Technology-Enabled Alternative Lending: Innovating in a Compliance Culture
Since the financial crisis, a significant amount of pressure has been put on larger financial institutions and banks to “do the right thing on behalf of their customers.” In light of these substantial shifts in the regulatory environment, banks have fully realized the need to build Compliance Management Systems (CMS) – or a robust ecosystem of compliance and control functions – within their already complex operating infrastructure.
During this time of rapid regulatory change, a view has emerged that the technology-enabled alternative lending industry has built a better underwriting mousetrap to provide simpler and more customer centric alternatives to the traditional banking system. However, a question remains largely unanswered for this segment – when, and to what extent, will the need arise to build a robust CMS to provide similar levels of compliance and control to their innovative approach to lending? Since online marketplace lenders often partner with issuing banks for origination, customer protection regulations remain fully applicable. At the same time, “safety and soundness” regulations, such as liquidity ratios and capital requirements, may be inapplicable to alternative lending marketplaces that do not hold deposits and operate by perfectly matching liabilities with investor assets. These variables combine to create a new model for regulators to comprehend.
Download the full white paper Technology-Enabled Alternative Lending: Innovating in a Compliance Culture to learn how alternative lenders have a unique opportunity to proactively address challenges by leveraging the hard lessons learned by traditional financial institutions in recent years.