Taking Advantage of Opportunities in Small Business Lending

Transcription:

Janet King (00:10):

Hi everyone. Hi. Hello. I'm Janet King. I'm the Vice President of Research at American Banker, and we are excited to have you here at this lunch today joined by Philip Taliaferro, who's the GM and SVP at Lendio, and they're hosting today's lunch. So welcome Philip.

Philip Taliaferro (00:25):

Thank you. Pleasure to be here.

Janet King (00:28):

Before we get started, can you just take a minute to tell everybody a little bit about your role at Lendio.

Philip Taliaferro (00:31):

Yeah, sure. Maybe quick background on the company. We're a platform for small business lending. We've been around for about 12 years. We have 450 employees. We're based in Utah but have offices in the New York metropolitan area. We were born out of the post-crisis era when a lot of community and regional banks kind of pulled back from small business lending. Small business lending went increasingly digital and they were a number of FinTech lenders that stepped into the market there. And so we are keenly interested in helping traditional banks and credit unions figure out how to adopt some of the practices that are in use by some of the non-bank lenders and help them accelerate their digital progress and the data science behind how they make decisions. So we worked with American Banker to put together this research to really double click on some of the insights for both the traditional banks and non-bank lenders. And so we're excited to be presenting it to you today.

Janet King (01:32):

Absolutely. And so let's give you guys a little bit of background on the research. We're going to have a little fun with today's session too, so some surprises ahead. But as Philip said, we conducted this research in American Banker in partnership with Lendio. It was conducted late in the third quarter of this year and we had 103 banking leaders from banks with 500 million to a hundred billion in assets reply to the survey and to make sure we got all the right people. We screened everybody to make sure that they were actively involved in running their organization, small business lending practices. About half of them are VP level or higher titles, and everyone else was like a director, senior director, senior manager or manager role. And they represent perspectives from banks of varying sizes, kind of like three different buckets. We had about a third in that 500 million to a billion. We had a third from a billion to 10 billion in assets and then we had 36% at banks with 10 billion or more. And so our goal really was to help understand how small business banking leaders see the future of their business and try to identify some of the trends and changing priorities that they're facing so that you can take those peer-based insights back to your own businesses to inform your own strategy. Anything you'd like to add there?

Philip Taliaferro (02:53):

Yeah, I had say arguably the biggest cliche in this space is small business lending is broken. Small business lending is difficult, small business lending is too expensive and there's been entire forest bulldozed to create the paper on which these papers have been written it. So it's a well worn path. What we tried to accomplish here, and we hope that you'll participate with us as we go through this today, is double clicking specifically on where these challenges exist. Is it about sourcing and targeting the right borrowers? Is it about collecting data? Is it about digitization of the application process? Is it about actually making a credit decision? And so we hope that you'll find the data not just insightful on hey, there are challenges, but also there are very discrete areas where there's opportunities that can be solved relatively simply with technology that's now available in the market.

(03:49):

We want this to be interactive, as Janet was mentioning. And so I would like most speakers will not tell you this, I will tell you this. Bring out your phones, get out your phones and open your camera. We're going to need you to take a picture of this QR code. And so we're going to start with a really easy question. There's no wrong answer to this one. And so I think in a way that this group of people took what was really a Nichey market for country music and globalized it, they broke down the barriers and changed this from something that was very specific to Tennessee, to Texas and so on. Turned it into a global game. I think the polling should come up automatically, but Pardon? Do you want me to just advance? Alright.

Janet King (04:42):

Oh there we go. Look at that. So wow.

Philip Taliaferro (04:45):

We've got some Canadians in the mark room here, so that's good and we've got a lot of friends in low places. Alright.

Janet King (04:54):

No, I think if we put Taylor Swift up here, she'd be much higher on the list.

Philip Taliaferro (04:58):

But she was born in 89.

Janet King (05:00):

She was not the nineties. That's true. That's true. This silly comment. That was a blonde comment.

Philip Taliaferro (05:07):

Okay, so cool. Wow. Poor Alan Jackson. That's tough.

Janet King (05:12):

He's not feeling much love right now. I know. No, 2%.

Philip Taliaferro (05:16):

All right, now we are going to be continuing to do some more questions, including one coming up right now and this should automatically pop up on your phone if you have Slido open. If you don't, you might need to re-scan this. So where does small business lending, and we're talking specifically about loans of less than a million dollars rank as a priority for your bank relative to other services that you're offering to these types of smaller businesses.

Janet King (05:46):

If you're just coming into the room, there's seats up front too. We've got a few people come in. There's lots of seats at these front tables.

Philip Taliaferro (05:53):

Yeah, we've got five, four here, two here.

Janet King (05:57):

This is great. So we've got about half who are saying it's in the top three another quarter, it's in the top five, 20%. It's our top priority.

Philip Taliaferro (06:07):

So this is really interesting and we appreciate the participation. There are going to be more polling questions as we go through this, so we love to get the feedback in real time and get you all kind of stimulated and thinking about the research. Turn it over to Janet now to dig into a similar question that we asked in the survey itself.

Janet King (06:23):

Absolutely. So we did, we asked our bankers taking the survey to tell us how important small business lending is to them as a strategic priority. And what we found is that the vast majority, as you can see here, say that it's a critical or high priority. And there was a companion question which talked about their growth goals and we saw one in three noted that they have aggressive growth goals for their small business lending business over the next two years and half are aiming for moderate growth. So it's a high priority and an area of expected growth for the bankers that we spoke to. What do you think is driving that commitment to small business lending?

Philip Taliaferro (07:01):

Well, I would go back just for a moment to the demographics of where we asked this. You'll recall Janet mentioned 65% or so of the respondents are from institutions of less than 10 billion in assets. And so it's very natural that folks who are with a community bank and even smaller regionals have a really close identity with their communities. And the lifeblood as we know of smaller communities is small business that is overwhelmingly where you get the employment, where you get the economic growth and so on. There's another thing going on here. I think, and we've touched on it a lot during this conference, which is we've seen mass consolidation in the banking industry that was kind of trending along in the eighties and nineties and then really accelerated during the financial crisis and has picked up again recently. I would argue that with these medium-sized businesses moving to the larger money center banks and separately consumering cards moving probably faster than we'd like towards the larger banks, the area in which community banks and that I'm talking specifically about the 10 billion and under that we have as sort of a demographic setup for the survey have a huge knowledge and information advantage and a relationship advantage when it comes to banking small businesses and they know with that intuitively and hence why you see it as a priority here.

Janet King (08:27):

Absolutely, and I mean the feedback that we got from the bankers suggests that that commitment to community, if you advance one slide is really a common theme driving small business lending. On the flip side, the bankers for whom SMB lending was not a strategic priority, which is the minority often say that it's competing priorities like a focus on their retail business is the primary reason why it's not more highly prioritized at their bank. So what advice, excuse me, would you have for small business banking leaders, her trying to build a business case for resourcing around small business lending specifically?

Philip Taliaferro (09:04):

I was really struck by some of the comments yesterday from the gentleman from citizens who talked, excuse me, Comerica, who talked extensively about you can't just look at small business lending or even small business in isolation. You're talking about offering wealth services and personal banking and card services to the same people. These are not just businesses, but they are owned by people and they employ people. And so you can't look at that in isolation. The other thing is obviously we're in a world right now where we're constrained on the deposit side. And so everyone's sort of thinking, well, how do I strike a balance between my objectives in growing deposits and my need to deploy capital, have assets on the balance sheet in terms of loans? And I think there's obviously, there's a really important symbiotic relationship here. If you look at the trends in the post-crisis financial crisis era, what you generally find is that the market for lending has become more national and more competitive than deposits.

(10:05):

That's been a trend that's been going on for some time. The Federal Reserve did a study in 2021 and looked at local market, what they call deposit density and loan density. And what they found is for local market deposit density is higher, loan density is lower, which indicates of course that the lending market is effectively nationalized. I don't mean that in the socialist, I mean that in the economic sense. So that's one data point. The other data point I think is really interesting. One of the credit bureaus who we work really closely with at Lendio is about to release some research in the next couple of weeks. For the last five years they've been surveying a small business owner, several hundred small business owners, and they asked them one particular question that caught our eye, what is the likelihood for you to switch your lending relationship in the next 12 to 24 months?

(10:55):

For the last five years, that number has been somewhere in between 15 and 18% of people who said either I probably will or I definitely will switch that number in one year more than tripled. It went from 17% to 54% between 22 and 23, which basically says to me, the small business owner is on variable rate products. They're watching the rates tick up and they're starting to get concerned and now they're really willing to shop even more aggressively than they ever have before. Well, what does this have to do with deposits? Because that's been a recurring theme of the conference. The next lender they go to is going to demand the operating account. There's absolutely no question and everyone in here who's a lender is doing the exact same thing. So unless you're able to proactively offer lending products and retain that relationship with the small business, you'll lose both the deposits and the lending. But we're going to talk about how to work through some of those challenges as we go.

Janet King (11:55):

That number was really shocking to me. That is such a huge increase year over year. It's amazing. Absolutely.

Philip Taliaferro (12:03):

Alright. We have another Slido coming up. If you still have it open in your phone's browser, it should auto refresh. If not, just take another picture here. How critical is lending to your small business deposit retention strategy? And we've tried to make this a little bit of a continuum. Is it sort of tangential? Is it moderate focus, is it unrelated? Can you kind of have one without the other?

Janet King (12:36):

So we're seeing a lot of criticals. I worry about deposit flight without adequate lending, and then the next highest is moderate. We have some degree of focus on SMB lending. So the majority of you are all on that top tier seeing it as critical.

Philip Taliaferro (12:52):

It seems to validate some of that data that we were talking about. Right?

Janet King (12:56):

Yeah. And I think the research really underscores the importance of lending, but to your point, it also highlights a number of challenges that bankers are facing on the path to achieve those targeted growth goals, to see their deposit growth go up to advance their lending initiatives. And so when you look at the lending cycle, at least from a high level, what you see is that banks are most often citing challenges with manual underwriting processes and targeting and sourcing borrowers. And after that you've got around 40%, which is still a very significant number of bankers who are citing challenges with obtaining information about borrowers and decisioning. So I think this is interesting, Philip, because I'd love to understand your perspective on how you see the relationship between these steps and areas in which inefficiency or inaccurate data in one step might impact the other.

Philip Taliaferro (13:53):

Sure. I'll maybe just go chronologically through more of a lifecycle, which would be row two and down and then we'll come back up to manual underwriting there at the end. So firstly is most of us in community markets and even the regionals tend to think about this type of lending as being mostly a human-based process. And I think that that's reasonable and has this place, and I talked a moment ago about the knowledge advantage advantages that you have when being present in the community, but the way to get operating leverage is digitization. And so there is as difficult as it can be, there are a growing number of people who are able to successfully apply for these loan products without any help from a human. We have plenty of data about this in Lindy's marketplace. We measure ourselves daily in what we call our unassisted app rate, which is basically the completion of an application without any human intervention whatsoever.

(14:53):

And that number was around 10% two years ago and we're up now at 20%. 20% is not phenomenal, but it's headed in the right direction and we think that digital adoption on the front end continues to drive that forward and that's fully completed, no human right. Then obtaining information about borrowers. As you collect information digitally, it's a lot easier to validate it. We're tapped into third party data sources that can validate data from a LexisNexis or a secretary of state or an OFAC screening and so on. And so that helps you move ahead. I was fascinated by decisioning, so I'm like, man, decisioning should be really hard. There's hundreds of variables and you've got to really get your head around who this person is. And the data here says we're not really that concerned about it. What it tells me is if you have high quality data that's been validated and it's in a format that you can understand, making the decision actually isn't that hard. And it doesn't have to be automated if you don't want it to be. If you want a human involved, you can be and you can actually get pretty decent operating leverage out of a human in the loop type of decision process. Lastly, on manual underwriting, I'm sure you all live this all the time, collecting borrower docs, producing loan docs, obtaining signatures, boarding to core continues to be a major challenge for the industry, and I think that's the data that we're seeing there.

Janet King (16:25):

Absolutely. So we dug in a little bit to some of the technology behind this and looked specifically at how effective folks feel their loan origination systems are. And what we saw is that for many banks, the tools that they have at their disposal are often viewed as being insufficient to meet some of these needs. So we saw only two in 10 of the bankers that we spoke to said that their loan origination system is highly effective for underwriting loans under a million dollars. And when we asked them about the limitations of the systems, they talked about their two manual, they're difficult to integrate or they're tied to outdated technologies and core technologies. So why do you think that those systems are not as effective as they could be? Philip? And I guess a second part to that is what should banks be looking for here to make sure they're investing their resources wisely?

Philip Taliaferro (17:17):

Maybe just draw a little bit of a contrast between the purposes and how the technologies are used in true small business lending versus more of commercial real estate or CNI lending. So if you think about the CNI, CRE type of world, what is the purpose of your loan origination system? It's collecting and maintaining information. It's being a system of record, it's compliance, it's workflow, it's doc management, its approvals and its integrations. And if you look at the world of small business lending, a lot of those things are present, but the index has switched a little bit to be about digital borrower experience, automation of third party data polls, analytics, getting to instant knockouts and recommending to a human what the decision will be. And those are things that largely are not present in a traditional LOS. We're going to go through here in just a moment, some additional data that highlights where some of those challenges sit.

Janet King (18:21):

Specifically digging into transaction analysis, right? And how important they feel it is to supporting their loan decision process. And when we asked them how important it was compared specifically to credit scores, we saw that 86% said it's important, and half said that it's very important. So again, the question was how important is transaction analysis compared to credit scores? Why do you think it's so important and how does it impact the tools that banks need to have at their disposal?

Philip Taliaferro (18:54):

Yeah, so this is kind of an interesting one when we sort of look at an underwriting process for a bank who's got aspirations of doing more small business but is kind of not quite there, and they're on the journey, what you typically find is they've made some adaptions to some of their other products in order to service the small business need. They're sourcing p and l statements, they're sourcing tax documents, they're using credit, typical stuff. The problem with those latter things on the financial side is one, small business owners don't always have them at their fingertips. And if they do, the data may not be reliable. Two is timing. Small businesses are often have a degree earnings volatility. And so you're seeing quarterly fluctuations, seasonality issues. And so you don't have a particularly recent view. And the other one, and I'm sure you all have seen this with some small businesses, is of small businesses can be really clever about managing tax liabilities. And so you typically find that the tax information on a small business may not be a truly accurate reflection of the underlying economic activity. Bank statement data in comparison tells you money in money out. And you can classify that according to, is this a revenue related deposit, a non-revenue deposit? You can look at transaction data not just for NSFs, but you can also find where there's an intraday balance that's below a tolerable threshold and your threshold may be five or $10,000 instead of 1000 or zero.

(20:35):

But this is really hard to do at scale. Just to give you some rough estimates, very small, small businesses have about 10 pages per bank statement per month. Relatively moderate sized businesses are more like 20. So if you want to go evaluate six months of data to really dig into this information, you're going through 120 pages. It's completely impractical to do and get real insights out of it. And hence why we're seeing some of the results in the survey that we did.

Janet King (21:08):

Absolutely. So what we're seeing is that most banks are doing some level of transaction analysis, but very few are doing highly detailed transaction analysis. And what was really interesting in the data is that you see a real difference between the banks who feel that they have a highly effective loan origination system and those that feel that that system is less effective, right? So it was two out of three, almost 67% I think of those who earlier said, yes, we have a highly effective loan origination system who say that they're doing very detailed transaction analysis versus just 17% of those that don't feel that way. So can you speak to that relationship between the LOS and the bank's ability to perform that kind of analysis?

Philip Taliaferro (21:55):

Yeah, and you may be thinking, this guy's just up here to bash LOS. No, I'm not. In fact, we at Lendio are partnered with several of them. We've written to their APIs. It's a hugely valuable part of the ecosystem. So I don't want to come across that way, but they serve a purpose. And then there's other things that you actually need to do small business. So yeah, I think this is exactly right. So just to maybe reorient us on the right side of the slide, those that said that their LOS was very effective, remember a few slides ago, that's only 21% of the population that fall in that side of the bar chart, but that 21% who said my LOS is really effective for small business lending for sub million dollar loans are doing this highly detailed transaction analysis I was talking about, which says there's some type of automated way of evaluating this 120 pages I was just talking about. Whereas those in the far right, somewhat or not effective, that's the other 79% of the population who are generally not doing very detailed transaction analysis and don't feel like that the systems that they have in place today are effective for the purposes of small business lending. Again, no surprise here, I think this basically just says, Hey, if you try to take a system that's designed for commercial real estate or SBA 5 0 4 and shoehorn it in to do these smaller value loans, it's unlikely to give you the speed and efficiency that you want.

Janet King (23:30):

Absolutely. Let's go back to Slido for a minute. Alright, going to challenge you to continue eating your lunch and answer questions. So this one focuses on where do you see the biggest opportunities for automation? Is it borrower experience, self-service? Is it third party data sourcing or data analysis and transaction analysis, underwriting, closing and boarding?

Philip Taliaferro (23:55):

And can you all just confirm that I think there are two, you can pick two options. Is that right? Yeah. Okay, cool. So just pick two if you're so inclined.

Janet King (24:07):

So we're seeing borrower experience, self-service and third party data analysis. Oh, switching up a little bit though as we're getting more answers. So it looks like borrower experience and self-service is clearly in the lead fill. And then data sourcing, closing and boarding, we're hopping around a bit. This is interesting.

Philip Taliaferro (24:29):

It is interesting. As you all can imagine when you're preparing for something like this, you have to envision what you think the audience is going to say so that you can prepare talking points accordingly. We put this question together and I was like, I have no idea what anyone's going to say. So be prepared for the unexpected right borrow experience. And it is really hard to get this right. And so having an experience that lets a borrower complete the whole thing, portions of it, find ways of nurturing and supporting the borrower during that journey is a really hard thing to do. We have talked to dozens of financial institutions who invested very heavily in a small business digital experience only to subsequently abandon it when they couldn't get the adoption that they wanted. So it's a hard thing to get right. For sure. Third party analysis and transaction analysis. So this is really interesting, the data that we put together, we'll show you another slide here in just a moment, seemed to indicate that third party analysis was going pretty well, but I think the survey respondents kind of had a bias towards credit polls alone versus A-K-Y-C-K-Y-B poll, identity verification and bank transaction analysis, which I think give a little more holistic picture and enable that lower touch that we're talking about.

Janet King (26:00):

So I think you mentioned it's hard, it's hard to get it right, but if you get it right, it can deliver a lot of benefits to the business. And when we ask that question of our bankers, what are some of the key benefits that you're seeing from your automation initiatives? Increased efficiencies was number one, improved competitive positioning and then IT kind of revenue generation reduced risk. So there are a number of ways that automation can obviously help accelerate progress across the business, but how else do you think it can really benefit banks with respect to small business lending?

Philip Taliaferro (26:33):

Yeah, efficiency here is really paramount. We talk with, I kind of contrast the non-bank lenders with the bank lenders that we work with at lendio. One of the things I think is really interesting is the non-bank lenders focus, a lot of their automation on avoiding having to review a file that they're unlikely to underwrite. And so the idea of doing this early knockout and getting rid of borrowers who they're unlikely to end up funding is a lot of automation upfront. Even some of the most progressive of the non-bank lenders and bank lenders and credit unions for that matter as well still almost always have a human in the loop on this. And so I don't think anyone has any illusions that you could get rid of a human completely and you could completely automate the process yet I think that's coming down the road. But there's certainly, I've used the word operating leverage a few times, but there's certainly ways of getting a lot more lift out of the resource that you have to today simply by adding some of these tools around them.

(27:40):

The other one I wanted to talk about just quickly is on revenue generation. Obviously if you could do more with the same resourcing, you can get more revenue out of that. One of the other things I think is really interesting about some of these data sources that I was mentioning, the K-Y-C-K-Y-B and the bank transaction analysis, it allows you to make a more balanced risk trade off. And so I would like to use an example we've seen with a community, a large community, small regional who had an S-B-S-S-A credit score cutoff, a hard cutoff of one 70, it's above one 70, they're in, it's below one 70, they're off, and this is for a sub hundred thousand dollars loan. With the addition of the bank transaction analysis, they were able to say, oh, well if the borrower's actually at one 60 SBSS but has eight deposit related transaction revenue deposits in a month and the K-Y-C-K-Y-B report turns out to be the following, that's actually a better credit risk than a one 70 SBSS with some other less robust metrics elsewhere. So there's an opportunity, I want to be careful about saying expand the credit box because the idea here is really calibrating the credit box to better understand borrower risk.

Janet King (29:01):

So the last thing we wanted to understand regarding automation is where are they on that journey, right? And how are they doing? And what we saw is that the picture's really mixed. As you can see here, banks have most widely automated, to your point, that third party data collection. But you had some good thoughts about that on a previous slide and they've mostly just partially automated or in the process of automating the other stages of the business and about a third have an automated at least four out of the five that we have here. So it seems like we still have some work to do here. Right. Can you talk a little bit about some of the use cases that you would see here for automating SMB lending?

Philip Taliaferro (29:40):

Yeah, absolutely. As I've referenced on the third party data polls, my suspicion is that this is a little bit biased towards credit and not some of the other things that we were talking about. So I would just have that in the back of my mind. Going through the data marketing and prospecting for borrowers, I think this is a notoriously challenging area for most of us in the market is knowing who to call and why and having an analysis. And I would say one of the most interesting use cases for some of this technology is around pre-qualifying existing depositors. So we talked about this symbiotic relationship between the deposited relationship and the lending relationship using transaction analysis to mine data in the core and generate prequalification offers, solves the wallet share problem. And it also solves row two, which is about marketing and prospecting because the easiest ones to close and are clearly going to be one where your bank already has a relationship. And then I want to maybe mention decisioning one more time, which is you'll hear no shortage of people who are pounding on about automated decisioning. Automated decisioning. I think decisioning does not have to be automated in order to be less painful. And so there's ways of using technology to recommend a decision and distill analytics in a way that allows you to get comfortable with having a human in the process and get some scale out of the existing team in order to drive efficiency without sacrificing your desire to have humans involved.

Janet King (31:15):

I think we have one final Slido question and we will have time for some questions if have them.

Philip Taliaferro (31:19):

We do. So much has been asked about where are we going with SMB, where are we going with SMB lending? It's true that both SMB lending and commercial real estate have kind of been the lifeblood of smaller financial institutions for many years. And so we wanted to ask this question to force a choice. Where do you see small business relative to commercial real estate in terms of your priorities as an institution so unchanged. And then the rest of them are sort of, is there a rotation one way or another? And if so, how significant is that?

Janet King (32:00):

So small rotation from commercial real estate into SMB 40%, roughly significant portions say it will be unchanged directionally it seems to be moving from real estate into SMB if you look at them in holistically there.

Philip Taliaferro (32:20):

Yeah, absolutely. So that's an interesting observation. I have to wonder, would we see the same result if we'd asked this question a year ago or even nine months ago? And my guess is you'd see a slightly different response, but it's really interesting to see that's focus. Oh, and by the way, I'd be remiss if I didn't mention there's probably a little bit of bias in this room, but the results are interesting nonetheless.

Janet King (32:44):

Absolutely. Well, we've got about five minutes left. I know you guys are finishing up your lunch, but you open to taking some questions from the room.

Philip Taliaferro (32:51):

Yeah, we'd love to have questions if you all are so inclined, we're going to have a mic that way we can pick up the audio. So we'll have someone bringing the mic around. And if you all want us to flip back and double click on any of the data that we've presented so far, we're happy to do that. Not the country music one, unless you really want to.

Janet King (33:11):

Hopefully you've all had a chance. Yes. Hi. Oh, we've got a mic coming for you.

Audience Member 1 (33:20):

So I'm not a lender, I'm an industry observer. So my question might be a little bit naive, but when you start talking about transaction data, this is obviously a small business banking conference. So there's the business DDA, but in the case where a small business owner is being underwritten with a FIO score, right? And leveraging that personal credit score, do you also look at transaction data from more of the personal DDA, right? So pulling in MX and Plaid and others. And also too would love to understand from the folks that are sitting in here that are actually lenders as well, how they think about transaction data if the personal transaction DDA transaction data kind of filters in the decision, or at least how you're thinking about this.

Philip Taliaferro (34:11):

It's a really good question.

(34:16):

I think there's sort of open debate about whether a small business looks more like commercial or whether it looks more like consumer lending. And it probably depends in part on where you draw the line. In my experience, at least most of what I've seen is you have business owners who act as a type of personal guarantor, in which case you're pulling personal FICO scores. But the business has to be able to prove its ability to service the debt as a going concern. And if they can't, then they should be funding this off of a home equity line of credit or some other type of product. On the personal side, the business has to be viable and so therefore the transaction analysis typically relies predominantly on the business itself. Now I'll also add, there's other things that we use typically to compliment all of that, which is we're pulling things like the business owner's, personal tax lien history or the business owner's UCC filings. And those things let you get a little bit more of a holistic point of view about how they run their personal finances in the business. But the transaction piece typically is just about the business.

Janet King (35:35):

Other questions?

Audience Member 2 (35:44):

Thank you for such a, I hope I didn't do that by asking Thank you for such a great presentation. It's clear that Lendio has a lot of statistics and education in the space. We heard yesterday with comerica's presentation that there's a lot of internal selling that has to happen. And I'm wondering what you've seen at Lendio is the real nugget that enables banks to adopt new tech in this environment.

Philip Taliaferro (36:14):

Yeah, so firstly is

(36:20):

Let's presume that there's a recognition that small business lending is important, but to the extent that there isn't, I think some of the things that we talked about with Comerica yesterday, really interesting around the ability to grow wallet share with the rest the business owners in particular, private wealth, retail, banking cards and everything else. So that's one. I think the second thing, and we've hit on this a number of times today, is that relationship between the deposit relationship, the lending relationship, and making sure you're not looking at them in isolation. There's plenty of analytics that can be produced around, well, what does wallet share look like? How effective are you at cross-selling? You can mine the same data that we talked about on the transaction side and figure out who are the other lenders who are in servicing your existing deposit base. And sometimes those results are shocking.

(37:19):

So that's sort of front end of the business case kind of stuff. Why would we do this in terms of more of the execution of it, most banks are absolutely terrified of making major technology changes because most of them have been burnt by it. So getting comfortable with a change that isn't a change program with a way of moving incrementally in a direction that transform some of the things that we've talked about, but without having to undergo a major heart transplant and maybe make more of a pacemaker, if you will. So I mean, those are I think, kind of the obvious keys to it. But I mean, there is financial institutions we've seen who have decided this is what I'm going to specialize in. This is going to be my focus and I'm absolutely going to scale this business up. But to dabble is tough. It really is. If you're like, Hey, I really want to focus on small business, my goal is to do four loans a month, you'll never make a business case out of it. And there's a couple of institutions in this room who are working with us who have just said, this is the product, this is the niche, this is what I'm going after and I'm just going to knock it out of the park.

Janet King (38:41):

Thank you. Anyone else have questions? We still have a little time. No, I won't call on anybody. But thank you all for joining us for lunch. Hope you're enjoying the event and enjoying Nashville and getting out to see your favorite country music here.

Philip Taliaferro (38:58):

And can you tell folks how to get a copy of this?

Janet King (39:00):

I believe all of these slides will be emailed to you following the event. So you should get an email from Arizent or American Banker with all of the information from the event, and you can find more content site.

Philip Taliaferro (39:13):

And then the white paper for this research is also available. You can either contact us at Lendio or the team at American Bank to get a copy of it.

Janet King (39:19):

And we'll make sure you get a copy of that as well. So thank you all very much for coming, and thank you to Lendio for sponsoring lunch.