Regtech Meets Fintech – How It Improves Lending | Cloud Lending Solutions

© 2016 Cloud Lending Inc. All rights reserved.
Regtech Meets Fintech – How It
Improves Lending?
BLOG PRESENTATION

● The added weight of growing regulations, targeted towards traditional and marketplace
lending is a critical challenge for lenders.
● Managing regulations, risk and compliance adherence is not an easy feat. Regtech, therefore,
enters as a constructive solution to manage the challenges confronting the lending industry
from a regulatory perspective.
● Regulation technology, or more popularly known as regtech, offers nimble and cost effective
tools and techniques to manage risk, regulations and compliance requirements
Lending as an industry is prone to risks
and frauds
1

Regtech in lending can improve operational efficiency, mitigate risks and frauds, and enhance
customer due diligence (CDD) and compliance management. It can play an important role in
making the lending process efficient by offering benefits as listed below:
● Operational Efficiency: Regtech can streamline the process by inducting regulatory checks
and audit requirements at each step of the lending process. This reduces the probability of
operational and processing errors thereby increasing the operational efficiency and
effectiveness.
● Compliance Management: Regtech inculcates critical KYC (Know Your Customer) and AML
(Anti Money Laundering) checks in the process to ensure that the lending process in its
entirety is compliant and meets the updated and new regulations.
For more information about lending process visit Cloud Lending.
2

● Fair Lending and Other Regulation-Specific Assessments: Regtech empowers you to integrate
new lending regulations like the Equal Credit Opportunity Act, Fair Housing Act, Civil Rights
Act, etc., and identify opportunities for enhancements which are compliant. Consumer
Complaints Management: Regtech can help in developing a complaints management function
focused on CFPB expectations and requirements to handle and reduce customer complaints
and improve customer engagement.
● Data Management: Regtech also enables data modeling, scenario analysis and forecasting
based on data aggregation from multiple sources. Currently banks spend huge amounts of
money, particularly to complete regulators’ stress tests, which can be avoided by introducing a
regulated data management system.
3

Regtech can expedite and smoothen the process of governance, risk
management, and compliance implementation and management in lending.
There are three pillars of regtech that act as individual and combined forces,
cutting across the different processes of lending.
● Borrower Experience
● Data Science
● Automation
4

● The first and foremost pillar of regtech is borrower experience. A lending process is driven by
the borrowers’ requirements. It is pertinent that lenders take care of the borrower experience
in different phases of lending. Interestingly, according to KPMG research, between 2013 and
2014, regulatory pressures, a new trust agenda and rapid progress on digital services drove
up customer experience improvement by 1%. Between 2014 and 2015, however, this
improvement was flat. This is majorly due to the deviations and discrepancies between the
current approach towards lending and the desired approach that needs to be followed.
● The current approach is more product centric, manual and depends on FICO-based risk
analysis by the majority of banks and financial institutions. The desired approach though,
requires to place the borrower at the core of the lending process and devise the financial
offerings and processes around it. The lending process should therefore be more customer
centric and automated with a broader perspective on risk analysis and credit scoring, by
including data points based on FICO, big data analysis and predictive modeling.
Borrower Experience
5

● The second pillar supporting regtech is data science. With the emergence of big data and
machine learning, data science has evolved as a substantial domain. Data science can
amplify the intellect and accuracy behind loan processing and management by many folds.
The traditional approach largely depends on credit scoring and financial analysis with limited
data to arrive at loan approvals and processing. The desired approach however requires a
multitude of data points like cash flow analysis, macro-economic factors, likelihood of
bankruptcy, bank transactions, predictive models and more, to be accessed and analyzed to
arrive at a decision.
● Data science, with the unification of machine learning and big data, enables predictive
modeling in credit scoring and can also help in streamlining the lending process, eliminating
errors and expediting the loan application approval process. It can also help in predicting bad
loans and in on-going monitoring of loans.
Data Science
6

● The third and most impactful pillar empowering regtech is automation. Contrary to the
traditional deal room, automation can accelerate the loan management process. Online
lending platforms like Cloud Lending Solutions, built on cloud-based technology can advance
the lending process at each step.
● The cloud-based technology, vis-a-vis a traditional legacy lending framework, offers benefits
which help in countering risks and frauds and assuring compliance management and
adherence.
Automation
7

The highly configurable open architecture provides an end-to-end loan management solution
for online and marketplace lenders, from origination and underwriting to servicing and
collections. Automation can thereby improve and expedite lending by:
● Automating and simplifying the origination and underwriting process with auto decisioning
● Configuring automated workflows to adapt to evolving market requirements
● Integrating effortlessly across disparate systems to optimize business processes
● Automating the lending platform via an open architecture as per the unique business needs of
the lender
● Managing customer contact requirements
The three pillars of regtech therefore, when implemented can improve the workflow and end-to-
end loan management process.
8

About Cloud Lending Solutions
Cloud Lending Solutions is a cloud-based, end-to-end lending platform delivering innovation to the global lending
community. Unlike legacy technology platforms that are expensive to maintain and prevent agile response to market
conditions, Cloud Lending Solutions’ clients take back control of their business by quickly implementing, extending,
and digitizing the entire lending lifecycle. Cloud Lending Solutions’ single system of record is the market leading cloud
solution supporting both consumer and commercial lending that scales for the needs of lenders of all sizes. Clients
include banks, traditional finance companies, online lenders, and marketplace platforms.
Copyright © 2016, Cloud Lending Inc. All rights reserved.
Thank you
+1-(650) 918-0499 | info@cloudlendinginc.com | www.cloudlendinginc.com
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Regtech Meets Fintech – How It Improves Lending | Cloud Lending Solutions