Fintech

University of Delaware, Other Universities Going Long on Fintech

September 15, 2020

This story appeared in deBanked’s Jul/Aug 2020 magazine issue. To receive copies in print, SUBSCRIBE FREE

The University of Delaware recently received a $9 million tax incentive to construct a new Fintech Center on its premier Science, Technology, and Advanced Research (STAR) campus, with help from a community-building company Cinnaire. Slated for completion in 2021, the building marks yet another fintech-focused resource for higher education.

Financial technology programs have long been offered at prominent business schools such as Harvard, Stanford, and Columbia, international schools such as Oxford, and research institutions like MIT since the late 2000s. 

Now that fintech has become a long term value creator in the financial world, other institutions such as the University of Michigan, Fordham, and Delaware are excited to implement fintech opportunities on campus for undergraduate and graduate students alike.

Discover Bank and Cinnaire jointly funded the building, a $39 million project. According to Delaware plans, it will create a space on the Delaware STAR campus to host a new Financial Services Incubator to encourage research and collaboration between students and industry leaders.

“The FinTech building will bring together computer science, engineering and business experts in cybersecurity, human-machine learning, data analysis, and other emerging financial technologies,” said Levi Thompson, Dean of the College of Engineering. “These collaborations will allow us to provide our students with a very unique experience that prepares them to excel in the workforce. Furthermore, our Fintech discoveries will benefit people throughout Delaware and the world.”

Cinnaire is a national nonprofit that focuses on improving communities’ financial health by creating capital solutions to revitalization projects: lending funds, managing, and building housing structures. 

Funding communities is what Cinnaire does best: in this case, utilizing a New Markets Tax Credit to fund an addition to the Delaware campus.

The nearby University of Fordham at Lincoln Center has also been trending toward preparing students for a fintech world. Undergrad and graduate students pursuing an MBA through the Gabelli School have the option of a fintech concentration.

The course work not only incorporates data science and machine learning skills into the worlds of credit lending and risk management but facilitates relationships between students and a wealth of industry partners. 

Sudip Gupta, professor, and Director of the MS Quantitative Finance program, spoke about the courses’ popularity there. The program is ranked in the top 20 of its kind in the world by Risk Magazine.

He has seen a revolution in fintech in the past few years that has recently received a big push by pandemic forces, introducing the wholesale adoption of fintech techniques into traditional financial institutions.

“The fintech revolution in the industry- big data, machine learning techniques, storage capacity, and cloud computing has been going on for the last couple of years,” Gupta said. “The pandemic provided the big push to move toward that direction.”

“STUDENTS ARE INTERESTED IN LEARNING MORE ABOUT THIS KIND OF SPACE”

Gupta has been following the development of alternative credit closely, recently publishing an award-winning paper studying machine learning to create alternative consumer credit scores using mobile phone and social media data.

“The idea of my research- let’s look at people who do not have a credit history or enough traditional credit you could get from a FICO score,” Gupta said. “Using this data, it turns out they are better predictors, and better to judge than FICO, and can reach out to more people.”

Gupta is excited for the adoption of big data techniques into alternative and traditional consumer loans because it offers a win-win for consumers and institutions alike, he said. Echoing the findings of many successful alternative finance companies, Gupta said his research showed that collected data could offer better insight for lending than “stale FICO scores.”

Up north at the Univerisity of Michigan, Professor Robert Dittmar at the Ross School of Business heads the Fintech Initiative. He is working on adding even more fintech classes. Recently, through a partnership with PEAK, a Chicago fintech lending company, Michigan launched a fintech initiative that incorporates undergrad and grad classes, faculty research, and a fintech entrepreneurial club that connects students to industry leaders. 

Michigan Ross is adding fintech classes for a variety of reasons.

“The simplest reason: students are interested in learning more about this kind of space,” Dittmar said. “And we’re seeing more demand from the industry side for students that know more.”

For years Dittmar said tech companies and startups in silicon valley were pioneering innovations in the industry. Through talking with alumni and contacts in the industry, Michigan found that fintech has gotten to the place where there is an excellent supply of data engineers. Still, there is a demand for professionals with the financial business expertise to implement these technologies.

“What we are trying to do at Ross is fill in that gap,” Dittmar said. “what we’d like is for [students] to know enough about the technology that they can provide the insights of finance and business to the people that are doing that technical work.”

At Ross, they are organizing what will one day be like a fellowship program. The program will feature a combined learning experience: students will learn data analytic finance, apply their computing skills in credit decision making classes, and then connect with the industry in experiential learning classes.

“In the last couple of years, I have been taking students to London to work at fintech startups in the UK,” Dittmar said. “And we are hoping to expand that program so that most or all graduate students have the opportunity to participate in something like that.”

Last year Ross hosted a “Fintech Challenge” competition to design a banking service to reach customers in a “banking desert” in rural Michigan. The program is hoping to host another challenge this year, despite complications of COVID-19.

The Aftermath: What Industry Experts Had to Say About The Future Alignment of People and Data

July 20, 2020

This story appeared in deBanked’s May/June 2020 magazine issue. To receive copies in print, SUBSCRIBE FREE
Like never before, the ways in which people and data are employed are overlapping more in a post-covid economy. Nearly three months of slow-down and, in some cases, complete economic shutdown have forced brokers and funders alike to view businesses differently than before. New documents, metrics, and terms are being incorporated into underwriting with the belief that it will provide a much more comprehensive picture of each business applying for funding.

Broker Fair Virtual took the chance to explore these new perspectives in The Aftermath, a panel featuring Moshe Kazimirsky, VP of Strategic Partnerships and Business Development at Become; Heather Francis, CEO of Elevate Funding; and David Snitkof, Head of Analytics at Ocrolus. Here, the industry experts discussed what the future of data and people may look like, what the new things that funders are looking out for are, and how the coronavirus has changed consumer and merchant behavior.

First up was Heather Francis, who gave a run down of how Elevate has adapted to the constantly shifting environment created by covid-19. “There were slim pickings on what we could fund,” Francis noted of the early lockdown period. Explaining that many businesses didn’t fit their criteria in the early days of lockdown, Elevate began the process of including new metrics and lenses through which to ascertain if businesses were financially viable.

National, state, and local restrictions became a daily check-in, rather than monthly; with one person being assigned to cover changes in local and even county regulations. As well as this, Francis explained that the company shifted its focus from underwriting the business owner’s activity to underwriting the consumers’ activity. This meant that foot traffic was constantly reviewed via FourSquare, trends that showed which industries were seeing upticks and downturns were monitored, and what customers in varying geographies were comfortable with was gauged.

“There are some areas in our country that were not heavily impacted,” Francis explained, commenting on the discrepancies between locations, particularly for bars and restaurants. “I know some of us have our optics on what’s going on in our daily lives, and a lot of people in our space are located in New York or California, and these were the very heavily regulated areas where everything was shut down and there was not much to do. Here in Florida, it was easier, with open-seating dining.”

David Snitkof echoed Francis’s points, saying that “the old way of businesses underwriting credit is no longer sufficient … If you were to only look at people’s repayment histories, their credit profiles, and things like that, you wouldn’t get all the data you need to make the right decision. Generally there’s this idea that the past is prologue and the greatest predictor of future results is past behavior, and this type of pandemic makes that no longer the case … we need to think beyond the traditional data sets that people have used to underwrite credit.”

According to Snitkof, the old models for underwriting and funding have been overturned, with funders adhering to three principals going forward as they chart new methods: more data, more time, more detail. This means incorporating more data and analytics than before, pushing for more data-driven strategies; requesting information and data from merchants that cover longer periods of time, with the hope of gaining further insight into the pattern of the business; and upping the thoroughness with which each merchant is scrutinized, recording more information that is unique to their industry, location, and business management.

“Lenders will realize that in order to make a credit decision, we need to have access to very deep, detailed, and wide time-framed data of our customers; and we need to be able to process it in an automated and efficient way,” Snitkof asserted.

Still, while it looks like data is due to play a larger role in the future, Heather Francis took care to mention that important data is currently missing from their metrics. Credit and delinquency reporting are on hold, just as rent is paused for many tenants; meaning that in two or three months, many funders could be in for a surprise when they realize their merchant is having trouble.

Speaking on the Paycheck Protection Program as well as the Economic Injury Disaster Loan, both Snitkof and Francis expressed that while it is good to see deposits for the government programs, questions must be asked regarding them. They can’t be viewed as revenue, since they do not reflect a business’s ability to generate revenue, said Snitkof, but rather they offer a chance to view how a company manages its cash-flow, with how they spread out PPP and EIDL funds being a key insight.

Looking forward, the panelists noted that the experiences of economic shutdown; PPP; EIDL; and how many business owners’ banks supported, or did not support, them could lead to a shift in how non-banks are viewed.

“It’s definitely a time and place for us to really highlight how our industry is placed to assist small businesses,” Francis stated. “We should really take this opportunity to expand on what we can do and how we can help. I think it’s our moment to shine because a lot of banks have pulled back on what they’re able to do in this time.”

This pulling back by banks became clear during the peak of the PPP application period, when many business owners complained of a lack of or poor communication between themselves and the bank they applied to. Highlighting the importance of the customer experience, Snitkof pointed out that this aspect of alternative finance may only become more important as time goes on.

“We have this golden age of customer service. Customers are going to demand good funding, on the right terms, with full transparency, with good speed of decisioning, with a good relationship, and if they can get that from someone who is not a bank, but is an alternative finance provider, then that’s a great funding scenario for them.”

More generally though, the panel ended on a note of ambiguity over the future, with the speakers agreeing that what comes next will be uncertain and challenging, as Francis reminded the audience of what 2020 has in store: a presidential election and a possible second wave of the novel coronavirus.

But there may also be opportunity for those who are there to take it, according to Snitkof, who finished off by saying that “the silver lining of what we’ve just been through as a country, as a world, as an industry, is that all those things that were good enough, they were on pause. So it’s given people the time and space to reimagine what they could do and actually look at the capabilities that we’ve available to us and say ‘maybe we can provide a great personalized customer experience to every small business and customer out there. Maybe we can be more automated and data-driven in our decisions. Maybe we can actually extend better terms on financing to people because we’re able to determine risk better, and optimize our market spend and cost of capital better.’ One of the good things about a disruption is it takes away a lot of the stuff that was good enough; a lot of those sacred cows are now ready to be disrupted and maybe in a few years we’ll see rapid innovation along those lines.”