7 Ways Fintech Industry Has Changed the Loan Process
Tired of waiting in a long queue to get your loan application through the bank? Enter Fintech.
So, what is fintech?
Fintech is a potent combination of two very dynamic words – Finance and Technology. Fintech innovations have come into existence to make financial services better and faster than what was traditionally available.
Why is fintech growing?
Fintech companies are empowering consumers to take control of their financial lives. They are creating more financial awareness than before, making them finance literate.
It’s ripping apart the monopoly regular banks had to help consumers get finance easily with the help of advanced digital financial technology.
What is fintech companies doing differently from traditional banks? They are combining traditional financial services with the latest in digital financial technology and Big Data to make your lives easier and better.
How is the fintech industry changing the loan process?
When you’re in need of a personal loan, what do you normally do? Approach a traditional bank or a financial institution, right? But the process can be quite frustrating.
The eligibility criteria are not easy to meet, and the paperwork is just too exhausting. While you were struggling to get a personal loan, the fintech industry emerged to change the lending process forever and for good.
Fintech companies are new, they are advanced, but they definitely aren’t as picky as the traditional lenders.
Here are some of the best aspects of fintech companies in India:
- Better lending models
Traditional banks and financial institutions accept deposits from customers and then extend their loan offering to customers in need. How do they earn money through this model? They charge borrowers more interest than they pay savers.
Fintech industry has managed to overthrow the bank’s authority with their peer-to-peer lending. Fintech startups have created a platform where people can earn interest by lending their money to those in need.
Fintech startup charge a small fee to establish the connection between the lender and the borrower. Instead of traditional applications, the borrower submits compelling stories as to why they need a loan.
- Automated underwriting process
Traditional banks still rely on humans to carry out the underwriting process and risk assessment of the profile. Fintech companies have got both these processes automated. This helps to speed up the personal loan application process.
Using financial technology to handle the underwriting process, lowers the operating costs. That’s the reason why fintech companies can offer competitive interest rates to their borrowers.
- Faster and easier approval and funding
Another feature that sets fintech companies apart from traditional banks is the speed at which they work. They offer faster applications, approvals and disbursal.
It may take weeks to get loan approval from a traditional bank. Fintech companies can do it within a few seconds.
- Better data utilization
Fintech companies do not rely only on factors such as your credit history; they use a large number of data points based on your online interactions to ensure that you have the financial capacity to repay the loan.
- Robust security system
Fintech industry lenders use advanced technology to make sure that your personal and financial details are secure.
They use tokens to view your data from other sites and they do not have the option of saving or storing it. So, there is no question of them using your data for any other purpose.
Other security procedures like encryption and website security, are also used to safeguard your information.
- Unique financial product offerings
Fintech companies have joined the financial services industry with unique financial products, such as personal loans, student loans, business loans, marriage loans, consumer durable loan, two-wheeler loans, vehicle loan, and debt consolidation loan. Because of which, the financial services industry has experienced a healthy product expansion in the lending markets.
- More Loans to More Borrowers
The new fintech industry lending model has created opportunities to people who found it difficult to get a loan approved from traditional banks, like small business owners. These small business owners now get a chance to get an unsecured loan (without collateral), which a while ago was a big deal.
End of the Line…
Fintech sector has been successful in challenging the status quo of traditional banks. It has a bright future as people today are experiencing a more flexible way to borrow money in less time. Better times ahead.