Loraine Lawson
Good day and welcome to The Buzz, a Bank Automation News podcast. I’m Deputy Editor Loraine Lawson. In today’s episode, I talk lending automation with Vince Passione, who is the CEO of the lending platform and online marketplace LendKey. Mr. Passione shares how his platform automates for banks and credit unions, and explains how his company is using artificial intelligence in its call center. We started the conversation with a bit of background on how LendKey differentiates itself.

Vince Passione
Yeah, so so we started the business back in 2009, Loraine and we started it really with a focus on enabling our clients to, to digitally originate and buy and sell loans. And in order to do that, we realized we had to deliver a lending as a service platform. And we define lending as a service as five things three technology, the ability to render an instant decision, the ability to digitally originate the loan, and then the ability to digitally service the loan. So we have technology to render the instant decision, we have a platform that allows the consumer to digitally complete the process of origination, and then we can digitally service that loan, and we wrap a call center around it so that we can take both the origination call, and the servicing call, and we service the life of the loan. So it’s true turnkey, and then on the front, what we do is we we typically will do marketing for our clients. And I’ll talk about why we do that we start differentiating between these lending network programs. And then on the back, we’ve allowed our clients the ability to manage their balance sheets, in a couple of unique ways. The first is pretty traditional. For someone like Navy or Customers Bank, they book alone on directly on their balance sheet, and they basically hold it for the life of the loan. Then we have others who they want to, they want the customer, but they don’t want the asset. So we allow them to book the loan , but then sell off the asset, and then we’ll service it for them. And then we have yet others that want to originate the loan because they see it as a as an asset they want on their balance sheet, but then they might not want the whole loan. Now why would that be? Well, in some cases, they might feel uncomfortable with an unsecured loan that might be too large, or they’re a bank or credit union in a very specific specific geographic area who are looking for some geographic diversity. So what they’ll do is they’ll they’ll agree to buy fractional pieces of loans, and they’ll buy them in vintages over time. And as a result, they’ll build a highly geographically diversified portfolio of loans, which is which is good for them from a risk perspective. So we have marketing, decisioning, origination, servicing, and then balance sheet management. So I think that makes us fairly unique in what we do. And then we’re offering the ability to directly originate an in school education loan, an education refinance loan, and then an unsecured home improvement loan. But I’ll stop there. I want to talk about some recent developments in a minute, but certainly we’d love to gauge the questions you got.

Loraine Lawson
Okay. Um, so I saw that you had helped half a billion dollars in loan originations this year alone. How do you help automate lending? You’ve talked about digitalising it? Are there ways in which you also automate for lenders?

Vince Passione
Yeah, yeah. So. So if you think about the process of automation, I think we take it from two vantage points. One is the consumer. And the other is well I should say three, the consumer what we do internally affects the consumer, and then our lending partners. And we always start with the customer experience and from customer experience perspective, I think for all of us as consumers, right, we want an experience where we’re not asked questions that we believe you should already have the answer to. We want to be familiar with we want that familiar experience. So typical for us is automating that process where everything from the consumer turning around and submitting a credit application and getting an instant decision in 10 seconds to the consumer then going through the origination process, and whether it’s verified verifying their identity verifying their income, allowing them to electronically sign the document, the process is fully digitized and fully automated. So if they want to just this entire process they could do on their own without picking up the phone without having to speak to a customer service rep. Then we have we do internally, because we are responsible, we link here responsible for all of the money movement, right. In the case of student loans, we’re certifying those loans to make sure the student is borrowing the right amount of money. Based on what the school says they their expected family contribution is, if it’s an education refinance loan, it’s very important that we pay off the other lenders in a timely way. And we understand what the payoff is so the loan that the loan is truly paid off, and there isn’t any frappe, any fraction loan left outstanding, which could be, have repercussions to the borrower. And then there’s us moving money from the lender and dispersing it. And in the case of a home improvement loan, where we have multiple disbursements. It’s a construction project in case of some of our home improvements, very important that we can automate that process. So there’s a lot of automation that goes on in our back office in monitoring funds movement, and ensuring that loans are originated properly. And it affects our lenders, because try lenders, the work they have to do is fairly limited. We’re ACHing funds out of their account, we’re then turning around dispersing it, where then we’re collecting payments and remitting it back to them. And then we provide all of the reporting for them and push that information into their core systems. So we really do when I say turnkey, and digital and automated, we really are providing a service where a client can go live. And a week after they live, they’ll see loans start to show up on their balance sheets.

Loraine Lawson
You said that you you tie into the core. Is that API, or he tell us a little about your technology underpinnings in that regard?

Vince Passione
Sure, sure. So. So to the extent that the cores that our clients are using provided an API, we can push the information to the core via that API. In some cases, what we’ll do is these will be a custom file that someone basically comes back to us and we’re pretty fastly creating nodes, so they can be uploaded to the core systems. But for us, because speed to market was really important to both LendKey and our client base, we made certain that we didn’t need to have this dependency on the core. And and we were able to turn around and push information to the core without having to turn around and build out very extensive capabilities to do that, which would slow down installations for our clients.

Loraine Lawson
Is that a batch process or it’s not an API,

Vince Passione
As I said, each core’s different, each customer installation is different. So some of them will turn around and take a feed, others will turn around and go via API, also we’ll run a batch process and pick up a file, and then spread it across their systems.

Loraine Lawson
Also wonder do you use AI at all on your platform?

Vince Passione
Yeah. So yeah, I was hoping you go there, because I think that’s probably one of the most interesting parts of what, what, as someone who has been in the industry for over 30 years, when I look at the use of AI, there are just so many different applications for it for us. And some probably that are some are very obvious, and some probably not so obvious. So the first the obvious ones are things like chatbots, right to utilize those into chatbots. But, you know, for example, we provide, render customer service for our clients. So as a result, we run a call center. And when you run call centers, and you’re the steward for over 325 clients, and they’re their customers and members, as you can imagine this significant amount of scrutiny that goes on in quality control and quality assurance people on the phones, whether it’s from a regulatory perspective to make sure they have proper training to ensure their own ethical customer issues. So we’re starting to use some newer technologies, where we’re converting voice to text, these telephone calls. And then once we convert them to text, we work with a partner who then deploys an AI module. And what they will do is they will actually read through these calls. And based on cadence, based on word usage, they create dashboards for you, dashboards that will be, oh, this is a compliance issue, because they use the wrongful term, it’s potentially a training issue, because there’s too much silence on this call. So there’s a marketing opportunity, because we’re seeing a common theme, as clients are asking for certain things amongst all the call center reps. So it’s a great way to take a process that requires people but to really condition it, and ensure that it’s being done correctly for quality control using AI. The third is, is what I call white glove treatment. So yes, you know, the process is digital. Yes, a consumer who does not want to deal with a person on the phone doesn’t have to. However, there are some some customers who do. And you can imagine, and we’ll make up in the makeup numbers, but for every 100 applications is probably 30 people really want to go through with the world. But in our marketing department, we’ll reach out to all of them on behalf of our clients, well, that means maybe 70% of the people that you’re reaching out to really don’t want to be bothered, they might have been shopping, and they have no intention of completing the process. But we’re still reaching out to them. So we’re using AI now, to determine based on all the applications that come through, which of these clients is most likely to want to complete the loan, and then we’ll do is we will actively reach out to them and a white glove offer to help them finish the finish the process. So the probability that people find which ones really want to close, are very important to us from an efficiency perspective, and also to create the customer experience. And the last is we’re just starting is looking at AI on the decisioning side, given the clients we deal with, they’re very sensitive to the use of AI and black boxes. But we have partners that we’re working with, to start taking the data we have we have quite a bit of it, we have over a decade’s worth of data on borrowers, how they, how they pay credit applications, how they were approved, and now have the ability to to condition some of that and half the battle in AI is having the data to train the algorithms right to find signals. So we’re just in the early stages of that. But that very fascinating technology that I believe there are so many applications of it across the lending process.

Loraine Lawson
I wanted to ask you about some of those applications for AI. What do you see in the future as sort of the way AI may transform lending in general?

Vince Passione
So I do think that, first I’ll put my consumer hat on, you know, I want to wake up in the morning and say, Siri, I need an auto loan. And should she, he or it, we’ll pick the best one for the idea that the application moves swiftly. The idea that the application is green versus blue, there’s a red button versus a green button there this big versus that big I have no interested in. You know, I’m I’m looking to go buy a car. And in the alone right now, the rest of this experience means nothing to me, except, Hey, I just want a great rate. And here’s what I’m looking to pay. So I do believe that we’re getting very, very close to that today. And I do think it will change the way we interact with that money. Because look, I’ve always in all the years I’ve been in financial services to me, people don’t wake up in the morning and go, I need a mortgage, I need an auto loan, they wake up in the morning and say I need to go buy a new home, or I need to buy a new car. The financial part of it is yes a byproduct to having to do it. So the ability for us to make sure that that that product, the right product is there for the customer when they’re ready to do it, really, really important. And I think virtual assistants will become right that interface for us, which is going to create a very interesting marketing issue for us. Because today, we all monitor what people are doing, right? We monitor what they’re doing on the web. All the algorithms are based on what things we look at. We get remarketed all the time, every time we look at something on the web, what happens when I’m actually sitting behind a virtual assistant, and I’ve never touched a browser that the decision of what loan I pick is being made by a piece of AI that’s acting on my behalf. So the games will change very, very quickly when you think about what happens with AI. But you know, I’m not a futurist but certainly when you look at I am a technologist, and when I look at the applications, there are a lot there are many of them will change the experience in a way that this idea that we touch a keyboard and touch a mouse we use a browser, it’s pretty much gone. It will probably be voice enabled and And we won’t have that presence that you will market to way you market to to you today.

Loraine Lawson
Do you see any? In the same way? Do you see opportunities to automate or any other technology coming into play and lending in general?

Vince Passione
Well, look, this is what, as I said earlier, I want to talk to you about a recent development. So, you know, as we’ve watched this pandemic, sort of take hold, and the devastating effects it had right on just the world in general, and in the financial in the financial industry, one of the things that happened as a result of the pandemic and the following recession, was this inflow of deposits, right, partially through flight to quality partially due to stimulus. And at this point, when we look just taking credit units, for example, think deposits at credits unions are up over 14%. Year over year, we’re looking at probably over $850 billion of excess assets, sitting on the balance sheets of credit unions and the same at community banks, they need to be deployed. So we today at LendKey, we directly originate these three asset classes, education, education refinance, and home improvement. But what we learned in 2009, was that our clients had in the the shadow of the Great Recession, all had the same problem they had, they had a liquidity issue, they had their deposits, where their loans, deposit ratios were reaching levels of 70%, which is not a healthy financial institution. And they had this voracious appetite for loans. So when the pandemic hit, the recession hit, we went back and looked at what happened in 2009. And so it probably makes sense for us to open up our platform, so that not only can our clients buy and sell loans from each other that were originated on our platform directly, but also those that were indirectly originated. So we’re now working with non bank lenders, fintechs, if you would, that originated everything from personal unsecured loans to solo loans, enabling those to come through a platform, in a product we call Aliro, which enables a non bank lender to partner with a bank or credit union originate directly on their books, and then on a monthly basis, sell those loans in a private deal network in a forward flow to other banks and credit. So it’s a wonderful way for non bank originators to reach the balance sheets of banks and credit unions. So we have deployed this technology, we’ve been using it for the past 10-12 years, internally for the loans that we directly originate. And now as a result of, of the relaunch of this product called Aliro, this past February, now we’re opening it up to almost any asset class, which we think is is new and different and can really change the way our clients and future clients manage their balance sheets.
As I said, I’ve been in the industry for over 30 years, this is probably the most exciting time I’ve had in the industry because of the velocity of change. You know, I was at a conference recently. And it was an interesting presentation given by two very, very, very respected venture capitalists, and they talked about, you know, the concept that, you know, digital digital, they’re no longer any digital deniers, you know, I’ve lived through several phases, right, the.com phase, you know, the Great Recession, and now this most recent recession, and in each case, right, these black swan events have had an impact on the disruption in financial services. And and I think what’s happened this time, is it because of the pandemic, because of the lock downs, consumers of all ages, have had to adopt digital technologies to interact with the world. It’s not just the the baby, it’s not just the Gen X’s and the Gen zs. It’s the baby boomers. Right? You know, my dad is 90 years old, he uses FaceTime now, right? So there are no longer any digital deniers, and it’s not going to roll back. And I think as a result of that whether I’ve seen, you know, companies like Bank of America, as well as some of the newest hottest startups are all moving at a pace of change that I’ve never seen before, to provide the kind of digital experiences that consumers are now going to expect on an ongoing basis. So that’s why I’m looking forward to the conversation because it really is all about right automation and creating really unique customer experiences now.