Steve Smith, CEO, and co-founder of Finicity talks about different open banking and data strategies, driving innovation in the fintech arena.
1. Tell us about your role at Finicity?
I am the chairman, CEO and co-founder of Finicity. I co-founded Finicity in 2000 along with Nick Thomas, and that year we launched our first financial product. We have since grown to provide a trusted and proven Open Banking Platform that puts consumers in control of their financial data and ultimately improves financial outcomes.
2. Can you tell us about your journey into this industry?
I have always had a passion for finance, graduating from the University of Utah finance program. My love of technology was born through my first start-up Megahertz, a pioneer in mobile data communications. After a few stops along the way, I was looking for something that could be beneficial to individuals and families. So, Nick and I started Finicity – a fintech pioneer – to combine the power of technology with time tested personal financial management techniques. We quickly started to connect to financial institutions so our customers could unlock the value of their financial data. Over time, this turned into our open banking platform.
3. How do you think technology will transform the financial sector, in general and in response to the challenges presented by the COVID pandemic?
Without question, COVID-19 has accelerated the digital economy.
The sudden need for contactless payments, checking balances, and the ability to apply for a loan on-line, among other activities, has accelerated digital adoption in many aspects of financial services.
Fintech apps have seen increased user engagement during this time, as well. According to Forbes, the US saw 35% growth in time spent in finance apps overall from the week of December 29 to March 15, 2020, and that has undoubtedly grown. And it’s true that fintech seems to grow during times of uncertainty, with the roots of modern fintech tracing back to the 2008 recession.
In general, what will continue to fuel this growth of the financial sector and provide the platform for fintech innovation is open banking. Finicity has also championed the move toward standards around data access, data types and data formats. By putting consumers in control of their financial data, open banking will fuel innovation among fintech to transform the way we all experience money — everything from budgeting, payments, investing and lending. Leading to improved financial literacy, an expansion of financial inclusion and ultimately improving financial outcomes across the board.
4. Finicity recently launched a Mortgage Verification Service within its open banking platform. Why does this new service benefit lenders and borrowers?
Finicity’s Mortgage Verification Service will help to shift lenders away from paper-based manual loan verifications and instead toward a one-touch, all-digital lending process. A digital verification experience shaves about 8-12 days off the origination process for loan closing. Since the loan origination process cost about $166 per day, this can provide significant cost savings and greater profit margins for lenders, while also increasing accuracy in loan approvals. Our Mortgage Verification Service is also accepted by both Freddie Mac and Fannie Mae in place of cumbersome manual loan documentation.
Millennials are increasingly becoming first time home buyers and they are expecting digital experiences. Digital verifications simplify the mortgage loan process for borrowers. Using a manual process can be tedious, time consuming and stressful when compiling different paper documents. And they increasingly want a streamlined digital mortgage experience – a recent McKinsey survey shows that 75% of people using digital channels for the first time during the pandemic say they will continue to use them when things return to normal. Lenders need to capitalize on this consumer demand, so there’s no question the industry needs to adapt by making the shift to digital verifications.
5. Could you explain why mortgage lending is moving toward a completely digital experience and away from a paper-driven manual process?
We’re seeing increased pressure on the mortgage industry to expand digital capabilities in the face of rapid market expansion. With rates at historic lows that borrowers know won’t last forever, aggressive lenders are going digital-first or quickly digitizing to give them more flexibility, speed and elasticity in their business, leaving other, traditional competitors trying to staff up to meet demand. Mortgage broker hiring rates are the highest in a decade. Less digital lenders are likely to face even greater risk when the market contracts again as borrowers will now be more digitally savvy and competitors will have a model that can more readily expand and contract with market movement.
Shifting to digital gives both competitive edge and the ability to scale, along with the ability to meet the needs of and drive retention with customers wanting a faster, easier, more digital process. It’s not only an economic imperative for lenders, but it’s also a customer satisfaction and retention imperative.
6. In what ways does your Owner Verification solution aid businesses in managing accounts?
Finicity’s account verification solutions eliminate the painful and time consuming ACH micropayment model, allowing consumers and businesses to set up and manage accounts in nearly real time.
7. Can you explain to us in detail about how your product helps with student loan accounts?
One of the trends we’re seeing today in business is a benefit program to help students repay student loans. In order to connect the organizations with the loan payment, they require the account details and confirmation of the account owner. This is similar to the ACH Account Verification process mentioned above and commonly used in today’s peer-to-peer payment systems.
8. What features of your Verification of Assets differentiates it in the market?
A few things set us apart. First, it starts with getting the best data possible. One area we lead is in direct data agreements with many of the largest banks in North America. Consumer-permissioned data is the best source for a complete and real-time view into individual, family and organizational financial health. Tapping into the power of data gives fintech organizations access to critical insights and allows them to make informed decisions.
Secondly, Finicity offers exceptional data intelligence to present the information as needed for the lender. Combining the highest value data with real-time asset verification allows the loan origination process, which once took days or weeks, to be completed in minutes.
And, our Verification of Assets is GSE approved for rep and warrant relief for the mortgage market. Finicity is an authorized report supplier for Fannie Mae Day 1 Certainty and a designated third-party service provider for AIM through Freddie Mac.
9. Can you tell us about how the new Mastercard Finicity partnership will impact the fintech industry?
Right now, we are independent companies and such planning can only occur post-close. But, we are excited by the synergies the organizations bring, so we expect great things going forward.
Speaking for Finicity, our open banking strategy and will accelerate innovation within the fintech industry. Finicity’s open banking platform is the engine (or fuel) for financial services innovation, giving consumers and businesses more control over their financial data. This includes determining how and where third parties – such as fintechs or other banks – can access information to provide new services in lending, payments, investing and budgeting.
Finicity’s open banking platform is designed to ensure control, access, transparency, traceability and security in the financial data experience, empowering consumers, and resulting in better financial outcomes. By putting consumers at the center of the financial experience, open banking promotes better financial literacy and financial inclusion, ultimately leading to better financial outcomes.
10. What advice would you like to give to new fintech solutions entering the market?
Move fast. You are the early adopters and the visionaries. You took the fruits of digital disruption and turned them into a business –data, the cloud, mobility. It’s about where consumer data is needed, but be super thoughtful to ensure you get the best data and best partner to create experiences that empower. Finicity puts the consumer at the center of the data experience,helping them feel more connected, more in control and benefiting more from using their data. And, it’s not just focusing on going digital – though this is a must. It’s not just about creating better experiences.
In today’s digital economy, tomorrow’s winners will build experiences that empower.
Experiences that empower are those experiences that do the following:
- Engage. the consumer feels like an active participant. They feel fully connected.
- Expand. through control over and increased access to their personal data there will come more opportunity and possibilities not previously had or seen.
- Enlighten. they inform—offering understanding and rich insights that leads to better decisions.
For example, in credit scoring consumers don’t fully understand the process, or they don’t feel directly connected. There’s generally a sense of ambiguity. Consumers don’t know what data is being used to determine their creditworthiness. We don’t just deliver data. Finicity delivers intelligence-driven insights –everything from verifications of income, assets and accounts, to our award-winning API. You need a partner with the data access and insights to power that potential, and too help you stay ahead of the pack, on the fast track to success.
11. What is the Digital innovation in wealth management according to you that will make a mark?
I’m going to actually reiterate a few points. Open banking is really a transformation platform across all financial services. Giving consumers the power to use and control their data will have huge dividends in wealth management. This transformation is happening now – it’s here.
Companies are already innovating with consumer-permissioned data. We are seeing this today and consumers will see the benefit – if not this year, then very soon.
12. Can you tell us about your team and how it supports you?
I’ve been very lucky to work with a smart and dedicated team. We focus on the things that move us all forward and avoid the things that don’t. Our team has grown a lot since our inception. Yes, we value innovation. Yes, we value growth. All these start with one simple word, TEAM. We aim to always say yes before no, and know before no. Our team is what makes us so strong. We are excited about our mission to help individuals and families improve their financial outcomes. All this wouldn’t be possible with the support of this great team.
13. What movie inspires you the most?
There are so many, but a few I’d mention here. The first, Awakenings, highlights a very important message about the power of the human spirit, and what it takes to nourish it with things that matter including work, play, friends and family. The second, Gravity, speaks to the strength of the human spirit in the face of adversity and massive odds.
14. Can you give us a glance of the applications you use on your phone?
Can I count text, email, Slack, and Zoom? Lots of time connecting with customers and team members. I like being engaged and many of my apps help me achieve my love of building something meaningful. And don’t forget the News, theScore, and Stocks/Yahoo Finance.
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