Matt Bevonnes He is the CEO and co-founder of Canopy Servicing, the premier loan and service management API platform. Matt previously held the position of VP and GM at green sky Head of growth in serious And Fakihiro. Here he shares his thoughts on why fintech should embrace radical transparency
The Fintech torch passed in 2021 from OGs like to forbid And market For cryptocurrency pioneers like open sea And Queen Piece And BNPL leaders love Klarna And after payment. The transition came with a few negatives, although it was smooth. The change of guard brought a new level of scrutiny on Capitol Hill, as lawmakers struggled to make sense of new payment tools and digital assets.
The questions posed in the House Financial Services Committee hearings are likely just the beginning. Buy Now, Pay Later is a leading credit product, with more innovation on the way. The enthusiasm for BNPL in 2020 and 2021 has inspired a generation of fintech entrepreneurs who are bringing new credit and lending products to market this year, thanks to best-in-class BaaS infrastructure and modern configurable ledgers.
But the shift from inflexible, opaque, and high-risk financial instruments to highly-configured, transparent, and more secure products is not inevitable. It was clear from recent hearings that the industry needs to do a better job of educating consumers and lawmakers about new payment instruments and new types of assets.
The lack of clarity is not limited to BNPL and cryptocurrencies. The persistent fog around traditional financial services has long acted as a moat protecting incumbent companies and aging infrastructure from start-ups.
“Confusion and misinformation were so part of the credit card world of 2009 that even the head of payments at Walmart couldn’t figure out the cost of any given transaction.” Jim McVeigh, One of the founders of Block, wrote in innovation stack.
To ensure that the promise of fintech is fulfilled, it is time for the industry to embrace radical transparency in the form of better and documented industry processes and roles, anonymous data sharing, and clear and accurate communication with customers. While for some industries this is not considered “radical”, it represents a fundamental change in financial services. Even in 2022, if you call your credit card issuer and ask how much you have to pay to close your account, you won’t get a straight answer.
Likewise, BNPL users cannot easily reveal how their BNPL provider and their bank partners work with credit bureaus – and what trade-offs result from that relationship. One of the selling point of BNPL tools offered by companies like AfterPay And Klarna Is that their issuers do not usually “pull hard” to the credit of the borrower and use this in their decisions. But there is a downside to this practice. In cases where BNPLs do not report lending activity to offices, loyal BNPL users who regularly make their loan payments do not build credit.
The current credit bureau report on BNPL does not serve offices, borrowers, BNPL providers or their banks, but it has continued even as BNPL has grown to dominate consumer borrowing in states like California.
It was only towards the end of last year, when Equifax It received anonymous data from the BNPL provider and conducted its own analysis, which determined that a policy change was necessary. The data showed, according to the credit bureau “Individuals who pay their BNPL loans on time can increase I Register 一 help consumers build and rebuild credit.”
In December, Equifax announced that it would implement the industry’s first policy for accepting data on BNPL trading lines.
But there is still much to be done. Other credit bureaus need to join Equifax, and BNPL providers need to start informing bureaus of BNPL products. To ensure the highest degree of consumer and merchant confidence—and allay the concerns of policymakers—it is also critical that credit reporting policy is clearly explained to consumers.
BNPL is a good place to start experimenting with radical transparency. By implementing new transparency practices developed first for BNPL, Fintech will generally benefit from a faster transition to market, deeper client relationships, and lower regulatory risks.
Information can be shared among ecosystem players with the goal of improving the collective user experience and answering questions such as: Do we have the right regulatory frameworks in place? Do we have the right balance between protecting users and enabling innovation? Does FinTech Promote the Public Good?
How much information should we share? What information should we share? These are healthy topics that fintech companies should discuss with their ecosystem partners, and I look forward to participating in these discussions.