The lending scenario across the world has experienced a radical transition from traditional financing to tech-based mechanism providing consumers faster, easier, and more transparent access to a range of loan providers. Fintech companies and lending applications are especially changing brick-and-mortar lenders, who are slow to adapt to market trends.
Lending in transition: What’s driving lending application development?
Table of contents:
Money lending application as a new rising technology-driven market
Financial technology has created a new rising market for alternative ways of borrowing. One of the aspects of technology that has been the quickest to adopt is online lending. By forming a new market for lending alternatives, both for institutional and individual consumers, the online lenders, peer-to-peer lenders, platform lenders and marketplace lenders have evidently embraced the tech innovation to cut costs, drive efficiencies and expand lending opportunities. This article talks about how technology has changed the ways people access various lending service providers nowadays, with more emphasis on lending applications, and how consumers can choose the best lending provider to fulfill their lending needs well.
Technology reduces the cost both for lenders and borrowers
Technology has not only benefited the borrowers but the lenders, also. It has created a win-win situation. By offering lending options online, the lending service providers can run a business model that is more cost-effective than the conventional bank mechanism of doing business. By avoiding maintaining a whole network of bank branches and bearing the expensive legacy IT services, a lot of online lenders are operating more efficiently. This creates an opportunity for the online lenders to decrease the lending cost for the consumers, and even afford to extend the loans that may not have been possible for cost-conscious conventional banks. The online lending is done through customized lending apps.
As per one of the articles published in The Economist, the online lenders’ recurrent business cost as a share of the outstanding loan balance may just be 2%, compared to the 5-7% for traditional lenders. With such a cost-effective structure, lenders tend to offer affordable loans via online apps, or even provide the loans that may never have been possible earlier.
End-user technology preferences
Most consumers nowadays prefer to apply for loans online — young buyers especially. While older generations still prefer traditional, human-based process, a viable digital process is now mandatory for lenders hoping to complete successfully across all consumer segments in increasingly competitive financial markets.
In addition, people today are busier in their everyday lives. They just don’t have sufficient time in the day to go to the bank to apply for a loan. An increasing number of modern consumers rely on online transactions rather than going to the physical location to buy anything or get something done. An ideal example of a shift to online transactions is in the travel industry. For decades, ticket items such as airline and hotel bookings were bought by visiting travel agents and waiting for hours in their office. With the rise of online travel sites, people don’t need to wait any longer or need to have “in-office” experience. This idea is further endorsed by the rise of e-commerce, online mortgages and insurance policies, virtual meetings, and government offices are increasingly moving online.
Digitizing consumer lending via technology
Digitizing the data collection area of lending enhances the consumer’s experience in a lot of ways.
- It shows what is required upfront to the consumer
- It decreases the frustration because of the more transparent process and the timeframe for the decision regarding loan application approval
- It reduces the delays that occur due to incomplete files that slow down the loan application evaluation
Online money loan applications offer a common database where all the loan application data is input once. Technology like the Electronic Tax Return Reader is applied to upload the tax returns directly, then it might not have to be keyed at all. This technology alone can save as high as 20 minutes per return, a number that adds up based on how many loans require years of data for many borrowers or guarantors. Moreover, the data is added to complete the process of application, the whole financial package is automatically updated when a bank or credit union uses a digital platform. The data update is done without human intervention.
Faster flow & access
Digitizing the information flow and access in lending offers major advantages to the whole credit team as well as consumer. It enhances transparency and minimizes the number of bottlenecks. Some online loan providers connect multiple data sources on a single interface, letting loan analysts and processors to import data from third parties like credit bureaus, appraisal firs, insurance or financial institutions. This decreases mistakes and extra workload, speeding up the loan decision-making process.
Access also gets improved. Online lending applications that use customized workflows implies that all information related to the borrower can be viewed in one centralized spot, and the decision steps can be documented instantly for improved audit monitoring.
Intelligence & analytics
Another key area of the online lending process that has been digitized in online lending apps is intelligence and analytics. One of the issues in the conventional lending process is that analyses and calculations can vary between underwriters, lenders, and analysts. This results in unreliable calculations, inaccurate reporting, and uncertain credit decisions. A digital lending solution or app, especially one integrated into a digital banking or financing platform, can analyze the decision and then price loan faster. Simultaneously, once the digital lending data is captured, the banks and financial institutions are in a better situation to use insights that helps them better determine the portfolio risk and make strategic decisions.
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The way technology has digitized the lending process, shifting it from traditional physical experience to online lending apps, has proven to improve the customer experience in several ways; speeding up the loan application process, increasing transparency, more choices for borrowers for affordable loans and improved profits for the lenders.
Any modern lending application should make it easier for consumers to get a loan on their terms. Any companies hoping to launch their own lending application need to follow market trends and offer mobile solutions to their customers. For a comprehensive product design workshop, or full development, call us and we’ll help you build out your idea.