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The Lending Brief (1)

Welcome to The Lending Brief,
I just returned from three days at FinovateFall in New York.
Today’s issue kicks off with agentic AI - with fraud, SMB lending, and embedded finance takeaways to follow in the coming days.
Want the deeper dives? 👉 Follow my newsletter on LinkedIn.
This week: Three insights. Three minutes. Zero fluff.
Day 1: AI Hype vs. Reality
The conference buzzed with AI demos, but the numbers tell a tougher story: 95% of pilots in banking show no ROI, even though a third of institutions already have projects underway.
Jason Henrichs of Alloy Labs called it “incrementalism” — banks are comfortable testing but slow to scale. AI is still too often treated as automation. But large language models don’t behave like traditional software; they’re probabilistic, not deterministic. Expecting them to fully replace loan officers is a recipe for disappointment.
The real opportunity lies in augmentation - making people faster and sharper. Sherry Wu of University of Michigan Credit Union shared how their chatbot Vic began as a fraud deflector but quickly became a trusted teammate. It didn’t replace staff - it freed them to focus where they matter most.

Day 2: The SMB Lending Wake-Up Call
Small business optimism is rising: the NFIB Index - the bellwether tracked by the Fed and Congress - just hit its highest since early 2023. Yet borrowing demand is at lows not seen since the pandemic.
Fraud is part of the story - a fake ID can be bought online for $50, hologram included. Add AI-driven spoofs and shell companies, and the loan intake step is more exposed than ever. At the same time, many community banks and credit unions are navigating outdated systems and looming leadership transitions, with 80% of community bank CEOs expected to retire within five years.
Meanwhile, SMBs - 36.2M strong and employing nearly half the U.S. workforce — are carrying more debt, while satisfaction with both banks and online lenders has dropped by double digits. Credit is tight, rates are high, and speed matters. Fintechs are winning share by moving faster, even at higher cost.

Day 3: Embedded Finance Moves Center Stage
Embedded finance is no longer an experiment — it’s strategy.
Norah Coelho of JPMorgan stressed that it complements branches, not replaces them. JPMorgan is opening a new branch at Howard University even as it integrates into digital platforms. Both channels matter.
Lauren McCollom of Grasshopper Bank explained how they scaled to nearly $2B in assets by making embedded partnerships a core focus, meeting clients where they already work. Best practice: go deep in a few industries - like healthcare, or hospitality - instead of trying to compete on footprint.
For Amanda Swoverland of Unit, the frontier is lending. Embedded payments and deposits are valuable, but credit is where banks and platforms create the most impact - if underwriting and compliance are built in from the start.
And the data landscape is shifting fast. With the Consumer Financial Protection Bureau’s (CFPB) 1033 rule finalized in 2024 and set to take effect in 2026, consumers will be able to carry their financial data across providers. As Mirella Reznic of Farmers Insurance Credit Union put it: “If our members can take their data with them, we need to be ready to use it in a way that builds trust and keeps them with us.”

🤔 What does this mean for lending?
SMBs are optimistic, but they need fast, confident credit to keep growing. For community financial institutions, the path forward is clear:
Competition is shifting. The rival isn’t across town - it’s the fintech app in your borrower’s pocket.
Community is evolving. Keep local ties, but sharpen focus on SMBs and younger, digital-first entrepreneurs.
Pilots must turn into orchestration. Success isn’t one AI test or one tool - it’s a coherent process where intake is faster, fraud checks are sharper, and staff can explain every decision.
Geography isn’t enough. Many SMBs start digitally - in QuickBooks, Square, or Shopify - before they think of a branch. By decade’s end, FIs need to meet them there.
Open data = portable trust. With 1033 taking effect in 2026, borrowers will carry their data with them. Institutions that can use it to simplify credit decisions will stand out.
Depth beats breadth. Choose one or two industries you already serve - restaurants, contractors, healthcare practices - and integrate into their digital tools.
Compliance is an asset. Embedded finance isn’t lighter-touch. Partners and borrowers want confidence you can deliver KYC/AML rigor inside their workflows.
💡Key Takeaway
Across all three days, one theme stood out: AI isn’t replacing loan officers — it’s augmenting them.
And borrowers are demanding it: nearly half of loans are now disbursed instantly, one in four expect funds in under 30 minutes, and 73% are willing to pay for that convenience.
Takeaway: Efficiency and urgency win - resolving application issues quickly and moving from approval to funded dollars without delay.
🙌 Help Us Grow
Know someone in lending who’d benefit from this? Forward the brief - or hit reply if there’s a topic you want covered.
📅 Next newsletter drops Tuesday, 09/16
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