Fintechs are known for innovation, and front-end successes and accelerated growth, especially related to the customer credit and payment experiences, have followed.
But fintech growth is still missing an incredibly important piece of the puzzle: back-end operations.
Before we dig into the real improvements fintech businesses need to make, let’s take a closer look at what they’re getting right.
Forming front-end partnerships
Fintech leaders, especially over the last several years, have been extremely successful in forging partnerships that deliver a stronger front-end experience to consumers and lenders. (Think “buy now, pay later” options and white-label loans).
Such low-friction partnerships allow financial technology companies to capture lending volume that belonged to retail and D2C partnerships, and direct the revenue to their other operations, including the development of new credit scoring models.
Tapping new credit populations
Fintechs have expanded the lending market through underwriting and credit AI models which pull in nonstandard attributes to give a different, arguably fuller, picture of a consumer’s creditworthiness. Consumers have long known that FICO scores aren’t always reflective of true creditworthiness — so the need is easy to capture.
With this different view of individual credit, fintechs have been able to successfully increase approval rates and decrease charge-off rates, winning on their highly advanced AI. But because a FICO score system has been in place for so long, the struggle to fit regulation remains.
How can an AI be trusted to eliminate discriminatory lending practices? Even as fintechs focus their energy on ensuring their models meet regulations, they continue to grow their business through front-end operations that contribute to their revenue requirements.
So, they’ve cracked the code on front-end growth. That’s where their money goes. And rightly so — it’s what investors want. But what’s happening on the back end, in their servicing model?
As companies build their business around the digital model, they require fewer human resources to service that model. With a great credit model, collectors, too, won’t be in high demand. The pitch, then, from fintechs to their investors, is growth, growth, growth.
And yet, there are unavoidable aspects of credit and payments servicing that play out on the back end:
Transaction disputes, lost billing statements, account transfers — anything can happen, and it will. That’s why, regardless of how much growth fintechs can keep on the frontend, optimizing backend operations is still a must.
Today, fintechs aren’t keeping back-end credit servicing and collections operations in the same light as front-end servicing. These tasks and processes are simply not as visible or exciting as front-end growth — but they are just as important.
And they’re inevitable.
As front-end growth continues, investments in back-end optimization have to deliver, too.
Balancing operational goals with demands for front-end growth requires careful resource planning and a true overview of CX.
Today, a lot of fintech companies outsource this operational effort — an easy solution, but perhaps not the most economical.
Imagine a consumer who originates a loan with one company, gets the loan serviced by another, and has another entirely different experience with a collector on the same loan. It’s an experience many consumers have had, and one many have come to despise. Where the experience is fractured for the consumer, the metrics are fractured for the operator. At a certain scale, this fracture becomes quite an expensive rift.
What’s the other option?
As fintechs grow, spreading their business across strategic support partners, vendors and outsourced agencies, the ability to aggregate the customer experience across multiple channels is critical. So is the ability to monitor it all — and to understand the metrics.
Fintechs will require evidence for their investors that operations are under control, that everyone, across all channels and vendors, follows regulations and experience requirements.
They can either 1) QA phone calls/complaints across vendors, or 2) aggregate all communications and run analytics over multiple conversation streams, across multiple vendors and channels.
Doing the second is smarter. It reflects the same strategies fintechs use to create and operationalize nonstandard data attributes on their front end. Aggregating communications and metrics allows you to determine how aggressively to ramp up activity on any given account.
As an example, imagine every conversation with a debtor gave you a new piece of information on likelihood to pay. (This is true — but many fintechs don’t know it yet.) You could use attributes such as:
All of these attributes can be exposed and be pushed into a more advanced prioritization and engagement model for the servicing of accounts and collection of funds.
Fintechs are already succeeding. They’re breaking growth records through strategic partnerships and upending standard credit models. But they’re neglecting the same care on the back end of loan servicing and collections operations.
By mimicking front-end efforts on the back end to 1) better aggregate and model data and 2) provide unified experiences across vendors and channels, fintechs can create new opportunities for customer experience and compliance. A focus on loan servicing optimization will keep the house in order with regard to both brand and data, and show investors that fintechs can deliver on their promises across the business — not just at the point of origination or payment.
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