The changing shape of bank-fintech partnerships
Blend, a fintech that initially specialized in software for mortgage lenders, is expanding into auto loans in the latest example of a startup broadening well beyond its initial area of expertise in an effort to appeal to more customers.
The San Francisco-based firm launched an auto lending product on Monday that is designed to enable consumers to upload documents quickly using mobile devices to get loan approvals faster. It comes on top of two other recent consumer-facing expansions, into home equity loans and deposit account opening products.
For banks that partner with fintechs, the expansions can lead to deeper relationships that help them bring new products to market faster.
"Could this have been something we could’ve created and built on our own? It could be, but I do think the bigger challenge for the bank is length of time to market as well as the ongoing investment required to keep it best in class," said Tom Parrish, vice president of consumer lending product management for BMO Harris Bank, which signed up for Blend's home equity product. "We could get to market faster with a partnership and have an advantage over our peers."
Blend is one of several fintechs pushing further into consumer spaces, in part by promising a faster turnaround time on loans and banking products. Many banks, including HSBC USA and TD Bank, use loan origination technology from the fintech Amount to expedite the approval of personal loans through digital channels. Alternative core provides such as Nymbus, Finxact and others promise quick digital account openings as part of their product suite.
And those fintechs are rapidly expanding their product suites. Amount was once focused mainly on personal loan originations, but has expanded into credit cards, deposits and, most recently, a new point-of-sale offering.
"As the retail banking ecosystem evolves, banks are not just looking for a tech vendor, they want to find a partner who can deliver the technology along with the proven strategies and capabilities needed to profitably scale their digital product suite," said Kevin Lewis, senior vice president, head of sales and partnerships at Amount.
Banks in large part have been forced to partner with third parties to roll out better digital experiences to keep pace with consumers’ preferences for conducting banking activities on their time and on mobile devices.
“The top performers are going to do a blend of homegrown solutions and partnering solutions,” said Bob Neuhaus, vice president of global financial services at J.D. Power. “Banks are keeping a close eye on fintech and new innovations out there and they have to be ready to move more quickly rather than doing everything on their own.”
The $129.5 billion-asset BMO Harris Bank first partnered with Blend after it ran into efficiency issues with its home equity application that flummoxed customers and bank employees alike.
“Prior to Blend, we had a very long application process that wasn’t intuitive and easy for our bankers to navigate and took 45 minutes to complete,” Parrish said.
“Our customers don’t have time to sit that long [with our employees] to complete an application. We also had a digital offering that was a separate application from what our bankers were using and that experience wasn’t ideal, either,” he said.
BMO implemented both the home equity loan product and the back-end digital portal, called Blend Workspace for Bankers, in March. That resulted in customers and bank employees utilizing the same application whether the process was started in branch or online.
While Parrish could not quantify to date how exactly those products have affected BMO’s bottom line, he said front-line employees have regained valuable hours lost to manual processes.
“We freed up hundreds of thousands of hours with the implementation of Blend so that our bankers can talk to that next customer,” he said.
Parrish said improvements to the application process also helped with originations.
“This has allowed us to better and more easily collect the required documentation so that customers can upload their documents, securely link their assets and payroll statements, and that can help expedite the origination process,” he added.
A key area banks are looking for additional help is in opening accounts, said Alden Seabolt, an executive on Blend's product team.
“One of the reasons why we started in deposits was that every firm is looking to lower their cost of funds and increase the amount of deposits they have at their institution,” Seabolt said. “Also, the deposit account is a tool for ongoing engagement between a consumer and their financial institution.
“We're bullish on deposits because, once somebody opens up a checking or savings account, a consumer continues to come back to engage with that financial institution on other products.”