NEW YORK, N.Y. — During uncertain times, a laser focus on consistency is the key to delivering growth and stability, BHG Financial COO Tyler Crawford said today at Fintech Nexus USA 2023.
He shared his thoughts during Double Down on What You Know, a discussion with Fintech Nexus co-founder and chairman Peter Renton.
These strategies have helped BHG create an end-to-end financial ecosystem driven by a strong product line and a focus on customer experience. The end result? Records in originations, revenue, and income.
Crawford is one of several BHG executives appearing at Fintech Nexus USA 2023.
Co-founder and CEO Al Crawford explored Credit & Underwriting Best Practices for Uncertain Times and his lessons learned during difficult periods on Wednesday morning.
Bank Division president Meghan Crawford-Hamlin joins a panel on community banks and credit unions on Thursday afternoon at 3:15. The group discusses fintech bank partnerships and how the relationship affects the two.
CFO Dan McSherry is one of several lending representatives who will speak about the importance of diverse funding sources on Thursday morning.
Crawford said that fintechs have had to adjust to rapidly-changing circumstances over the past year. The liquidity seen two years ago was out of control. The interest rates could be the lowest of our lifetimes. The focus was on growth and leveraging cheap capital—fast-forward one year to surging inflation and the fastest-moving interest rates in four decades.
“With that suck of liquidity, the business changes drastically,” Crawford said.
BHG’s response? Focus on the bottom line. Improve efficiency. Ensure there is enough liquidity to last long-term.
Crawford said these conditions limit who you can pursue. Test and learn which customers can absorb the higher rates you must pass on to them. Develop different strategies for different customers. Do it well, and you maintain margins and grow your business.
BHG’s three pillars of success
Crawford said BHG’s backbone is its three-pillared funding strategy. The first is a marketplace where over 1,500 banks buy up to $20 million in assets daily. BHG added ABS markets and committed capital initiatives
“In this market and any market, that liquidity and that diversification is probably the biggest competitive mode for that lender today,” Crawford said.
That variety allows lenders to swim in both ends of the pool, albeit cautiously. In tighter times, increase the focus on quality over quantity. There’s less margin for error. But there’s still an opportunity to test by working with one of those 1,500 institutions on offerings like longer-term loans of up to a decade.
The overall focus is on finding higher-quality borrowers. Crawford estimates that BHG has similar lead volumes today than a year ago. They fund 20% fewer. Don’t acquire customers in bulk.
Crawford advised focusing on bottom-line growth from the beginning. Don’t get swept up in the mania of customer acquisition in easy times. Keep those blinders on.
Investing in fintechs, adding new products
BHG invests in select emerging fintechs. Crawford advises them to have up to 18 months of liquidity as now is not the best time to raise more.
It’s also a challenging time to introduce new products. You want to focus on the core revenue generators while at the same time being Netflix and not Blockbuster. Maintain balance by taking the same prudence you applied to lend and deploying it in product development. Ask more questions. Take your foot off the gas.
Crawford said that approach allows lenders to maintain their core while taking the odd measured bet. Execute the blocking and tackling, the “Xs” and “Os.” It’s not the exciting 30-yard bomb, but consistent, three-yard gains still produce touchdowns.
