Why Banks Need Real-Time Loan Data to Survive a ‘Credit Recession’ - The Financial Brand

Friday, September 23, 2022

Consumers want instant digital credit decisions. This goes not only for BNPL, but credit cards, mortgages, auto lending and more. Financial institutions that cannot provide this run the risk of falling behind. But the decisioning must be as accurate as it is efficient or defaults will follow.

In one survey of bank executives, nearly all said they believe a recession is just around the corner and tougher economic headwinds are ahead for 2023. What that will mean for loan portfolios and for loan demand remains to be seen, but it’s a certainty there will be an impact.

Financial institutions that cannot make the most accurate lending decisions run the risk of lending to those that may have a higher propensity to default if a recession occurs.

This is especially important as smaller institutions need to expand and diversify their lending portfolio to be able to withstand the defaults that accompany recessions. At the same time they need to be able to meet consumer expectations for quick loan decisions, given the inroads made by fintechs providing real-time, digital lending services such as buy now, pay later.