All new technology is born out of purpose. For example, search engines were created to sort through the massive amounts of data online. And with every upgrade or enhancement, technology compounds itself to create something better. And on and on it goes.
Even in just the last 10-15 years, think of how much technology has evolved to change our daily lives:
- DVDs vs. streaming services
- Hard drives vs. cloud storage
- Dial-up vs. 4G
- Blackberry vs. smartphones
- Printed books vs. digital
The cloud has also dramatically changed the way loan trading is done today. Over the last six years, we have seen a drastic increase in marketplace lending, with growth of nearly 150% on a compound annual basis, putting marketplace lending around a $300 billion industry. This online presence in the lending space has created opportunities for community banks and credit unions. The economy is creating obstacles with rapid interest rate increases to fight inflation, as well as higher rates on deposits that is squeezing interest income. As a result, FIs are fighting the liquidity challenge, which is making strong credits readily available for participation.
As the economy continues into uncharted territory, we see many banks and credit unions keeping their options open when it comes to new tools that could help them expand their network beyond local geography and diversify their portfolio.
A cloud-based platform allows your institution to have flexibility as strategic initiatives change throughout the year. In the past, the only way loan trading was accomplished was strictly through a “buddy network,” whether from relationships you made in banking school, former coworkers at a previous bank or credit union, or even brokers. All of these are still happening today, and it’s vital that relationships stay at the heart of community financial institutions. It’s also key to have additional tools in your toolbelt to help facilitate buying, selling, and loan participation. With an online loan trading platform at your fingertips, there are several benefits your financial institution can gain:
- Better serve the needs of your community – Field requests that may lie outside the scope of your current credit box to help borrowers in need of funding.
- Expand your network – Discover other institutions with similar goals and models that are located miles away.
- Diversify your portfolio – Grow a certain loan asset type or reduce part of your portfolio to offset risk.
John Wooden is one of the most famous college basketball coaches of all time. He once said, “We can have no progress without change, whether it be basketball or anything else.” As the financial space continues to adapt to the technology age, we will continue to see things evolve with marketplace lending. Whatever circumstance is present at the time, an online loan trading platform gives your institution the freedom to be in the driver’s seat as you navigate opportunities for your institution.
Learn more about how Jack Henry™ can help you simplify the loan trading process today.
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