Capital One’s sixth annual survey at SFIG Vegas 2019 found that an overwhelming majority (90%) of survey respondents feel that adopting new technologies will be important to preparing their businesses for the next economic cycle.
The survey also found that machine learning and artificial intelligence (35%) leads the charge as the technologies offering the greatest potential to the industry. Following closely behind were blockchain (23%) and online and mobile payments (19%).
“Falling in line with our expectations, technology will continue to have an impact on the financial world. What’s most interesting to see is that more than one-third of the survey respondents may be channeling resources into machine learning and artificial intelligence,” said David Kucera, senior managing director and head of the Financial Institutions Group at Capital One. “Whether that means the industry will utilize AI to determine who they lend to or improve compliance functions, it will likely influence the way these businesses function, especially as the economy evolves.”
The survey also revealed that ABS professionals believe the biggest risks to their businesses are uncertainty around regulatory risk and increased credit risk, both at 29%. However, despite regulatory risk being a top concern, the industry’s apprehension has nearly cut in half over the last two years. In 2018, 48% noted regulations were the biggest risk to their businesses while 58% thought so in 2017. Additional top-of-mind concerns for 2019 include increases in interest rates (18%) and increased competition (17%).
With regulatory and credit risks casting a dark cloud over the industry, it is understandable why overall optimism around credit quality is low. The survey results show 55% of the industry expects that credit quality will worsen while only 5% expect it to improve and 40% expect it to remain the same.
Although there are risks, respondents still expect growth within the industry. Twenty percent expect that both unsecured consumer loans and esoteric assets will have the highest growth in the coming year. However, ABS professionals have very low expectations for ABL and factoring (11%), which is a 7% decrease from 2018.
This year, 41% of ABS professionals expect that underwriting standards will remain the same while 34% expect that they will loosen, which is a 20% decrease from 2018.
Capital One conducted a proprietary survey of conference attendees at SFIG 2019 from February 25-26, 2019 in Las Vegas, Nevada. Survey respondents included professionals from across the asset-backed securities industry
