Revolutionizing the Lending Process Using Technology
A modern, growing and robust economy rests on the pillars of growing financial inclusion. This involves providing access to financial products and services to all individuals and businesses across the social spectrum at an affordable cost, on a timely basis and with appropriate needs, from reliable and responsible providers. In recent years, technology has revolutionized industries across the world, including the financial sector. Digital lending is seen as the easy way out to a long banking process, which also ensures close monitoring and in-depth analysis.
Digital lending is the process of providing loans that are requested, disbursed, and managed through digital channels in which lenders use digitized data to inform credit decisions and create intelligent customer engagement. The Covid-19 crisis has opened more than one door. When the world returns to normal, the pandemic has created opportunities for innovation, learning and behavior change. Digital transformation has accelerated, businesses have scaled up their technology investments in cloud-based products and services, and digital sales have gained momentum with traditional retail stores coming online for the first time. With all of these changes in place, digital lending has taken center stage for ten months. The digitalization of the lending process brings a number of powerful benefits to banks, including better decisions, improved customer experience, and significant cost savings. Banks are gradually switching to technology to better organize the digital lending process. Some of the applications of artificial intelligence (AI) and its uses that are a major source in the lending process are,
• Robotic Process Automation (RPA) – The banking, financial services and insurance industries are benefiting from RPA technology. Automating loan management is RPA widely used in this section.
• Document Automation – Document automation helps lenders regularly extract prospect knowledge from their documents.
• Business Automation – Business automation allows potential customers to fill in digital varieties to use loans.
• Electronic Signature – The electronic signature feature allows documents to be flagged online.
The digital loan process
The digitization of the lending process has had mixed results globally, with a strong focus on hybrid models, where a combination of technology and affordability offers the most viable and scalable proposals. Generally speaking, the digital loan can be divided into five parts. From acquiring and onboarding a client, to appraising, disbursing the loan, and receiving payments, it’s all part of the digital lending process.
Digital lenders acquire clients using a combination of digital marketing tools and digital onboarding channels, enhanced by strategically designed touchpoints and physical referrals. An important aspect of the acquisition is the identification of the customer. Digital lenders use technological innovations to access verified government and private sector records before lending.
Digital lenders use technology to analyze the backgrounds of loan seekers. Lenders access and use digital data to make faster, more automated and more accurate underwriting decisions. Digital lenders use both conventional and alternative data sources, advanced algorithms and analytics to make secure decisions quickly and remotely.
Disbursement and reimbursement
Digital lenders disburse loans and collect repayments remotely through digital channels such as bank accounts, e-commerce accounts or mobile wallets. These cashless channels improve operational efficiency and reduce fraud by providing access to their funds in seconds.
Digital lenders leverage data and algorithms to support their collection process. Delinquent customers screened through a custom recovery strategy will be blacklisted. They lose access to future credit, which can be a powerful motivator.
Digital lenders use digital channels and customer data to create an intuitive, convenient and personalized customer experience throughout the lending process. This involves both outbound and inbound communication and account management. Lenders send personalized reminders based on customer behavior.
The future to come
FinTech lenders are currently playing a central role in turning the economy around. The effects of disruption caused by digital lending across all areas of customer engagement, origination, credit scoring, underwriting, risk oversight, compliance, governance and recovery are still felt. Digital lending is expected to open new doors in the financial sector. Some of the key predictions for the future of digital lending are,
• Improvements to underwriting or credit models using data from non-traditional data sources.
• Profitability gains from FinTech models should drive product innovation.
• Increased control and regulation in non-traditional lending models.
• Data and analytics driven expansion into new customer segments and business models.
Consumer adoption of FinTech models is increasing steadily thanks to mobile penetration and the convenience of online segmentation, trading and STP positioning models).
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