Long gone are the days when getting a loan was a long and tedious process. You no longer have to fill many forms in multiple institutions and wait for weeks for approval.
You also don’t have to manually go through various loan options to determine which financial institution is offering you the most lucrative loan. Besides saving the trees, both lending institutions and customers have something to gain from the rise of financial technology (fintech).
Here are six ways fintech has affected the lending industry positively.
1. Fintech has introduced new lending models.
In the past, banks depended on customer deposits to give loans. Now, fintech allows for peer to peer lending. The lenders gain interest for lending to customers who need it. The client who needs the loan does not deal directly with the individual giving them the money, but they transact through a peer-to-peer service.
The service determines the customer’s eligibility and sets the rates and fees. One great thing about such a model is that the interest rates may be lower than those from traditional lenders.
2. Reduced bias.
There have always been people who felt they were denied a loan because of bias. It may be true as traditional application forms require you to fill your age, gender, ethnicity, etc. Now, there is no such fear. The approval process relies on data automation.
The system compares pertinent information such as your income, other loans, your credit score, etc. to determine if you qualify. The other personal information doesn’t really weigh in on making the lending process fairer for everyone.
3. Perks and savings.
If a lending institution is a purely online company, then they make savings on rents and utilities, among other costs. To increase their savings further, if they automate their business processes, they may also have lower personnel costs. These savings can help them offer better interest rates to their customers. They can also enable them to provide perks to their customers, such as giving unsecured customer loans or loans without fees.
4. Increasing capital availability.
Compared to the past, banks have tightened their lending allowance. This means that fewer people can get loans from the banks even if they need it. Coupled with the strict requirements by traditional brick and mortar banks, many people were missing out on getting some much-needed help. That is where online banking and fintech lending institutions have been a godsend to customers.
Now, you don’t really have to go to the bank to get a loan. Online lenders like GlobLoans.com can lend you the cash you need even in the comfort of your home.
Fintech companies and online banks need only gain access to your financial information (with your permission), and you are well on your way to getting the money you need. Besides availing the capital customers’ needs, customers can receive offers from multiple lending institutions from one application form, enabling them to take the best loan for them.
Whatever the reason, be it getting a mortgage from a housing finance lending institution or student loans, fintech will help you get the best.
5. Ease the application process.
In the past, when applying for a loan, you had to go to the banks you wanted to get the loan from physically and fill in many forms. You also had to provide crucial information, such as utility bills and your bank statements.
Now, all that is in the past. For starters, thanks to autofill technologies, filling applications has never been easier. Secondly, the same application form can be submitted to multiple lending institutions simultaneously.
Finally, you can connect the institutions with your bank so that you don’t have to retrieve your bank statements yourself. All this means that you can quickly go through the application process and wait for the money.
6. More speed and security.
Fintech is leveraging new technologies such as Artificial Intelligence, data management, and blockchain to provide you with loans more securely and faster. Through AI and machine learning, the lending institutions are learning how they can improve their lending process and increasing their security measures to curb and detect fraudulent activity. Data management deals with how these companies access, store, and manage your financial data.
Automation services are helping these lending companies provide loans at a faster rate than would traditional banking and lending institutions.
After accessing the customer’s financial data from various sources (with their permission), they analyze it to give the customer the loans fast and with the best rates and terms. All this is done while the institutions strive to adhere to the Financial Conduct Authority guidelines.
The fantastic thing about fintech is that there is still so much that can be done to improve the lending process. Soon customers will see growth in the use of digital signatures, better fraud detection services, and more. This means that the lending process is bound to continue shortening while becoming more secure, which benefits both the customers and the lending institutions. Let’s wait and see what else fintech has in store in the future.
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Chris has served as a business advisor to a big list of small and micro businesses; localized businesses and social enterprise in particular. Chris is also an avid reader and loves to stay updated about latest tech and innovation.