How Technology is Transforming Lending | How Financial Technology used
How Financial Technology used
Financial technology: About a few years ago, taking a loan was thought of as a long and complex process. Which involved multiple trips to the bank, talking to bank officials, comparing rates from different lenders, filling out hundreds of paperwork, and then waiting eagerly for the bank’s approval.
Fortunately, things have now become more simple and convenient for customers. Due to the Internet and the availability of a Smartphone. Now, technology is creating a new way of borrowing money.
How Technology is Transforming
It is extremely thrilling the way technology is making financial services. Especially lending, one of the most captivating sectors to keep a watch on. The rise of FinTech- financial services technology innovation- is one of the biggest developments of recent times.
These companies are trying their best to make financial services more clear, more systematic, and more user-friendly in all areas by launching new products and services like payday loans, short-term loans, loans without guarantors, etc.
They are offering new ways of payment processing and transferring money and developing a new way of cutting costs and improvement in the user experience. One of the regions of FinTech that have been the fastest to use new technologies is online lending.
By shaping a new market for an alternative way of accessing funds- for businesses and consumers both-online lenders, marketplace lenders, P2P lenders, and platform lenders have welcomed technological innovations to increase efficiencies, cut costs and augment opportunities.
Financial Technology Reduces Cost
Through online lending, lenders can run a business model. That is more profitable than the conventional model of doing business. Instead of maintaining a grid of bank branches and paying for costly IT systems, many online lenders can run more productively and efficiently.
This enables marketplace lenders to decrease the cost of borrowing for customers. Moreover, they even afford to provide loans that might not have been feasible for a more cost-centered traditional bank.
Online Lenders are Data-Centric
Online lenders are keener on finding ingenious ways to analyze risk and pinpoint creditworthy borrowers in ways that go beyond a credit record. For example, they are interested in looking at a wider range of data to evaluate whether a borrower can qualify for a loan such as social media, online sales, accounting records, etc.
This data-driven lending method is often more moralist and fairer than credit history alone, and also more appropriate than a traditional bank loan application procedure. The use of big data and analytics tools is becoming prominent in analyzing customer data.
Marketplace Lenders Move Faster
Online lending technology makes it easier for borrowers to get approval for loans faster than ever before because the online lending platform can automate most of the approval processes.
Unlike banks, which are often using obsolete IT systems, online lenders have more updated technology that provides real-time data, faster loan decisions, and monitoring of customer’s creditworthiness.
The conventional bank outlook is changing fast due to innovations by FinTech companies. Though banks will never go out of the market. Customers’ conception of what ‘banking’ actually means and which products and services must be offered by banks is changing at pace.
Hence, online lending will help in improving the financial service sector and becoming more effective. More attentive to consumer’s needs, and more accessible and fair to all types of borrowers. Especially the ones who don’t meet the stringent criteria of traditional banks.
