The materials available in this article are for informational purposes only and not for the purpose of providing legal advice. You should contact your own advisors with questions regarding the content herein covering financial institution risk management and automated underwriting software. The opinions expressed in this article are the opinions of the individual authors and may not reflect the opinions of MeridianLink, Inc.
Millennials and Gen Z are the two fastest growing segments for financial asset acquisition and share of total origination activity.
They also have a high proficiency in and preference for digital-first experiences. In fact, a recent report found digital banking is non-negotiable for 80%+ of Gen Z and millennials, with modern digital experiences as the most cited factor in their decisions on where to bank. Over half of each demographic designated these experiences as a top need.
However, offering a digital experience alone isn’t enough to attract and retain these generations’ business. To solidify these relationships, you need automated underwriting software and a lending risk management strategy that balances speed and compliance, all while making the borrowing process simple, transparent, and fast.
Unlocking Consistent Growth Through Modernized Underwriting & Faster Decisions
82% of Gen Z and 62% of younger millennials are willing to switch banks for improved digital services. As digital transformation in banking and lending flows continues to advance and options keep expanding, tolerance for friction and slowdowns is steadily declining.
Lenders should consider this alongside a few other key facts outlined by Experian:
- The peak of Gen Z is currently reaching age 18, the eligible age to acquire credit independently.
- Subsequent generational cohorts will come with a natural decline in people aging into credit eligibility.
- Credit-building products like secured credit cards and secured small-dollar loans are most popular among millennials
With these items in mind, lenders need to consider how they can leverage loan decisioning tools to safely increase lending opportunities among these key cohorts while balancing speed, fairness, compliance, and profitability.
How AI and Machine Learning-Powered Data Intelligence Can Help
It can often feel like you’re tasked with doing it all: serving your consumers, growing your business, and staying ahead of competitors, all within your defined risk tolerance and compliance regulations.
That’s why MeridianLink® Consulting offers Reveal Pro solutions. Between Decisioning Optimization and Advanced Analytics, these two distinct but highly integrated services combine data analytics and data science with a deep knowledge of the MeridianLink® decision engine and LOS to revolutionize underwriting—and the overall lending experience—through automation.
Using statistical analytics, Decisioning Optimization identifies key risk drivers and their thresholds from an optimized variable set to create comprehensive underwriting guidelines tailored to your lending strategy, credit policy, and risk appetite. These guidelines are fine-tuned based on credit decision simulations run on thousands of real loan applications and then implemented into an automated decision framework.
With your newly optimized decision engine in play, Advanced Analytics actively monitors automated decisioning rates and portfolio performance alongside your credit strategy and business goals. It uses this information—and data from macroeconomic shifts, changes to your consumer risk profile, and credit strategy updates—to deliver actionable insights, resimulations, and suggested underwriting guideline reconfigurations to maintain the best possible results.
The insights you receive with Reveal Pro solutions include:
- Trend analysis to uncover influential market patterns
- Credit demand to pinpoint credit product trends that inform outreach strategy
- Benchmark analysis to compare your FI’s performance with peers and find areas to refine
- Profile analytics to better understand consumer behaviors and circumstances for more personalized outreach
- Disparate impact analysis to help you more easily remain compliant with fair lending laws and regulations
And much, much more.
As for the results these solutions offer? Among them are:
- 40% to 75% auto-decisioning rates, creating the speedy, streamlined experience younger consumers expect.
- Higher origination volume as application abandonment dwindles.
- Enhanced risk profiling that translates to fewer delinquencies, reduced credit losses, and a resilient loan portfolio.
- Risk-based pricing and intelligent loan structuring that maximizes profitability while reducing risk.
- Cost-saving efficiency with lower underwriting expenses and smoother operations that set you apart from the competition.
Not to mention upwards of 300% returns on investment and consistent consumer satisfaction.
The Upsides Continue With the Custom Scorecard
With Gen Z currently working to build credit and many millennials in the process of improving credit, traditional credit pulls aren’t always the most reliable indicator of loan qualification within these expanding consumer segments.
Alongside Reveal Pro solutions that reduce risk and optimize underwriting automation, MeridianLink also offers a Custom Scorecard to help you further enhance your ability to safely expand loan volume among younger potential borrowers.
Using AI and machine learning, the Custom Scorecard aggregates application, consumer, credit, and performance data to pinpoint optimal predictive variables. These variables are analyzed to determine the probably of default, which is then converted into a credit score. Finally, that score is augmented by refined underwriting rules and implemented within your decision engine.
See how the Custom Scorecard helped one institution achieve 70% auto-decisioning among indirect loans. Read More
This empowers a more holistic view of each applicants qualification based on multiple alternate data sources, leading to:
- A score performance average 25% better than generic credit scores.
- Enhanced ability to rank order risk by categorizing loans with more positive expected outcomes into higher scores and loans with more potentially negative outcomes into lower scores—advancing your risk assessment.
- More efficient, effective origination with the ability to eliminate unnecessary rules and policies that no longer differentiate credit risk.
Discover how Reveal Pro services and the Custom Scorecard worked together to lift auto-approvals from under 2% to 17.5%, all within risk appetite. Learn More
Tap Into the Next Generation of Lending Growth With Confidence & Accuracy
Your next generations of borrowers are waiting. Reach them with speed, efficiency, and accuracy using MeridianLink® Consulting Reveal Pro services and Custom Scorecard. From personalized, expert-guided models to machine learning- and AI-driven analytics tailored to each borrower’s unique needs, you can finally move beyond one-size-fits-all decisioning and toward a smarter, faster, and more transparent lending strategy.
Explore how MeridianLink’s data solutions can help you unify systems, surface insights, and act on intelligence in real time.
