They eliminate paperwork for loans, connect lenders directly to account and credit data, and often supply fast and frictionless customer service. But most importantly, they fund ‘unbankable’ businesses.
And, crucially, fintech has also helped lower pricing for customers and businesses by starting to provide banking for free through digital applications and mobile phones. All this has served to promote financial inclusion.
How Fintech is Revolutionizing the Loan Application Process
Fintech solutions benefit both borrowers and lenders. Benefits for borrowers include easier application procedures. On another positive note, the increased use of fintech solutions means that sophisticated algorithms and automated verification technologies are capable of speeding up background checks and loan processing procedures, saving borrowers both time and effort.
Fintech merchants have made getting a mortgage (previously requiring stacks of paperwork in-branch, and revisiting the bank for more information) a simple process for homeowners reliant on smartphones to access loans through their providers. In addition, lenders are increasingly accepting digitally submitted documents – form-filled pay slips and income statements, among other things – meaning less time to process those applications.
The innovation of fintech technology makes it easier for lenders to approve small business loans, by analysing alternative data and through machine learning algorithms. With better access to credit, small firms that have thin or no credit history can obtain funding at reasonable interest rates.
Streamlining the Underwriting Process
Fintech refers to innovative activities at the interface of finance and technology, which apply technology to banking and other financial processes to enhance efficiency or create new or improved products. This is the prime example of how FinTech has transformed the way businesses apply for a loan to the borrowers individual consumers, by saving the time of collecting the documents and subsequently verifying them at both the borrowers and lenders ends, it also can reduce the communication delays between these two parties, as well as time of the loan disbursement. Usually, traditional lenders had to either call the borrower’s employers to check on their income or validate the borrower’s bank account in person to check on the amount of their savings. This meant that getting a loan not only takes a long time but is also very tedious for both the borrower and lender: today’s lenders have offered all borrowers enormous convenience by automating this manual data collection process from the borrower to the lender. The overall consumer experience of requesting a loan has been transformed from highly inefficient to much more time-efficient for everyone involved. With the help of these online forms, fintech companies streamline the process of document collection while reducing the time needed by reducing the number of phone calls and email exchanges. More importantly, by directly accessing bank accounts using APIs (application programming interfaces frequently used in websites), fintechs can gather the data required by decision-makers in a faster and more accurate manner while also lowering the chances of having documents rejected or having data determined to be questionable. As a result, it is crucial that the lender chooses a fintech that employs new technologies when it comes to these information-gathering tactics.
Increasing Access to Credit
Digital loan applications have eradicated paper documents completely. It speeds up the loan approval and disbursement times, making it more secure and convenient, and enhancing the overall convenience. Fintech companies are levelling the playing field by providing more access to financial services for disadvantaged groups. Using their application program interfaces, people can now easily send money abroad, buy stocks or cryptocurrency, or obtain cheap credit. For consumers, fintech typically means using banking apps, financial management and investment apps – like banking apps, financial management and investment apps, for example – to better manage their finances in a way that helps them track incomes and expenditures or that offers more attractive interest rates than visiting a brick-and-mortar bank. Whether it’s saving up to buy a house or a car, or paying off debt, apps are enabling users to exert more control over their finances than ever before.
Streamlining the Customer Service Process
Fintech companies are making finance easier than ever – from peer-to-peer payment apps, to digital banks offering saving rates and no-fee checking options, to budgeting tools built into apps for users to track expenses and cashless payments now available through smartphones as everyday payment options, fintech is revolutionising the way people manage their finances.Customer service is pivotal in earning users’ trust and cultivating patrons’ loyalty. Fintech solutions have also quickened the process of loan approvals. While conventional lenders would want borrowers to submit documentation such as pay cheques and income statements, borrowers using fintech apps can simply link their bank and payroll services accounts to the lender’s portal and provide a real-time verification of assets and income. Besides investment opportunities, consumers can go online and access a product and service assortment that traditional implementation cannot provide, perhaps a greater variety of credit cards and savings accounts available through digital banks (Neobanks) that do not need to build costly branches, and often at better rates than the brick-and-mortar banks.
