How to leverage identity verification to take on the $100 billion digital lending opportunity

8-09-2017

Four years from now, digital loans will present a $100 billion opportunity, while digital lenders are projected to have a 10% market share by then.  

Alternative lenders were the first to realize this staggering digital lending potential, with 13 major U.S. digital lenders growing full-year 2016 loan originations 15.0% to $28.39 billion, with some platforms seeing triple-digit annual growth. Traditional financial institutions offering loans have joined the race at a later stage, now working against the clock to catch up on market disruptors while meeting ever growing consumers’ expectations for convenience and choice. This widening gap is especially acute when focusing on mortgages; as home loans have gone mobile, large banks' share of origination volume, by number of loans, dropped by about half, to 24%, between 2008 and 2015, according to Home Mortgage Disclosure Act data compiled by the Mortgage Bankers Association.

Many in the trade argue that this digital overhaul is long overdue, stressing the many benefits of digitization for both consumers and organizations – including augmented security, greater convenience, and higher quality data collection, and warning about the dangers of lagging behind.

On the other hand, this quest for digital lending experiences has turned out to be a boon for fraudsters, who equally benefit from the ease of use and convenience of new technology. In an attempt to mitigate the increasing risk of fraud, regulators keep toughening Know Your Customer (KYC) policies, increasing the frequency and depth of identity verification checks.

Furthermore, recent data breaches such as the Equifax one – which is estimated to have virtually affected 40% of the U.S. population – put additional pressure on lenders, which see how time and money spent in achieving compliance and mitigating fraud risk is rapidly eroding their business’ margins.

Removing friction from digital lending with identity verification

Paperwork has long dominated the lending experience, with loan files easily exceeding 500 pages. To date, borrowers had to track down years of financial records, spend hundreds of dollars mailing and faxing trailing documents, and make numerous in-person trips to their lender’s offices. On the other side of the coin, lenders have to invest in costly, labor-intensive and inefficient documents review processes.

Lenders leading the pack are taking their loan application processes online, enabling consumers to verify their identity in the digital challenge and allowing them to submit all the documentation they need electronically, from anywhere and at any time.

At Mitek, we have seen how top players in the lending space are implementing advanced mobile capture and ID document verification software solutions to protect both themselves and their customers from fraudsters, meet compliance requirements cost-effectively, and decrease the need for costly manual intervention with automated data pre-fill. All of it without trading off an outstanding user experience.

Moreover, lenders delivering on consumers’ expectation for a seamless end-to-end digital lending experience are staying on top of impending competition to win the $100 billion digital lending opportunity.

Do you want to deliver a fully digital, fast, secure, and compliant loan application experience? Talk to our digital lending experts