If banks are to stay competitive in the near future, they will need to change some of their operating procedures. That’s easier said than done when you’re managing 200,000 people across the country. It’s even harder when that massive work force has been using the same methodologies for years. According to Phin Upham, who recently spoke at the Milken Institute Global Conference, new opportunities are presenting themselves for banks to service large segments of the population traditionally priced out by high interest rates.

Data Driven Approach

Phin Upham believes there are two basic problems: people living paycheck to paycheck can’t monitor their money fast enough, and legislation is not based on any kind of data. Banks must comply with strict regulations that require cash on hand to stave off another financial crisis, among other restrictions. This is how well-meaning legislation can cripple the lending capabilities of an institution. Simply put, risking money on poor credit buyers is no longer feasible when you can’t afford to take on risk.

This is where fin tech opens up a new segment of lending. Right now, the smartphone is the fastest channel for delivering this new method of banking. The mobile segment allows for people to transmit loans that are much lower than a conventional loan, with interest rates that are better than what customers find in payday loans. Real-time transactions and banking will present real-time data to the customer, who can better manage his or her money and prioritize spending.

Ignoring the growing problem consumers face with debt will only further erode the middle class.