Advancement in technology paved the way for the financial industry to change by introducing new systems that can easily access financial services through technology. One of the sectors that were significantly affected by these innovations is the lending sector.
Lenders now have new techniques in offering their services to the public. Here are four ways fintech changed the lending sector to understand better how the financial sector innovations improved.
Faster Approvals and Release
Traditional banks will take up weeks or months for your loan to be approved, while fintech lenders can process, approve, and release your loan within 24 hours only. Technology helps the lending process a lot by providing easy access platforms such as mobile applications and websites.
Banks have already started to use innovative technology offered in the financial industry by creating online platforms to provide a fast and hassle-free loan process, which will help banks keep up with high-tech lending companies.
Provide Alternative Lending Type
Conventional lending acquires deposits from their borrowers so that they can grant loan offers to other customers. Fintech helps discontinue this practice by offering peer-to-peer lending to consumers. Peer-to-peer lenders do not require deposits from their borrowers, but rather give individuals a chance to earn interest by lending to others.
Some banks collaborate with peer-to-peer lenders to improve their credit assessment type. It can also help banks improve their lending strategy online, offering the consumers a lower-cost loan option.
Gives Consumers Perks and Savings
By offering loans online, lenders can save from their operational costs, such as rentals, human resources, and administrative expenses. The money lenders saved can be extended to their customers in perks like better interest rates or no-fee unsecured personal loans for fair credit.
Utilizing Data
Fintech lenders will acquire data from various alternative sources to swiftly determine if a borrower has the capability of paying back the loan. The data gathered will then be quickly analyzed to make an overview of the borrower’s creditworthiness.
The information included in this data is the borrower’s rent, utilities, and auto payments. This information will help lenders weigh the risk imposed with that particular borrower. To keep up with the advancement, financial institutions started to use alternative credit data to acquire a more comprehensive vision of the borrower’s financial background and rely on credit scores alone.
How Fintech Helps The Lending Industry
With these changes, we can tell how huge the impact of fintech is in the lending industry. The innovation gave the consumers a chance to acquire unsecured personal loans to get fast cash, which increases the number of personal loan applicants.
In the early months of 2019, an estimated 19.3 million individuals applied for unsecured personal loans compared to 2017, where there were only 2 million applicants. These numbers show that fintech helps the lending industry to flourish.
The increased number of fintech lenders is the key factor in the significant increase in consumers. As fintech lenders continue to multiply, it’s also expected that consumers will also increase.
Advancements In Lending
- Blockchain is one of the most popular technologies in the financial industry. It helped eliminate the problem most consumers are experiencing in the industry, particularly in the lending sector. Conventional lending has become outdated and slowly breaking with the pressure of the changing technology and the consumers’ increased expectations.
Blockchain does not only help consumers with their lending problems. It also provides potential solutions to most lending problems banks are facing.
However, this technology requires a distinctive level of organizational unity where lending companies need to concur on functional, technical, and legal methods known to be difficult.
- Lending mobile apps are widespread nowadays. With a few clicks on your mobile phone, you can gain access to numerous lending apps that offer a quick application and cash release. Mobile lending apps only require a few documents from the consumers, like valid IDs and a fully filled-up form provided by the lenders.
- Crypto lending has begun to emerge slowly. Cryptocurrency is a digital fund where you can purchase. In short, it is a digital or virtual currency that utilizes cryptography to make it secure and safe. Crypto lending is an alternative to conventional lending where lenders lend money to their borrowers using cryptocurrencies with an imposed interest.
- Payment Gateways are the new payment method most consumers use today. It is a hassle-free and secure money transfer platform that you can perform anytime and anywhere using your mobile phone or computer. There are various options available in the market where you can choose.
Online lenders mostly prefer ACH or The Automated Clearing House to accept loan payments from their borrowers. ACH is an electronic system that carries out bank transfers from one bank to another.
Takeaway
Fintech has just begun, and many changes are still on its way. Financial technology’s primary goal is to provide consumers with easy and hassle-free access and more options to improve the financial industry’s services. As technology still evolves, it is expected that fintech will evolve along with it.