Direct Debt Payoff Is Benefiting Consumers and Banks Alike

January 13 , 2021

SHARE ARTICLE

When a global pandemic swiftly changed the world in early 2020, many in the country suddenly found themselves without a steady income and facing financial insecurity. While cities shut down, storefronts closed their doors, and uncertainty swept the nation, millions of people were—and are—in desperate need of financial support for the months ahead. 

Banks quickly saw the number of new loan applications soar as people sought out assistance to stay afloat. A recent study by Bankrate found that 38 percent of people applying for these personal loans intended to use the loan funds to pay off outstanding debt. With a limited income, debt consolidation loans became a practical solution for those looking for opportunities to save where they could. 

With this economic uncertainty likely to remain for the near future, it continues to become increasingly important for banks and financial institutions to deliver the financial services that consumers need. Direct debt payoff takes immediate precedent.

How does direct debt payoff work?

While applying for direct debt consolidation, consumers are required to allocate a fixed percentage of their loan funds for direct debt payoff to their creditors. All qualified applicants are presented with a pre-approved loan offer with various rates and terms.  

A consumer has to meet the minimum payoff amount in order to qualify for direct debt payoff to supported creditors. Unlike standard unsecured personal loans where funds are deposited directly into the consumer’s account to pay creditors themselves, direct debt payoff disburses funds to the consumer’s verified creditor accounts. Any remaining balance of the accepted loan offer is credited to the consumer’s bank account. They can then track the movement of their funds and payoff status for their debts.

How does direct debt payoff benefit banks and financial institutions?

It’s clear that direct debt payoff benefits consumers, but what about the financial institutions offering a direct debt payoff program? 

Reduces overall risk 

Direct debt payoff is designed to pay off debts that consumers directly own under their names with Know-Your-Consumer (KYC) verification fulfilled during the payoff process. The funding payoff is directly controlled by the lender for specific usage which mitigates the risk of debt stacking. 

Enables targeted marketing 

Direct debt payoff can be positioned as a credit product that helps bank consumers take out a new loan without increasing their debt-to-income ratio while reducing their overall debt balance. 

Simplifies the funding process 

The payoff process disburses the loan balance directly from the bank to the recipient’s selected creditors, only crediting any remaining balance into a consumer’s bank account.

Features that drive success for direct debt payoff programs

The maturation of debt consolidation loans will be one of the core drivers in the unsecured personal lending market going forward. Providers that are able to offer an end-to-end omnichannel solution with a modern user interface, digital identity verifications, and secure funds disbursement will see market share increases.

The key is to find a banking technology provider that can orchestrate a user-centered consumer experience together with the payoff technology that can integrate with a bank’s preferred servicing platform on the back-end. The platform also needs to enable consumers to monitor their fund movements and the payoff status for their respective debts. 

Implementing a direct debt payoff program

It is crucial for financial institutions to build products that are inclusive and allow for greater access across the financial wellness spectrum. Adding direct debt payoff to a bank’s product offering will not only grow its unsecured lending portfolio with smart and lower risk loans, it will contribute to greater financial wellbeing for its consumers — a top priority for financial institutions.

Most of these financial institutions will leverage a network of partner providers to solve these challenges. Finding the right partner can make or break any cloud banking innovation. For many of these financial institutions, adding a direct debt payoff program to their personal loan portfolio simply comes down to the banks appetite to build, buy, or partner with a provider. 

Given the current environment and steady rise of these loan products, many banks will opt to partner with a proven technology provider to go to market quickly and efficiently.

Amount is powering the future of modern banking by combining modern digital banking experiences with the expertise and insight from over $7.5 billion in lending transactions. By leveraging data integrations and proprietary models to identify risk, Amount’s platform empowers your financial institution to grow the right way. 

Amount helps partners go digital in months—not years—with omnichannel retail banking experiences and a robust point-of-sale financing product suite underpinned by platform features including fraud prevention, verification, decisioning engines and account management. 

Amount partners can optimize performance across product categories by tapping into various service offerings including customer acquisition, funnel and performance assessments, and risk analytics. Amount clients include financial institutions collectively managing close to $2T in US assets and servicing more than 50 million U.S. customers. 

Learn more about Amount’s new direct debt payoff technology and make more possible for your customers.

Download our one-pager today!

amount-solutions-brief-direct-debitDownload Now

Footnotes

The information in this post is provided for informational and advertising purposes only. Amount's service may vary for each customer. For more information, email us – media@amount.com.

1 2
Amount

Built by lending industry experts, Amount’s platform has been tested, refined, and optimized to power modern banking experiences. Our omnichannel solutions enable frictionless consumer application and servicing so your customer can bank when they want and where they want. Our enterprise bank-grade infrastructure and compliance ensure that your bank is protected while powering profitable new growth opportunities.

Direct Debt Payoff Is Benefiting Consumers and Banks Alike

Posted by Amount on January 13 , 2021
Amount
Find me on:

Direct Debt Payoff Is Benefiting Consumers and Banks Alike

When a global pandemic swiftly changed the world in early 2020, many in the country suddenly found themselves without a steady income and facing financial insecurity. While cities shut down, storefronts closed their doors, and uncertainty swept the nation, millions of people were—and are—in desperate need of financial support for the months ahead.

Banks quickly saw the number of new loan applications soar as people sought out assistance to stay afloat. In fact, a recent study by Bankrate found that 38 percent of people applying for these personal loans intended to use the loan funds to pay off outstanding debt. With a limited income, debt consolidation loans became a practical solution for those looking for opportunities to save where they could.

With this economic uncertainty likely to remain for the near future, it continues to become increasingly important for banks and financial institutions to deliver the financial services that consumers need. Direct debt payoff takes immediate precedent.

How does direct debt payoff work?

While applying for direct debt consolidation, consumers are required to allocate a fixed percentage of their loan funds for direct debt payoff to their creditors. All qualified applicants are presented with a pre-approved loan offer, and they are able to choose from various rates and terms.  

Based on the fixed percentage required for debt consolidation, a consumer has to meet the minimum payoff amount in order to qualify for direct debt payoff. Unlike standard unsecured personal loans where funds are deposited directly into the consumer’s account to pay creditors themselves, direct debt payoff disburses funds to the consumer’s verified creditor accounts. Any remaining balance of the accepted loan offer is credited to the consumer’s bank account. They can then track the movement of their funds and payoff status for their debts.

How does direct debt payoff benefit banks and financial institutions?

It’s clear that direct debt payoff benefits consumers, but what about the banks and financial institutions offering a direct debt payoff program?

Reduces overall risk

Direct debt payoff is designed to pay off debts that consumers directly own under their names with Know-Your-Consumer (KYC) verification checks fulfilled during the payoff process. The funding payoff is directly controlled by the lender for specific usage which mitigates the risk of debt stacking.

Enables targeted marketing

Direct debt payoff can be positioned as a credit product that helps bank consumers take out a new loan without increasing their debt-to-income ratio while reducing their overall debt balance.

Simplifies the funding process

The payoff process disburses the loan balance directly from the bank to the recipient’s selected creditors, only crediting any remaining balance into a consumer’s bank account.

Features that drive success for direct debt payoff programs

The growth and maturation of debt consolidation loans will be one of the core drivers in the unsecured personal lending market going forward. Providers that are able to offer an end-to-end omnichannel solution will see market share increases. Combining this with a modern application interface, digital identity verifications, and secure funds disbursements will be a requirement for any successful debt consolidation program.  

The key is to find a banking technology provider that can orchestrate a user-centered consumer experience together with the payoff technology that can integrate with a bank’s preferred servicing platform on the back-end. The platform also needs to provide consumers with the transparency to access the movement of their funds and the payoff status for their respective debts.

Implementing a direct debt payoff program

It is crucial for banks and financial institutions to build products and services that are inclusive and allow for greater access across the financial wellness spectrum. Adding direct debt payoff to a bank’s product offering will not only grow its unsecured lending portfolio with smart and lower risk loans, it will contribute to greater financial wellbeing for its consumers — something that is a top priority for financial institutions.

Most of these banks and financial institutions will leverage a network of partner providers to solve these challenges. Finding the right partner can make or break any cloud banking innovation. For many of these financial institutions, adding a direct debt payoff program to their personal loan portfolio simply comes down to the banks appetite to build, buy, or partner with a provider.

Given the current environment and steady rise of these loan products, many banks will opt to partner with a proven technology provider to go to market quickly and efficiently.

Amount is powering the future of modern banking by combining modern digital banking experiences with the expertise and insight from over $7.5 billion in lending transactions. By leveraging data integrations and proprietary models to identify risk, Amount’s platform empowers your financial institution to grow the right way.

Amount helps partners go digital in months—not years—with omnichannel retail banking experiences and a robust point-of-sale financing product suite underpinned by platform features including fraud prevention, verification, decisioning engines and account management.

Amount partners can optimize performance across product categories by tapping into various service offerings including customer acquisition, funnel and performance assessments, and risk analytics. Amount clients include financial institutions collectively managing close to $2T in US assets and servicing more than 50 million U.S. customers.

Learn more about Amount’s new direct debt payoff technology and make more possible for your customers.

Topics: Product