What Are The Digital Transformations In Capital Markets?

By Franck Fatras, President & COO, LendingPoint

Franck Fatras, President & COO, LendingPoint

The digital transformation in capital markets is based on two things. First, information: especially access to and amount of information.  The other is speed.

The information available in the past was quite limited and not easily accessible. The amount of information and the type of data that we are able to obtain today (in close to real time) is so diverse and complete that it is has transformed the way we look at risk and marketing. The challenge becomes to identify which data is relevant, and to be able to use it to truly provide a unique service for the customer you are targeting.  AI has become popular in risk and financial services, but the human element is still critical.  We need to identify what data is relevant -- success today will depend on asking the right question of the data you have.

Speed is an important factor, as well. Just like in everyday life, we want to spend less time doing mundane tasks and more time doing the tasks that are critical to the business. We look for every opportunity to reclaim a few minutes here or there. The amount of data available helps us make quick decisions, and this "speed to decision" allows us to interact with customers in a manner that best suits their lifestyles.

 We are all dealing with technology every day. How does technology drive your life?

Technology drives many aspects of my life, from my smart home to the way I communicate (Facebook, email, texts, etc.). In business, the same principle applies—technology is a way to make life easier. There are many ways technology makes a difference in our business—from the ability to digest copious amounts of information in a timely manner, to the ability to automate workflow and improve efficiencies, to the ability to report and do analysis on every stage of a customer journey. Technology affects how we interact with each other, and the ability to track that interaction allows us to constantly optimize the experience.

“Technology affects how we interact with each other, and the ability to track that interaction allows us to constantly optimize the experience.”

What are the important roles of capital markets in driving sustainability?

 For any lender, access to capital markets is the life-blood to their sustainability. At LendingPoint, trust, alignment of interest and execution are the cornerstone of our capital markets strategy. As a balance sheet lender with a credit-first approach to lending, we have leveraged data and technology to build predictive credit models that generate an asset which outperforms our peers in the near-prime market.

For us, our portfolio’s performance drives sustainability, as it is the foundation for serving our market, protecting our investors, and driving profitability—which is ultimately the best and only way to remain a leader in the industry for the next decade, regardless of economic cycles.

Are the capital markets young enough to embrace disruptive technology?

 Access to capital markets is the ultimate disruptive technology. It was access to capital that drove the industrial revolution and its access to capital markets that will continue to drive the FinTech revolution. Lenders that can generate confidence from equity investors and institutional lenders are the firms that will become marquee players in the next chapter for FinTech.

That said, capital markets don’t embrace technologies. Capital markets invest in experienced management teams that can consistently execute and deliver results. From this viewpoint, it is disruptive technologies that must understand what moves the needle for decision makers at capital market firms.

As it relates to capital markets, not all players are motivated equally. We view a three-tier stratification: equity, mezzanine, and senior lenders. Depending on where the investor plays in the capital structure, the investor will seek proper coverage for risk-reward, protection on the downside, and/or a high degree of confidence for asymmetrical returns.

In effect, our approach to capital markets is very traditional in that we never lost sight of the fundamentals: smart capital seeks to invest in experienced teams that know how to ask better questions to deliver consistent results.