NEWS: 62% would bank with tech companies

ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

December 3, 2019

62% of Americans would try banking with tech companies, survey says

62% of Americans would buy a financial product from an established tech company, according to Bain & Company's annual retail banking survey published last week. Nearly 132,000 people in 22 countries responded to the survey.
That figure varies greatly by age group and from country to country. About 32% of Americans age 65 and older said they'd bank with a technology company. But 75% of people ages 18 to 24 said they'd be willing to do so. The U.S. lies near the middle of the pack among countries surveyed. About 89% of respondents in China said they'd bank with a tech company. That figure drops to 29% among the French, bucking the enthusiasm held by much of Europe regarding tech companies.
Citi estimated that one-third to half of total payments volumes and investment volumes could go to disruptive models by 2025, Bain said.

Loyalty can be somewhat difficult to track because customers may not completely cut ties with their primary bank, Bain wrote: They may maintain a checking account with their primary bank while increasingly exploring tech disruptors' options for credit cards, mortgages, loans and funds transfers. Read more at BANKING DIVE

Each State's Economy Posted Gains in First Half of 2019

States' economies have improved at different paces since the Great Recession, as reflected by the combined personal income of all residents. Utah for the first time tied with consistent front-runner North Dakota as of the second quarter of 2019, with growth almost four times faster than last-place Mississippi over the longest economic recovery on record. Over the past year, all states experienced gains, despite economic turbulence in the farming sector.

Since the recession started in late 2007, oil-rich North Dakota and a group of Southern and Western states, particularly Utah, have recorded the strongest growth in the sum of all personal income received by their residents. Many of those states also gained residents the fastest over the past decade, a trait typically associated with a strong labor force and economic expansion.

While North Dakota and Utah tied for the lead with long-term growth rates equivalent to 3.4 percent a year, Mississippi recorded the weakest recovery with a growth rate equivalent to 0.9 percent a year, after adjusting for inflation. The rates represent the constant pace at which inflation-adjusted state personal income would need to grow each year to reach the most recent level.
Read more at The Pew Charitable Trusts

CFPB constitutionality case gets March date in Supreme Court

The Supreme Court will hear oral arguments March 3 in a case that challenges the constitutionality of the Consumer Financial Protection Bureau (CFPB), according to the high court's calendar. The court agreed to take the case in October.
In Seila Law v. CFPB, a California debt collection law firm argues the CFPB's leadership structure is unconstitutional, and therefore it should not have to comply with a civil investigative demand from the bureau.
At issue is a provision in the Dodd-Frank Act that allows the president to only fire the director of the bureau "for cause." The Justice Department filed a brief in September urging the high court to take the case, and CFPB Director Kathy Kraninger has since

The Seila Law case has knocked around the lower court system for more than two years.

The U.S. Court of Appeals for the Ninth Circuit rejected the law firm's claims against the CFPB in May. And the law firm filed a petition with the Supreme Court the following month.
Read more at BANKING DIVE

U.S. bank regulator further cuts supervision costs for banks

WASHINGTON (Reuters) - A leading U.S. bank regulator announced on Monday it was further slashing how much it charges large banks to cover the costs of monitoring them.

The Office of the Comptroller of the Currency said banks would pay 10% less in fees in 2020, the second straight year it has cut costs by that amount.

The move is expected to save banks $85 million, according to an agency spokesman. The OCC estimated it would collect $1.1 billion in such fees in fiscal 2019, according to its annual budget request.

Joseph Otting, a former banker now leading the agency, said the regulator can charge banks less after finding ways to operate more efficiently.
Read more at REUTERS

Payment Trends: Contactless and Digital Payments. by Kristen Hoyman

Nearly every business in the business to consumer (B2C) space needs to have a payments option and most in the business to business (B2B) space need one, too. What used to be a convenience is now a requirement. The lack of many options not long ago meant that B2C and B2B payments were simple and streamlined. It used to be easy for a business. Sign up with a processor, get a terminal in your store or office, process payments and move along to the next initiative. But things are changing...

Payments Options Changing with Technology
Consumers have choices like wearable technology, mobile payments, contactless payments, online payments for e-commerce, peer to peer payment services, mobile wallets, RFID (radio frequency identification) technology, NFC (near field communication) technology, and non-bank payments providers. These choices make it tough for a business that wants to accept payments to figure out how to get to their customers in a way that is both convenient for the customer and cost-effective for the business.
Read more at REPAY

What's Behind the Subprime Consumer Loan Implosion?

OK, we've got a situation in subprime consumer loans. The delinquency rate on credit-card loan balances at the nearly 5,000 smaller commercial banks in the United States - this means all banks except the largest 100 - is blowing out, according to Federal Reserve data. In the third quarter, the delinquency rate at these banks rose to 6.25%. That's higher even than during the peak of the Financial Crisis.

Back in 2016, the credit-card delinquency rate at these banks was in the 3% range. It has more than doubled in two years.

Credit card balances are considered delinquent when they're 30 days or more past due. This delinquency rate means that out of the banks total credit card balances, 6.25% are 30 days or more past due. This is a disturbingly large rate.

But delinquencies are a flow. Balances are removed from the delinquency basket either when the customer cures the delinquency, such as catching up with past-due payments, or when the bank "charges off" the delinquent balance against its loan loss reserves.
Read more at WOLF STREET

DATA POINT: BORROWER EXPERIENCES ON INCOME-DRIVEN REPAYMENT

Our data point reports are prepared by our Office of Research to provide an evidence-based perspective on consumer financial markets, consumer behavior, and regulations to inform the public discourse. This data point documents which student loan borrowers use income-driven repayment (IDR) and how their delinquencies on student loans and other credit products evolve as they transition onto IDR plans. The report follows borrowers throughout their first year on IDR and shows how some borrowers continue to pursue lower payments while others transition back to standard repayment.

Read at the CONSUMER FINANCE PROTECTION BUREAU

Banks top credit unions for 1st time in customer satisfaction survey

Banks have topped credit unions in overall customer satisfaction for the first time since the American Customer Satisfaction Index (ACSI) began keeping tabs on credit unions in 2008. Banks scored 80 out of 100 points, while credit unions earned 79. That marks a dip for both from last year, when banks and credit unions each scored 81.
Banks were placed in three categories: national, super-regional, and regional and community banks. National banks were the only category to increase their score overall from last year, to 78 from 77. Three of the four national banks saw increases individually, with Citi ranking highest at 81.
Regional and community banks outscored their national and super-regional competitors in each of the 12 benchmarks participants were asked to measure, except number and location of branches and ATMs. Regional and community banks also outscored credit unions in every measure except number and location of branches.

Trends show increasing parity among banks and credit unions. As recently as 2011, there was a 12-point gap between customer service at credit unions (87) and banks (75). Credit union scores began their most recent dip in 2015, when they fell from 85 to 81. Customer satisfaction with banks jumped from 76 to 80 the following year.
Read more at BANKING DIVE

The Future of the CFPB: the Executive Branch and Separation of Powers

On October 18, 2019 the Supreme Court granted certiorari in Seila Law v. Consumer Financial Protection Bureau (CFPB). SCOTUS will answer the question of "whether the substantial executive authority yielded by the CFPB, an independent agency led by a single director, violates the separation of powers," and the Justices requested that the parties brief and argue an additional issue: "If the Consumer Financial Protection Bureau is found unconstitutional on the basis of the separation of powers, can 12 U.S.C. § 5491(c)(3) [the for-cause removal provision] be severed from the Dodd-Frank Act?"

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) established the CFPB as an independent bureau within the Federal Reserve System designed to protect consumers from abusive financial services practices. The structure and constitutionality of the CFPB has been addressed before. In 2018, the D.C. Circuit held in PHH Corp. v. CFPB, No. 15-1177 (D.C. Cir. 2018) (PHH) that the current structure of the CFPB, which features a single director that cannot be removed by the president except for cause, "is consistent with Article II" of the Constitution.
Read more at National Law Review

How to Build a Credit Scoring Model - Part 1

You can be using credit score algorithm models but if you don't have the right data, it's all for naught.

This first of a two-part blog series aims to provide you with the insights so you can:

1. define key business objectives around scoring credit for existing and new customers

2. assess what if any data you might be missing

3. consider how AI and ML can help you build a credit scoring model that meets your business objectives

To that end, I'll review aspects of what comprises:

* the right data

* useful credit scor es

* the importance of defining success to your credit score model algorithm