Credit unions
Know what you're buying when you fund loans originated by fintech partners.
The landscape
Credit unions increasingly fund consumer loans originated by fintech partners, through loan purchases and participations. That puts the credit union's balance sheet behind someone else's underwriting, fraud controls and servicing. Our founder ran credit at a lender whose funding partners include credit unions, so we know what those partners need to see.
Where we help most
- Diligence on fintech partners and the loans they originate
- Evaluating loan-purchase and participation terms
- Monitoring purchased-loan performance against expectations
- Pricing and policy for direct consumer lending
Use cases for credit unions
Lending and credit risk
Credit policy design and evaluation
Design a credit box, or test an existing one: who you approve, at what limit, with what verification, and how the application funnel and offers shape who applies. We measure which rules actually rank-order risk and what each change would do to approvals, losses and return.
Pricing and unit economics
Set prices from loss-adjusted returns, not a competitor's rate card. Risk-based pricing, price response and adverse selection, channel and acquisition cost, and return by segment.
Loss forecasting and stress testing
Forecast losses that management, auditors and examiners will accept. Vintage and roll-rate forecasting, CECL reserve review, macro scenarios and stress testing.
Competitive and market analysis
Know what competitors are doing from what they have to disclose. Public filings, ABS trust performance, call reports, BDC marks and changes in lenders' published credit criteria.
Capital markets and partnerships
Bank–fintech partnerships
Design or evaluate a partnership between a bank or credit union and a fintech originator. Our founder has been on both sides: buying fintech loans at a bank, and restructuring bank partnerships as the fintech.
Forward-flow deal design and evaluation
Structure or evaluate an agreement to sell or buy loans on an ongoing basis. Eligibility criteria, pricing mechanics, concentration limits, performance triggers, servicing terms and reporting.
Portfolio valuation and sales
Price a whole-loan portfolio to buy, sell or mark. Loss, prepayment and cash-flow assumptions from tape-level data, diligence on the originator and its servicing, and a clear read on what a price implies.
Case studies
Rebuilding credit, pricing and modeling to support 4x origination growth
A BlackRock- and TruStage-backed personal lender with $6B+ originated since inception, funded through credit union and institutional partners, needed credit infrastructure built for growth and investor scrutiny.
Making the case for a bank's push into unsecured lending
A super-regional bank weighing more unsecured consumer lending needed a quantitative answer on through-the-cycle returns, and a way to grow quickly.
Credit frameworks for new products and loss forecasting for a $50B+ consumer book
Launching new consumer products, including education refinance and point-of-sale financing for the Apple iPhone Upgrade Program, while owning CCAR and loss forecasting across the consumer portfolio.
Cutting charge-offs by $10MM a year through collections strategy
Building a centralized credit analytics function across all US consumer products and using it to rethink collections.
Related analysis
Are banks outsourcing lending to fintechs?
During the pandemic, the fastest-growing loan category at large US banks was loans to non-bank financial institutions, which mostly means warehouse lines to fintechs. Banks increasingly grow in assets where they don't own the customer.
Is there such a thing as too much deposit?
Deposit growth outpaced loan growth, loan-to-deposit ratios fell, and NIM compressed. The loans that did grow came from fintech warehouse lending and riskier unsecured consumer credit. Then the pandemic turned the trend into a flood.
The dilemma in lending
The best credit comes from borrowers who don't need the money. That's an oxymoron, and yet true. The opportunity is in borrowers with an urgent need today and strong income prospects tomorrow.
Have a credit question with money behind it?
A portfolio to value, a credit box to rethink, a funding partner to convince. Send a short note and we'll reply within one business day.
Or connect on LinkedIn.