Long queues. Tons of paperwork. Mortgage and too much hassle.
The traditional lending ecosystem is fraught with inconveniences in a world where instant gratification in consumer delivery is the new normal. It lacks agility and flexibility to meet the needs of the new consumer. Fintech organizations are far more technology-enabled. They utilize advanced technology to deliver efficient, fast, and flexible financial services to consumers. No wonder fintech is fast disrupting traditional service providers and growing at an unprecedented rate of 9.2% to nearly $158,014.3 million by 2023.
The changing landscape of lending
Traditionally, when borrowers in need of capital approach lenders, they are provided standard options–a folio of one-size-fits-all loan products. Without deep insights into consumer needs, these loan products cannot meet each potential borrower’s specific and unique credit needs. There is no differentiation in loan products, and all traditional lending entities are fighting for the same piece of the pie. Add to this the often-prohibitive service cost – making loans economically unviable for many borrowers in the market. Furthermore, the approval process is too time-consuming and complex, undermining the needs of credit seekers who require the loan immediately. Naturally, easy access to credit is one of the biggest challenges in the global lending ecosystem. This is where digital lenders come with an advantage.
Digital lenders have a competitive advantage over traditional lenders as they have new-age technology and data capabilities that make lending far more quick, efficient, and data-driven than ever before.
Paving the path to an equitable financial ecosystem
Digital lending creates a more inclusive financial ecosystem and delivers loan products and services to underserved and previously excluded individuals and businesses. New-age technologies and data drive innovation in digital lending. Simultaneously, data analytics is also ensuring less risk in the digital lending space. Even policymakers are encouraging the development of new and agile loan products to serve the businesses.
Fintechs, often equipped with digital lending capabilities, have changed the game for borrowers. They give remote access to credit in a brief time. Additionally, underwriting is easier and more data-enabled than ever before. This efficiency of digital lending is a game-changer in the global lending landscape, opening new routes to ease access to credit for all borrowers, irrespective of their creditworthiness in the traditional sense of the term.
A wider circle – Correlation of data opening new revenue opportunities for digital lenders
Digital lenders no longer rely on manual underwriting processes. Instead, they use financial transactions and FICO® credit scores to identify risk factors. There are also new and innovative risk repayment methods, from real-time payment deductions to standard mortgage paid conveniently via apps.
These digital methods enable fintech organizations to collect and analyze additional data about their customers for customer-centric decisions. These include determining credit limits, holistically understanding their ‘customers’ financial needs, and delivering new and innovative financial products that serve the unique needs of each digital-savvy customer.
The Way Forward
Digital lending is redefining the dynamics of the credit ecosystem. With lower costs and improved reach, financial institutions can do more with less. However, digital lending also requires a robust long-term strategy to be truly safe and risk-free. The lending journey does not end with disbursement; loans also need to be collected, serviced, even restructured, and renewed as time passes. With so many moving parts, digital lending requires careful planning to avoid the risk of a false start for financial institutions. Process automation, new and intelligent technologies such as AI and ML, and intelligent data analytics are at the heart of a wholesome digital lending strategy.
What next?
Tavant can help lenders diversify how they do business and effectively unlock savings with next-gen technologies. To learn more, you can reach out to us at [email protected] or visit here.
