From concept to category-defining product
How TruStageTM conceptualized then created the first-of-its-kind digital lending insurance product – Payment Guard Insurance
In the ever-evolving landscape of digital lending, the fusion of technology and finance has ushered in a new era of convenience, accessibility and speed. The proliferation of application programming interface (API) components has revolutionized integrated payment processing, laying the foundation for the seamless delivery of financial products and services.
However, amid this meteoric rise in digital lending capabilities, a critical gap in the consumer credit ecosystem emerged – one traditionally filled by lending insurance. This article delves into the transformative world of insurance in the digital lending ecosystem, shedding light on the pivotal role that digital lending insurance plays in safeguarding the interests of both borrowers and lenders.
Filling the gap in digital lending insurance
Digital lending insurance has emerged as a solution to growing consumer concern about loan repayment, offering benefits to both lenders and borrowers.
2.1% of people who own a credit card are behind on their payments, and it’s predicted this number will rise to 2.6% by the end of 2023.1 This rise in delayed payments is happening across many loan types – credit cards, unsecured personal loans and auto loans – as consumer demand continues to stay strong despite rising prices. The percentage of borrowers 60+ days past due is expected to climb to 1.95% in Q4 2022 and is expected to drop further until finishing 2023 at 1.90%1.
With years of economic turbulence, consumers have built up financial stress that will likely continue with the high Consumer Price Index (CPI), high inflation rates and fluctuating job market2.
TruStage’s innovative solution to consumer concerns
Understanding this financial stress, TruStage has created a first-of-its-kind digital lending insurance product designed to promote financial resilience for lenders and borrowers.
TruStage Payment Guard Insurance is a pioneering innovation in the digital lending insurance space, with the intent to help protect borrowers in case of covered job loss or covered disability. It’s designed to help enhance the overall consumer experience by reducing the risks associated with loans, making digital lending platforms more attractive to potential borrowers.
Loans with Payment Guard are designed to be better for lenders and borrowers. See the benefits for yourself:
· Differentiate your loans. Increase originations.
· Improve portfolio health. Attract more capacity.
· Build lender confidence. Expand underwriting.
· Decrease collection burden. Reduce operating expenses.
· Add additional value to your business model.
· Lightweight integration. Rapid time to market.
Ultimately, by including digital lending insurance as a component of their lending solution, digital lenders, fintechs and other financial institutions alike may create a safer, more reliable, people-centric ecosystem.
The bond between insurance and lending
To understand TruStage's innovative solution to consumer concerns, you should know the relationship between insurance and lending. It will help provide valuable insights into the evolution of these industries and the challenges consumers have faced over the years.
Lending and insurance go hand-in-hand
For years, insurance has served as a crucial framework essential for the financial well-being and strength of both lenders and borrowers. Without insurance, most lenders would be forced to work with highly restrictive credit qualifications, and borrowers would find it difficult to secure funding. Debt protection, credit insurance, guaranteed asset/auto protection (GAP), personal mortgage insurance (PMI), warranties/mechanical repair coverage (MRC) and various specialized safeguards have evolved into an indispensable part of the lending industry’s foundation.
Limitations of legacy lending insurance
Most legacy lending insurance policies were developed for a highly intermediate flow – with loan officers, salespeople, financial advisors and mortgage professionals who are compensated for the upsell.
This added friction (and misaligned incentives) is not compatible with digital consumers who require simple and fast interactions.
Emergence of digital lending
Digital lending has grown quickly but still has plenty of room to mature. This modern approach to lending is more inclusive compared to legacy lending, extending credit to more of the population. The fast-paced growth of digital lending has been spurred by five drivers in the lending industry.
1. Expectations of digital consumers: We live in a world of consumers who have adjusted to the “Amazonification” of products and services. Consumers today require speed and convenience that come with digitally native experiences.
2. E-commerce growing in popularity: Commerce as a whole has significantly shifted online. This trend became even more pronounced due to the COVID-19 pandemic. Now e-commerce accounts for the majority of all consumer purchases.
3. Development of digital banking technology: The components of digital lending – from origination to servicing – are becoming readily accessible to product teams. This reduces the time for lenders, online banks and even popular consumer platforms like Apple Pay Later to offer credit to their users.
4. The rise of digitally native lenders: There’s been a surge of digitally native specialty lenders that have emerged over the past few years. Providing loans across every traditional lending category, as well as new products like buy now, pay later (BNPL).
5. New data changes lending strategy: Recent innovations have created a new class of digital lenders that have the opportunity to use data from cashflows in and out of checking accounts to understand the borrowing capacity of an individual. This has opened the floodgates to provide credit digitally to a larger population of borrowers.
The evolution of lending and insurance into the digital space created a gap in consumer credit needs that needed to be filled. The journey from concept to the creation of Payment Guard serves as a testament to the power of innovation and dedication in the world of digital lending insurance. Through visionary thinking and unwavering commitment, TruStage has not only redefined a product category but has also paved the way for a more secure and convenient lending experience for countless individuals.
Danielle Sesko is the Director of Product Management at TruStage. Danielle has been with TruStage for over 10 years and has held a variety of roles ranging from financial leadership to transformation and product development. Prior to joining TruStage Danielle spent her career in financial services and Mergers and Acquisitions. Danielle currently leads TruStage’s Digital Lending Insurance initiative which is focused on creating new digitally native products for new markets.
2Bureau of Labor and Statistics, The Employment Situation, October 2023
TruStageTM Payment Guard Insurance is underwritten by CUMIS Specialty Insurance Company, Inc. CUMIS Specialty Insurance Company, our excess and surplus lines carrier, underwrites coverages that are not available in the admitted market. Product and features may vary and not be available in all states. Certain eligibility requirements, conditions, and exclusions may apply. Please refer to the Group Policy for a full explanation of the terms. The insurance offered is not a deposit, and is not federally insured, sold or guaranteed by any financial institution. Corporate Headquarters 5910 Mineral Point Road, Madison, WI 53705.