Survey Shows Security Costs and Compliance a Growing Concern for Lenders

BillingTree, in partnership with American Banker, recently conducted an annual survey of lending institutions in the U.S. One of the goals for the survey was to examine the top operational issues and concerns that lenders had, and then explore how this related to the things they valued most about their payment processing partners.

One of the key findings was that respondents identified fraud mitigation/data security as the most important factor affecting business growth. Compliance policy/procedure implementation/maintenance and increased operating expenses were tied as the second-most cited critical factor and loan technology upgrades/integration ranked a close third.

Respondents were asked to rate the list of potential concerns related to current lending operations. On a scale of 1 (lowest, least important) to 10 (highest, most important) fraud mitigation/data security received an average rating of 7.7, with more than a quarter of respondents (28 percent) giving fraud mitigation a rating of 10. The combined tie of compliance policy/procedure implementation/maintenance and increased operating expenses both received a mean ranking of 7.3. Loan technology upgrades/integration was rated at a 7.

Considering the number of high profile security breaches in the past few years, the concern over data security comes as no surprise. Large security incidents recently included JPMorgan Chase’s August breach affecting 76 million households and seven million small businesses, Home Depot’s breach of 56 million card account records, and the Sony hack discovered in November, in which emails were stolen and hard drives destroyed.

Compliance concerns always loom large among consumer lenders, but the emergence of the Consumer Financial Protection Bureau (CFPB) and its recent enforcement actions have lenders on high alert. The CFPB has not yet issued its new rules on debt collection, but it has begun to issue enforcement actions. The resulting ambiguity and uncertainty is reflected in lenders’ concerns about compliance policy and procedures.

Managing operating costs in an environment where there is constant pressure to offer better service at a lower cost while maintaining compliance is a constant challenge for lenders. Online and mobile payment technologies factor heavily into lenders’ plans to enhance payment effectiveness. This in turn impacts operating costs while supporting compliance with payment and collections regulations.

While consumer lenders see opportunities for growth, they must also be mindful of growing risks to their organizations from fraud/data security, uncertainty related to regulation and compliance, and continuous pressures to control costs.

The biggest obstacles are the ‘unknowns’ associated with regulatory compliance and the potential risks. The biggest opportunities lay in leveraging technology to lower costs, while boosting customer loyalty through ongoing communications. Communications and collections technologies are useful tools in overcoming obstacles and capitalizing on opportunities, which is why payment processing partners as seen as strategic allies.

BillingTree conducted the survey of lending institutions in the U.S. The purpose of the survey was to understand the usage of payment technology solutions and the priorities of decision-making consumer lending professionals. As the industry navigates a shifting business and regulatory environment, survey results will help to establish a benchmark to examine trends year-over-year.

To read more of the survey results, you can access the entire report, 2015 Consumer Finance Business Strategy and Technology Survey here.