The Informed team spread out to cover a number of recent conferences and tradeshows – to see and be seen! The trips were informative, productive, and in some cases, fun. Topics ranged across regulatory compliance, risk and governance, auto finance, fintech, powersports financing and general finance. Below, some of the team recaps their adventures – we wanted to share their perspectives while they were fresh, which meant we couldn’t include them all.
American Financial Services Association (AFSA) Annual Meeting
American Financial Services Association’s (AFSA) mission “is to promote safe, ethical lending to responsible, informed borrowers and to improve and protect consumers’ access to credit.” As a member of AFSA Informed.IQ contributes insights into protecting lenders, consumers and dealers.
Jim Drotman, EVP of Ford Credit opened the day for AFSA 2022 Annual Meeting with riveting opening remarks from Pete Williams, former NBC News correspondent. Setting the tone for the meeting focusing on how current and past events affect the auto lending industry and the importance of awareness and lessons learned.
Those remarks were followed by a full slate of sessions. The in-person sessions were dynamic and lively, and people were eager to get back into the IRL swing of things. There was a heavy focus on how state and federal regulations affect lending as AFSA lobbies for lenders in Washington. AFSA is known for having a pulse on current bills in the pipelines as well as the effects of recent announcements from the CFPB.
There was a lot of discussion around the Stop Discrimination by Algorithms Act and the effects if it were to pass. The bill does not define what an algorithm is but the lenders and AFSA used multivariate regression models as the primary example. They discussed how third party risk models don’t expose the inputs, so could inadvertently cause disparate treatment. This was a major concern for executive leadership at some of the captive auto lenders.
As for the lenders’ internal models, there was discussion around inputs and features of the ML models that were proxies for protected groups (race, color, religion, sex, etc) and ensuring lenders minimize these features within their alternative datasets. This highlighted the importance Informed has placed on our model governance and risk documentation to help prepare lenders to be audit ready and provide documentation to model risk governance.
The general session, Federal and State: What’s Ahead, discussed increased activity among state Attorney Generals had great feedback and audience participation. State Attorney Generals are collaborating with each other and with the CFPB to go after the large lenders at much higher rates than ever before.
The examples discussed were
- Non-Bank Lender Trident Mortgage to Pay Over $22M for Redlining
- Navient reaches $1.85 billion settlement over student loan practices
- Citi to pay five states $4.2 mln over interest overcharges stressed the results of non-compliance with regulatory laws.
These insights are in line with Informed’s lenders sharpening their pencils to maintain nationwide compliance with ever changing regulations. Informed’s automation and partnership with F&I Sentinel showcases the opportunity to address state level regulation appropriately while enabling lenders to dynamically change logic and thresholds in real-time. An example of regulations changing quickly and expectation of quick lender adoption is the GAP premium cap for military members in CA.
It was incredible to learn from respected industry leaders across the dealer, lender, and partner ecosystem. The movement toward automation and digital was apparent from key players in the auto ecosystem, and it is fascinating to see how the different players are innovating on the future for the industry.
Money2020 is the premier FinTech extravaganza, and this year did not disappoint. A reported ~20,000 attendees converged in Vegas to discuss innovations in payments, lending, fraud, cryptocurrency, insurance, investing, and a myriad of other sectors, as the worlds of finance and technology continue to merge.
The panels were engaging and informative, featuring industry thought leaders and a star-studded roster of celebrity guests. As consumer preferences and technology continuously evolve, so do the key themes at Money2020. This year, several stood out:
- Embedded Finance – historically, consumers have received financial products from banks. Over the past decade, we have seen neobanks capture market share, often touting lower fees given reduced operational overhead associated with maintaining a branch network, among other things, and a savvy customer-first digital experience. Now, a plethora of consumer companies are beginning to embed financial products within their core business as a way to differentiate their offering and drive customer engagement and loyalty.
- Fraud and Income Verification – as financial services become increasingly digitized and we witness the demise of the bank branch, fraudsters continue to capitalize. It can be daunting to lend money to someone you haven’t met and never will while fraudsters are getting more sophisticated. Specifically, the increase in synthetic fraud and ease of ability to manufacture artificial documents continue to be a source of innovation from technology providers and area of investment for financial institutions. The ability to more accurately and quickly verify income is critical to provide lending products and underwrite effectively. Customers have many options when it comes to obtaining financial products and speed is key. With economic headwinds predicted, mitigating asymmetric information and selection bias will be critical towards originating profitable vintages.
- Artificial Intelligence – artificial intelligence continues to be a priority area of investment for financial institutions, particularly in a tumultuous economic environment. Lenders seek to cut costs and automate redundant or tedious functions that can be served by machines in a more cost-effective and efficient manner. This is particularly relevant in credit decisioning, fraud detection and document verification, customer support and servicing, among other areas. It will be interesting to monitor the delicate balance between maintaining a personalized human touch with the speed and convenience that consumers desire.
- Partnership Ecosystem – this year highlighted the importance of partnerships in the FinTech space. With companies continuing to specialize in their respective areas and niche products, it is important for technology players to capitalize and build on their own success by adding synergistic value from other technology partners. There was a vibrance in the conference toward partnership, with many of the major players in the industry looking at new ways to bolster their offering or create new products together.
As always, Money2020 was a great learning experience, a fantastic venue to generate new ideas and business, and make connections with folks across the FinTech ecosystem. We are fortunate to have met with countless partners, prospects, and customers in Las Vegas and look forward to attending the event again next year!
Powersports Finance Summit 2022
After Money 2020 we jumped right into the Powersports Finance Summit 2022. This was our first foray into the Powersports Finance Summit and it went extremely well. Key insights shared in conversations with a variety of providers to this market as well as the presentations given by key players made for a great introduction to this market.
Speakers from Wells Fargo, Yamaha, Freedom Road, Thunder Road and Octane provided a variety of perspectives on important topics in today’s environment.
Key takeaways included:
- Automation – the idea of leveraging automation to stay competitive with new entrants to the market came up in almost all of the conversations and presentations. “High tech” newcomers are imposing an increasing burden on long time players. Moving from an old methodology with brick and mortar, people, and infrastructure to a more decentralized, remote, cloud based methodology is key to staying competitive and is a differentiator to those who would enter the market and try to compete with established companies. Informed stands in a very advantageous position to assist both sides of this equation and our conversations and opportunities reflected that effort.
- Market Conditions – Reflections on the state of the economy and the resultant actions having taken place or predicted to come are weighing on how to proceed in the short and medium term. The pendulum swings of the Covid era placed difficult challenges on all levels of this industry. Exceedingly high demand followed by supply chain shortages, inverted asset valuations and the current challenge of escalating rates have made timing new initiatives very difficult. A common theme was that putting the customer first by maintaining an even course of action and sticking to the principles that have made their businesses successful is the best way to move forward in these uncertain times. Informed is ready to assist by creating value and certainty when our customers are making decisions on who to lend to, or not.
- Compliance / Fair Lending – Taking a proactive approach to compliance was a key theme in the current environment and also in looking forward and accelerating growth. Changing state requirements for specific products, such as California’s recent position towards GAP agreements, require diligence on the part of lenders to ensure they can meet their regulatory requirements. Sentiment is that scrutiny by CFPB will continue to increase, further emphasizing the importance of having controls in place to mitigate their oversight. Informed gives our customers confidence that their lending process is as bias free as possible by utilizing our advanced machine learning to provide a straightforward approach to decisioning on data provided by applicants.
This summit enabled our team to really get to know this market and heightened our ability to serve it through increased understanding, awareness and access to decision makers. We’ll be back again next year!
With the fall conferences behind us, we are looking forward to January 2023 when Texas is the place to be! Between AFSA’s Vehicle Finance Conference, NADA and the JD Power Auto Summit, the Informed team will be on the road again. Let us know if you’ll be in Dallas the week of January 22 so we can meet up.
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