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The development of technology will continue to define the lending industry’s future. The way lenders apply the technology will also have a huge role in reshaping lending.
Financial technology’s specific targeting of new groups of consumers, especially those who prefer the virtual way of doing things, is the biggest reason for its success up to now.
Fintech presents numerous opportunities for lenders to become more customer-centric and enhance customer experience significantly. They can do it by combining technology’s speed and precision with the human touch.
Top Lending Technology Trends
Below are some of the technology trends in the lending business:
Machine First Delivery Model
Digital transformation is behind the lending industry’s most dynamic improvements. Both the lenders’ and customers’ life become a whole lot easier because of these changes.
Today, machines have started to take over simple tasks, which leaves lenders free to find new ways of improving company performance and customer experience and manage complex issues. Organizations that will be ahead of the others in giving the right of first refusal to machines to help deliver exceptional business performance and customer experience will be the ones to taste success first.
Imagine the things you could do with all the resources and extra time you have if forms such as personal income statements, banking statements, property titles, and evaluations, as well as compliance requirements were all digitally automated.
Enhanced Collation Of Consumer Data
Masses of consumer data will be put to actionable use by lenders. Extracting real-time insights about customers can be a powerful way of creating experiences that keep them coming back for more term loans.
Microservices
Integrative microservices allow loan companies to digitize lending operations in their own way and at their own pace.
Cloud-based microservices are the most popular, allowing lenders to add services as modules one at a time. It avoids rushed replacement of legacy systems and helps lending institutions adapt to regulatory changes more smoothly and effectively.
New Credit Scoring Systems
Alternative scoring systems are coming out from the fintech sector. Fintech providers use data-driven models to improve risk assessment.
How Lenders Use Technology
Here are some of the ways lenders are using the technology trends above to reshape the loan industry:
Incorporating Blockchain Technology In Online Lending Platforms
More and more lenders have developed a low-cost but high trust lending platform through blockchain technology.
Incorporating blockchain technology means that the complete loan process now exists online. It eliminates third parties and intermediaries by allowing people to keep a record of their transactions and documents digitally using an anonymous ledger platform.
Improving Identity Protection And Cybersecurity With Blockchain And Biometrics
Identity protection and cybersecurity are becoming even more vital in the lending business as transactions transform from physical to digital and remote.
The most significant industry risk that lenders face is borrowers defaulting on payments. However, regularly updating credit information and loan data through blockchain and biometric technologies help lending companies make decisions with increased assurance. These two new technologies can detect incongruences and expose duplicity. They help lenders achieve more transparency.
Using AI (Artificial Intelligence) To Vet Applicants
Many lenders think that the FICO credit score as a basis for approving applicants is an incomplete indicator of creditworthiness.
As a result, lending institutions have started to explore new mechanisms, particularly ones that use artificial intelligence. AI-powered credit-checking models consider information surrounding so many data points like education details, employment history, and spending habits in verifying if applicants can clear the debts on the scheduled due date.
With the help of AI, alternative data sources and trended data provide a holistic and a more transparent view of the applicant’s creditworthiness, making it possible to conduct a more accurate risk assessment.
Employing Machine Learning To Make Underwriting Decisions And Detect Fraud
Lenders have started employing machine learning to improve the underwriting decision-making process. The algorithms can help lending institutions validate if a potential borrower is telling the truth about their income level, among other things.
Machine learning-backed underwriting suits people with not enough credit history best. It also works among those with less income or charged higher interest due to lack of financial data.
Lending companies are now also heavily using machine learning for detecting fraud through customer behavior analysis. The time customers spend answering application questions and time spent looking at the price options are some of the pieces of information that back the analysis of customer behavior.
Utilizing Robotic Process Automation (RPA) To Speed Up The Loan Process
Speed and simplicity are a must-have in today’s finance world. No wonder there’s now an increasing number of lenders employing RPA to process documents, verifications, comparisons, and loan initiation quickly.
With robotic process automation technology, lending institutions can set up computer software (robot) to emulate human actions as they interact within digital systems. RPA technology also allows the integration of human-like operations. That way, RPA robots can execute a business process just like how humans do. They carry out different repetitive tasks by interpreting, triggering responses, and communicating with other systems.
With the help of robotic process automation, faster loan processing becomes possible, which results in improved borrower experience.
Solving Uptime Concerns Through Cloud Computing
Storage, security, and 24/7 upkeep time are the lending sector’s most valuable aspects. Cloud computing can solve issues surrounding these components of the lending industry. That’s why more and more lending institutions are moving to the cloud. Cloud-based operations also offer additional benefits like time-efficient and cost-effective management, secure connections, simplified online processes, and disaster recovery.
Disbursement And Repayment Collection Through Digital Channels
Mobile wallets, eCommerce accounts, and bank accounts are just a few of the digital channels that lenders utilize nowadays to disburse loan amounts and collect borrower repayments remotely. By providing customers with access to their borrowed funds within just a few seconds through cashless channels, lending institutions can enjoy improved operational efficiency and reduced fraud.
Leveraging Data And Algorithms In The Collection Process
Lending companies now leverage data and algorithms in improving their collection process. A customized recovery strategy can help them filter and blacklist delinquent borrowers. Customers lose access to any future credit as a result, which acts as a powerful motivator.
Final Thoughts
A rapid change is taking place in the loan industry as financial technology brings more radical innovations to the table.
Machine learning and artificial intelligence aren’t only all about hype right now; they’re getting realized. Of course, lenders using these technologies have to keep in mind that risks come with adopting fintech prematurely, especially if there’s no proper measurement of results in place. Also, lenders shouldn’t overlook the significance of human touch even though the technologies discussed above are already here to stay and be part of the future of lending.
