Treating Loan Applicants with Respect

By Jim Bruene on October 23, 2014 5:47 PM | Comments

image I've been denied credit twice.

The first time I understood, sort of. I was starting my first job and had a little, if any, credit history. But still, it hurt that my Fortune-50-employer's credit union wouldn't give even a $500 credit line to a freshly minted engineer. Luckily, the first big bank I tried had no such qualms and promptly sent me a MasterCard with a $2,000 credit line.  

The second time, 25 years later, made zero sense. I'd received something like 100 direct mail preapproved offers from this issuer before I finally said yes to one. Yet, I was rejected online when I went to accept it and again when I called to appeal. They wouldn't say why, but it was likely related to that curse of the loan applicant, self-employment (see note 1). 

So, as a consumer and especially as a small biz owner, I've always had a bit of a love-hate relationship with banking credit departments (note 2). Having worked in credit/loan product management, I am sympathetic to the tricky underwriting concerns behind the scenes. Granting credit is like being a parent. You have to learn to say "no," a lot.

But also like a parent, you must say it tactfully and respectfully to maintain a healthy relationship. And that's where many financial institutions lose points.

The reason I bring this up is that I'm in the middle of a refi with a top-10 bank. I originally chose them for my home loan 5 years ago because of its world-class online mortgage application process and great reputation. But that original note comes due in February, so I must refi once again. I've been happy with this company, so I decided to stay with them, even though they weren't the lowest rate. I hoped that being a long-time customer (14 years) with three deposit accounts, a business credit card (4 years), a personal credit card (3.5 years), and a mortgage (4.5 years) would ease the process.

And maybe it has. But boy do they sure make me feel like an idiot along the way. The mortgage process began two months ago, via a phone application. And trust me, it could not have been a more cookie-cutter deal in terms of LTV, debt-to-income ratios, credit scores and such. The only complicating factor, underwriting wise, and I guess it's a huge one, is that I own a substantial stake in a small business.

During the past two month I've uploaded 23 documents including explanatory letters, tax returns, and so forth. But here I am at day 66, and I still have no idea if the refi will go through, especially given that it's past the original lock expiration, a situation they've been "looking into" for 4 days (note 3).

Not once has the bank reached out through email to apologize for the delays, or to thank me for continuing through the maze of documentation, or even to provide a simple loan status report (note 4). I have gotten a couple voicemails from the original sales rep asking me for more info, and generally he's done a good job of being upbeat.

I understand the documentation rules for conforming loans are onerous these days and the bank is not making the rules, only enforcing them. But I feel completely disrespected at this point. And even if this one eventually goes through (note 5), I would be highly unlikely to do another loan with them, nor would I recommend them to someone else. And this is a company that I've lavished praise on both in private and in public for a decade and a half.

It doesn't have to be that way. Here's how to be a good partner when your customers ask you for money:

1. Educate

Declined someone's loan applications can create huge relationship problems. I've never seen the research, but I think it's safe to say the attrition rate of declined customers is higher than approved ones. So the best way to save declined customers from leaving, is to stop them from applying for the loans in the first place (note 3). Good consumer education, including specific information on the applicant's credit score and likelihood of being approved, is important. 

2. Say thanks

Even though customers are asking you for money, this is actually what keeps the lights on at most banks, so THANK CUSTOMERS profusely in multiple channels.

3. Keep in touch

No one asks for a loan just for the fun of it. And in most cases, time is of the essence. If you have to say no, do it fast. If you are saying, yes, then help them understand the process, deadlines, and expected closing date at every step of the way. If you can swing it cost-wise, maintain real-time status online AND more communicate every business day as to where the loan stands. It costs approximately ZERO to email your customers. Why would you not?

 4. Offer alternatives

If you have to say no, offer alternatives. When my credit union turned down 22-year-old me for a credit card, they could have retained my business if they had offered a co-signed card option and/or a secured imagecard with a migration plan to unsecured credit. If there are no reasonable alternatives within your product set, send them to others who may be able to help.

5. Be empathetic

Applying for a loan is a humbling activity. No matter who you are, you can still be rejected (see Ben Bernanke's recent experience). Sure, it may not be your fault. The secondary market investors, having been burned in 2008/2009, are MUCH stricter on the documentation front. And it's understandably frustrating for banks and their mortgage employees. But don't pass that irritation on to your customers. You are the trusted advisor. Act that way.

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Picture credit: eBay

Notes:
1. Along the same lines, our company has been stonewalled when seeking commercial lines several times. The bank doesn't outright say no, they just keep asking for more documentation until we finally lose interest.

2. That said, I don't want to sound completely ungrateful. The mortgages, home equity loans and so forth, have allowed us to purchase a home that has appreciated nicely and to drive cars that don't need repairing. So overall, I'm grateful to the credit grantors that have taken us under their wings.

3. Because they bank has been so slow in making underwriting decisions, the original 60-day lock has expired and they want an extra $1200 for a lock extension, even though I've met every paperwork requirement on schedule. It's 100% their fault for taking so long. My request for a waiver of this penalty was "sent to management" a few days ago, but naturally I've heard nothing.

4. They do have an online mortgage system that helps track what's going on, but it doesn't appear to accurately reflect the real status. Several of my doc uploads show a big "rejected" flag, but no one has asked me about them.

5. WARNING: This is a regulatory minefield. You have to be super careful not to show any bias in the application process, especially when discouraging a consumer from applying.

Comments

Apple Pay Works (Duh), But it's No Starbucks (Yet)

By Jim Bruene on October 21, 2014 4:14 PM | Comments

imageWell, that was anticlimactic. But I knew it would be.

Between Starbucks mobile, Square Wallet, Google Wallet and my Discover Card contactless sticker affixed to the back, I've made a few hundred in-store purchases with my phone.

So smartphone purchase #247 today was hardly remarkable from a UX standpoint. The only thing that would have made my first Apple Pay experience interesting would have been if it failed (resulting in a much more clickable headline for this post). But although it took 3 tries (note 1), the phone finally vibrated (the same as my Nexus) telling me that Apple's NFC magic had indeed triumphed (note 2) adding 1.05 cent to its Q4 numbers (note 3).   

And although I firmly believe we are at "peak plastic" for debit/credit cards and payment via the cloud is inevitable, I don't see how Apple Pay adds 15 BPS (or a half-cent for debit) of value to the card-using experience. But to play with Apple you have to pay. And 15 BPS is a lot better than the 30% interchange Apple has collected for the past 6 years on in-app purchases. So I'm not criticizing the rumored economics or the 500 issuers who have signed on. For competitive reasons, you might as well play along (or not, see previous post). 

Bottom lineI'm not giving up on plastic, or merchant-specific apps like Starbucks (or MCX?), quite yet. The iPhone/TouchID experience is great, but at this point, it's slightly more cumbersome than plastic (note 4) and costs more if you account for my tendency to drop the phone (note 5). 

And Apple Pay's consumer value for in-store purchases will come in the future with more integration between phone, bank and merchant (note 6). Getting customers to give up plastic is all about the three R's: rewards, receipts, and relationships (note 7). Starbucks has nailed it (note 8). Apple has not, yet.

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Screenshots

My first Apple Pay in-person transaction
Left: Push notification on top of homescreen
Right: How it looks within the Apple Passbook app

image       image

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Notes:
1. The first time I put the phone next to terminal, nothing happened when I authenticated with TouchID. I'm not sure if it was my phone's failure or the cashier failed to ready the charge properly. The second time it connected, but I was declined with a negative "buzz" from the phone. The cashier readied the charge a third time and this one went through with a pleasant vibration and push notification on the screen. These things happen, even when swiping plastic, so I don't hold it against Apple Pay. That said, were I a so-called normal consumer, I probably would have pulled out my plastic and waited for Apple Pay 2.0 next year before trying again. 

2. Sadly, I still had to make chicken scratches (aka my signature) on the Verifone display at Bartell Drug for the $6.99 box of tea and also have a paper receipt shoved into my hands. It's not Apple's fault, but it does detract from the overall UX. 

3. My $6.99 purchase times the rumored 0.15% interchange rebate to Apple. 

4. I've only been using TouchID for a month, but so far, I find it clumsy. I have 3 fingerprints registered, and some work better than others. But overall, I find it can take numerous attempts to get it to authenticate. This is not something I want to experience at the front of the checkout queue. It's bad enough that I'm standing there waving my new $600 gold smartphone at the terminal. I don't need to be holding up the line while I fumble with said device. Once the novelty wears off, I'll probably go back to swiping plastic, at least if there's a queue. 

5. In addition, every time I pull my phone out, especially when juggling purchases at the point of sale, there is a chance I'll drop it. And since I detest cases, I crack my screen every year or two. Assuming it costs $100 to fix, and I crack it once every 5 to 10,000 times I handle it, its cost me 1 or 2 cents to use my phone in lieu of plastic. 

6. This post is about the physical point of sale. The one-click mobile payment process for Apple Pay-powered shopping carts and apps has immediate and understandable value for both the consumer and merchant. 

7. You could argue that the increased security from phone payments will move people off plastic. But consumers still do not trust mobile phone security, for good reason. And they know they are covered for plastic security breaches. So the known threat (plastic) probably trumps the unknown (phone) for the time being. 

8. And the Starbucks experience gets better next year when "order ahead" goes national.

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Categories: Apple, Mobile Payments

Banks Gear Up (or not) for Upcoming Apple Pay Release

By Jim Bruene on October 14, 2014 7:42 PM | Comments

image If all goes well, some time within the next week Apple Pay will be up and running. Short-term it won't cause a ripple in market share or consumer behavior (see previous post), but long-term it is likely to be seen as an important mobile-payments milestone.

Regardless, I look forward to using it. But with only a couple contactless terminals in my usual Seattle haunts, I guess I'll be buying lots of coffee at Peet's and Tully's while I test it.

But I digress.

imageThe subject for today is what banks are and aren't doing to ride on Apple's mobile coattails. There has been little FI marketing so far, other than PayPal's NY Times full-pager poking fun at it (15 Sep 2014, see inset). And some media buys from Visa and MasterCard.

Eleven financial institutions were named at the official Apple Pay launch Sept 9. Six major launch partners below and 5 "coming soon" issuers (see note 1).

The big six have been almost silent since the first week when four of the six issued press releases, emailed customers (note 2) and/or posted promos on their websites.

Issuers may now be gearing up their marketing machines, which were caught relatively unaware last month due to Apple-prescribed secrecy, for an pre-holiday Apple Pay push. However, I would not be surprised if major issuers, who've already seen contactless card usage fizzle, take a wait-and-see approach for the remainder of 2014.

In any event, it will be interesting to watch. 

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Apple Pay FI launch partner marketing to date
_________________________________

American Express 
   Press release: No
   Email: None reported
   Website promotion: None reported
   Website site search: Nothing listed

Bank of America
   Press release: No
   Email: One reported by The Financial Brand (link) though I did not receive
   Website promotion: Nothing now, but promo reported at launch by Jim Marous in The Financial Brand
   Website site search: Links to landing page (link)

Capital One
   Press release: link
   Email: One sent to my consumer account (12 Sep)
   Website promotion: None reported
   Website site search: Nothing

Chase
   Press release: Quoted in Apple's official release (link)
   Email: One reported by MediaLogic (link) though I did not receive
   Website promotion: Nothing now, but promo reported at launch by The Financial Brand
   Website site search: Nothing

Citibank
   Press release: link
   Email: None reported
   Website promotion: Nothing now, but promo reported at launch by The Financial Brand
   Website site search: Nothing

Wells Fargo
   Press release: link
   Email: Two sent to my consumer account (11 Sep and 19 Sep)
   Website promotion: Nothing now, but promo reported at launch by The Financial Brand

   Website site search: Nothing

______________________________

Second wave issuers
______________________________

Perhaps because they are smaller and must try harder, three of the six next-wave Apple Pay issuers (note 1) have promos running on their websites today:

Barclaycard homepage (one of three promos in rotation)

image

PNC Bank homepage (in lower left corner)

image

US Bank homepage (one of 3 promos in rotation)

image 

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Notes:
1. The 5 other issuers mentioned at the Apple launch were: Barclays, Navy Federal Credit Union, PNC, US Bank, USAA. Yesterday, Arvest Bank announced it was supporting the system as well.
2. Despite having 10 card accounts (4 business and 6 personal) across the six launch partners, I have only received emails from two (Wells Fargo on Sep 11 & 19 and Capital One on Sep 12).

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Categories: Apple, Mobile Payments

Launching: "Final" Credit Card with Integrated Disposable Card Numbers Captures Imagination of Product Hunt Geeks

By Jim Bruene on October 9, 2014 6:38 PM | Comments

imageProduct Hunt is the newest website catering to tech enthusiasts. Each day 40 to 50 new products or new product features are featured on the site. Anyone that has registered is allowed to upvote any of the submissions and a continually updated leaderboard surfaces the hottest products of the day. Then at midnight, the whole thing resets, and 40 to 50 more products get their 24 hours of fame.

I've been following it for a few months and have seen that while there are only 2 or 3 fintech entries per week, they tend to be popular (which could be a function of their scarcity). But rarely, if ever, do they climb to the top. And this week, not one, but two companies have dominated their day on Product Hunt.

On Tuesday, the Plastc Card (yes spell check, no "i") had 545 votes, almost 200 more than runner up Student Developer Pack. Plastc is similar to Coin, a computerized credit card that can hold multiple mag stripe cards in a single piece of plastic, planning to ship to pre-order backers in the first half of next year. Plastc holds more cards, has an e-Ink display, and at $169, costs more than three times the pre-order price of Coin.

On Wednesday, fintech ruled the Hunt again, with new security-minded credit card, Final, gaining more than 900 upvotes, 600 more than the next closest newcomer, Clearbit. I believe it's the record for a financial product, eclipsing Plastc's from the day before.

image What is Final?
Final is a standard mag-stripe (and chip) credit card with a companion mobile app and desktop dashboard. The card is upping the security ante by incorporating easy-to-use disposable (aka temporary) card numbers for ecommerce (card not present). It allows users to designate a unique number for every online merchant, that way it's easy to shut that merchant off, if you don't want them to be able to charge your card again. Users can also set transaction limits by merchants to make sure there are no overcharges.

Final also plans to offer advanced controls for brick and mortar purchases. Purchases could be allowed at only certain merchant categories for example. And Final's card will be able to be tethered to your smartphone allowing chip-and-pin purchases only only when the two are in close proximity to each other. 

The card management app features PFM features not unlike what Moven and Simple offer today. But there is more emphasis on fraud controls and ridding yourself of "gray charges" ala BillGuard (see inset). In fact, the best way to think of Final is a credit card version of a Moven/BillGuard mashup. It is to credit cards what Simple was to checking accounts. A winning combination of good design, consumer advocacy and a bit of tech flair.

The startup is still looking for a credit card issuer partner (attention Capital One, this could be your 360 credit card), so pricing is not available. However, CEO Matt Rothstein told me yesterday that they plan to make the card fee free. In fact, they are looking at the business as much more than just a security play. They are focused on consumer advocacy and helping consumers reign in their spending (see first screenshot).

Final Thoughts 
Final is part of the current batch at TechStars Boulder and is pitching at its Demo Day today. The company has 2,200 people on its waitlist (Update: As of noon Pacific on 10 Oct, the number has jumped to more than 21,000). Not a bad first-24-hours out of stealth. There is clearly consumer demand for more card controls, to avoid outright fraud, fight merchant overcharges and reign in overspending.

imageMost of the newcomers that have gone down this path have used prepaid debit cards and/or account aggregation. We haven't seen an ambitious startup credit card play since well before the 2008 meltdown. Final will benefit from substantially higher interchange (albeit shared with its partner), but will also have to deal with rejecting the credit applications from a significant portion of its waitlist. That will not be easy to explain to the early adopter crowd, who will likely take their case to social media (note 1).   

But overall, I'm a big fan of what they are trying to do, and expect to be following Final for a long time, unless they get swooped up by a large issuer right out of the gate.

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Final desktop card management area: Transaction view (9 Oct 2014)
Notes: 
A.) Current balance and monthly goal dominate top of page. 
B.) Customer service, and a log of recent inquiries, appears in right sidebar
   

image 

Final desktop card management area: Budget view

image

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Note:
1. I'd advise having a prepaid card backup to mitigate the rejected applicant backlash.

Comments

The Conference Journey: Why We Started FinDEVr (and Finovate)

By Jim Bruene on September 17, 2014 4:56 PM | Comments

image I just stopped by the Green Lake (Seattle) coffee shop where Eric Mattson and I first hatched the plans for Finovate seven years ago. At that time, we were so focused on selling enough tickets to pay the Midtown Manhattan-sized bills, we had few thoughts on the long-term plan. 

Fast forward seven years.

A week from today we'll be in NYC for the eighth time hosting the largest Finovate ever, closing in on the 1,500 mark for the first time (much appreciated everyone!!!). Thanks to a surging local fintech community, the NYC event is even outselling the San Francisco area one for the first time since 2011.

Why did we create Finovate?

While I'd like to say we were hoping to bring the fintech community together to foster innovation (which I think has happened), but it wasn't quite that ambitious at the start. I'd always been a conference fanboy, going to 4 or 5 per year to speak and/or cover in our publications. But in 2007, one of my favorites cancelled. Looking to fill that void, we created the event that I would most want to attend.

One day. One track. Rapid fire. New products. In NYC. And the ability to speak directly to the speakers afterwards. And thankfully, others shared the affinity for that format.

imageSo, why did we start FinDEVr?

There is so much emphasis on strategy and the big picture these days, that the tools and technical underpinnings to get from here to there can be lost in the noise (case in point, the 1,121 articles on Apple Pay last week). And as the programmable web (APIs, SDKs, etc) weaves its way into financial services, it's harder than ever to keep up.

So, we created the event that I would have wanted to go to back when I was an engineer. One that focuses on how to BUILD the new services that eventually show up on the Finovate stage and in bank/CU/financial apps.

Whether FinDEVr attracts the fintech developer community in the same way Finovate has struck a chord with fintech execs remains to be seen. We already have 50% more attendees signed up for FinDEVr (Sep 30/Oct 1) than we had at the first Finovate, so it's off to a promising start (see details below).

Check back with me in 7 years and I'll let you know if it was the right move. 

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You can still be part of the inaugural FinDEVr in San Francisco's Mission Bay area. Event registration is open for a few more days. And if you'd like to bring your whole team, please email (sanfran@findevr.com) and we can work something out. 

There is no where else where you can meet the dev folk at Yodlee Interactive, TD Ameritrade, MasterCard, Visa, PayPal/Braintree, Forte, Intuit, and Google. Plus Avoka, EVO Payments, Eshtapay, Financial Apps, InComm, Xignite, Xero and 40 others all in the same place and in just two days (see full list here).

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Categories: Finovate

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