook or Twitter account.
Analyzing thousands of data points in less than 3 seconds is now the norm. Add to this the ability to access a borrower’s rent and utility payment history and one would expect fees charged to borrowers will decline. Ah, but don’t jump to this conclusion! In today’s economic environment, few borrowers evaluate fees and rated charged for their loans. Of primary importance is how quickly can the borrower access money with the least amount of hassle. The costs are secondary in importance.
Lenders charge what they can. Borrowers just want emergency money FAST. Rate competition is rare. Particularly after the disruption that’s taken place in the payday loan industry beginning last August.
NOTE: If you’re a lender who has been forced to sit on the sidelines because you’ve “lost” access to your ACH provider, contact Jer at 702-208-6736 [jer@TrihouseConsulting.com] If you’ve “lost” your bank account, contact Jer. There are new ODFI’s and ACH providers ready to serve you. To get the ball rolling quickly, GO HERE: Request for Information. AND, if you represent an ODFI with an interest in the PDL space, reach out to me! It’s a $60B (US) industry.
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