FinTech: The Changing Force Behind Digital Lending

Banking CIO Outlook | Saturday, December 15, 2018

A few years ago, securing a business loan was arduous and painful. The applicant must have some pull with the upper management with bank officials, and even then the loan was not guaranteed. FinTech is changing the entire lending landscape. Technology is acting as a catalyst and transfiguring the way companies apply for a loan, to whom, and where. Banks and Non-Banking Financial Company’s (NBFC) are no longer the only authorities that issue loans. Lending institutions, banking, non-banking, and loan marketplaces are taking advantage of Artificial Intelligence (AI), Machine Learning (ML), Digital marketing, Voice Recognition, Video, and Cloud Technologies. 

The Virtual Shift

Technologies like high-speed internet and increasing smart devices like smartphones and computers are assisting lenders to engage and influence potential applicants. The paradigm shift of technologies is empowering both lenders and applicants in disbursing significant amounts of credit quickly, efficiently, and with lower risk. Lenders issue quick loans to qualifying applicants based on tech-enabled risk modeling techniques that remove limitations related to manual credit assessment. Technology allows lenders to reach their target audience based on their internet search and social media behavior. The borrowers have choices like peer-to-peer and new to credit due to the arrival of tech-enabled alternative financing platforms.

Abundant Choices

Earlier, the lending landscape was limited. Applicants had a limited number of choices, and they had to accept the available options offered by lenders, banks and non-banking finance companies. Technology has opened up a plethora of options to the borrowers. They can choose where they want to apply whether from a lender or a loan marketplace and they can select from various competing lenders. Additionally, the application process is far more straightforward and intuitive than before. It is always available and a single loan application shows multiple options to choose from the applicant.

Better Credit Assessment

In the old days, a borrower had to submit hundreds of pages as documentation along with their applications. Manual evaluation of vast amounts of data can lead a lender to miss many data points. Modern tech-oriented solutions that utilize AI, ML, Big Data Analytics, and Data lake management Optical Character Recognition (OCR) enables the lender to gather and analyze data and derive insights on the creditworthiness of the applicant. Other than the usual financial profiling, modern day tech evaluates social media pattern, messaging patterns and GPS data. 

The loan fulfillment is incredibly fast and what took months now merely takes weeks or days. In some cases, where the amount is small, it even takes hours. The cloud-based software that works in the back-end can process multiple loans simultaneously.

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