8OCTOBER 2019Key Elements of Backup Servicing for Fintech CompaniesBy Larry Chiavaro, EVP, First AssociatesIt's common knowledge that selecting the right servicing partner is critical in achieving success for any Fintech. What some people don't understand in this sometimes volatile industry, however, is the importance of quality backup servicing. The dynamics of backup servicing are steadily changing through technology, out-of-the-box thinking, and a keen focus on supporting our clients' needs. To truly understand what is needed to create a reliable backup servicing contingency, it is essential first to define the role of a backup servicer:A back-up servicer is a service provider who agrees to take over the servicing of a portfolio of assets on the occurrence of certain trigger events, most common the failure of the existing servicer to perform or the servicer's insolvency.This sounds simple, like a straightforward task ­ but it isn't. The promise of being able to effectively take over the servicing of a portfolio upon a trigger event is not the same as actually having the experience, security, capacity, and infrastructure to correctly onboard and manage that portfolio in an expeditious and compliant manner.So, while every Fintech is different, below are some common factors to look for when creating robust backup servicing:Asset ExperienceWould you hire a plumber to fix your air conditioner? Of course not. When looking for a backup servicer, asset experience matters. Companies historically focused on business loans, credit cards, or other asset classes will have systems, compliance programs, and people relevant to those assets. For a Fintech, business experience matters. Card experience works for cards. If you work with unsecured consumer loans, you will need a company experienced in that asset class. You don't want your portfolio to be your backup servicer's market entry point.ScalabilityA reliable backup servicing program requires a servicer with the ability to scale up quickly. Servicers with a SaaS focused, cloud-based platform can scale up much more rapidly than a Larry ChiavaroIN MYOPINION
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