The technology behind the secure, simple and fast lending we have at our fingertips today has completely changed the way we borrow. From faster loan approval to the ability to click a button or two and get pre-approval for a loan that might’ve previously taken weeks.

How it all started

The need for online lenders came about when banks were no longer providing the money that people needed to handle their financial troubles. After the financial crisis in 2008, banks appeared to be relatively limited on who they were willing to lend money to regardless of whether it was a small personal loan or a full mortgage. For this reason, an alternative needed to be found.

Enter online lenders. This remote option for loan application gave consumers access to the funds they needed without having to go through any lengthy application processes as with a bank. While the likes of credit scores and financial state did still come into play in most cases, they still offered a more accessible finance form to the masses.

However, while the reduced availability of loans from banks did open up a door for online lenders, it isn’t the only reason that this alternative became so popular. In fact, the digitisation of lending was an inevitable outcome of the growth in financial technology.

Innovation Of Online Lending

The innovation of online lending was a natural progression from the almost archaic nature of traditional banking. In a world where technology is taking over our everyday lives, from the way we travel to the way we work, being able to securely handle our money online was the natural next step. Consumers want instant gratification with their online activity, which we’ve clearly seen with online shopping. Millennials and Generation Z are the greatest adopters of ongoing digital drive in India, the number of users opting for online banking is expected to double to reach 150 million mark by 2020.

–  Data Management

The way that banks and financial institutions manage, store and gain access to our data are three key concerns for customers, and understandably so. Banks have been able to access our financial history for decades now, but with improved innovations in data management, lending is becoming a much more private and consumer-controlled process. On the opposite end of the scale, however, the rise in data-focused innovation has allowed lenders to access the data they need, with permission from the consumer, in order to offer better loan rates according to their financial state.

–  Online Banking

As we all well know, banking was previously a primarily bricks-and-mortar based process. Any time a consumer wanted to withdraw money or organise their finances in any way, it would mean a trip to their local branch. For those who couldn’t access the banks easily, this meant reduced access to their money which, in turn, made lending and paying back the loan difficult.

With the improvements in online banking, however, these physical branches are becoming redundant. Consumers can do most things with the tap of a screen or the press of a button, from transferring funds and setting up direct debits, to applying for loans and cashing in cheques. Accessing our accounts and loan information from our mobiles, in particular, has meant that managing finances is much simpler and more trustworthy.

Additionally, the allure of online banking has drawn people towards online-only banking firms like Neo- Banks.

AI & Machine Learning

Banks, credit-card companies and lenders alike have been using AI and machine learning to not only improve their lending processes but as a security measure to ensure no fraudulent activity has taken place. In fact, this kind of security has become a core focus for FinTech startups, offering a more secure and fraud-free process for managing and handling our funds, ultimately protecting our money, log in details and more.

How FinTech Made Speed Possible

While FinTech had undoubtedly increased security, what about speed? After all, with most consumers demanding fast responses from companies of all kinds, the ability to offer loans and other credit options quickly is a must-do for any bank or lender hoping to capture a significant share of their market.

Well, the movement of loan applications to the online world alone has completely changed the way that both individuals and businesses can access funds. Studies suggest that small business owners, on average, would previously spend up to 25 hours on a single application for traditional banks, while an online lender could offer the same application and loan terms with just a 30-minute application. From fast online approval to the more limited number of details that could give lenders access to a wider credit report, FinTech has offered a faster answer to borrowers as to whether they’ve been approved and the terms that they will have agreed to in order to gain access to the money.

The industry still has some way to go in terms of speeding up the process but currently, it’s faster than it’s ever been before. It’s not just fast, either – it’s also more inclusive. With the processes in place at various lenders, most can access data on your financial state that determines not only your credit score but your current income and expenditure in order to determine whether you can realistically afford the loan you’ve applied for. This ensures a fairer and safer process that will ensure you will never be given a loan that a lender, within their knowledge, believes you could not afford to repay.

The Future Of Financial Technology

Despite how far the lending and financial technology industries have come, there’s still plenty of room for improvement and these improvements are already underway. The future of financial technology is a bright one, from improvements in customer service to better fraud detection, security, big data and even the growth of digital signatures.

–  Customer service

Customers are the proverbial fuel to the business’s fire, offering them income, interaction and in some cases, even the publicity needed to gain further customers in the future. The finance and lending world is no exception. In fact, it’s suggested that customer service should be the core focus of the finance industry, second only to security. Chatbots, in particular, have become a normal finding in the finance industry, answering questions relating to generic information, helping to give quick access to answers when they’re needed.

–  Real time Loan Processing:

Real-time processing can act as a massive fuel in transforming the experience for customer. Today’s lending systems can support eKYC, e-sign and digital locker with integrations to submit documents online, provide easy access of credit scores from credit bureaus, verify documents in real-time, detect fraud and integrate with payment gateways that can enable quicker decision making and disbursal.

–  Big Data And Automation

When Big Data and Automation are paired together, the possibilities are endless. Every applicant that goes through an online lender will face a series of decisions that are being made behind the scenes. From whether they’ll accept the credit score, to whether they’ll overlook a missed payment or their current income, these decisions are arguably binary. With the implementation of better machine learning automation and the Big Data landscape, lenders can make better-informed decisions that, while automated, still offer a more personalised experience from the lender in question.

Digital Signatures

There are a shocking number of banks and mortgage lenders that still require a physical signature from their applicants and often one that requires visiting a branch to provide.

Digital signing technology is by no means a new thing, but the financial industry has been slow on the uptake for the most part. Online signing makes the identification and verification of the location and applicant arguably simpler,

Financial technology has changed the world of lending for good. Offering faster applications and quick decisions on most loans, borrowers can access the funds they need without having to wait weeks to even hear back from their bank. Whether you’re in need of a short term loan, a mortgage or even credit for a car, you can thank innovative technology for the ease and speed at which these are accessible today.

Clearly, advanced technology has a fundamental role to play in helping Financial institutions achieve their digital ambitions and realise the vision of the ‘digital lender’. This vision is reflected in the EPIK’s advanced Loan origination platform “Vanguard”, which enables lenders to digitise their business and profit from it.