Financial technology, or FinTech as it is widely known, has disrupted the traditional methods of banking, and millions of people are already making the switch. These online services allow a wide variety of financial services to be faster, more convenient, and more secure. Because of these advantages, it’s not surprising that the World Bank is reporting a strong growth in digital banking transactions, especially in light of the pandemic. People can save time and money by exchanging and borrowing funds using their own devices and from the comfort of their own home. Similarly, businesses and their consumers can experience the following benefits by borrowing or lending through FinTech services.
Alternative lending models can be offered to clients
FinTech is definitely rising in popularity because it allows interested borrowers to pick alternative lending options. For instance, the most popular option is peer-to-peer or P2P lending. This model allows individuals to borrow low-cost loans from other people through several FinTech platforms, like Upstart and LendingClub. Similarly, B2B lending options from companies like Funding Circle allow SMEs to acquire funding from other businesses.
On the other hand, borrowers can also acquire money through crowdfunding loans made popular by platforms like KickStarter. FinTech solutions allow new entrepreneurs and startups to raise early-stage capital by preselling products or providing equity.
Loans can be approved in just a few days
The digital process for FinTech loan applications erases the need for borrowers and lenders to spend so much time and effort on extensive paperwork and a lengthy application process. In fact, The Fintech Times states that borrowers often spend around 25 hours applying for a traditional bank loan. Meanwhile, FinTech allows online lenders to provide the application and terms in just 30 minutes.
This online financial service utilizes several innovations to help lenders in screening applicants quickly and efficiently. As a result, borrowers can be approved loans in a few minutes and gain access to the money in less than three days.
Borrowers are Evaluated Using Improved Assessment Methods
Traditional financial institutions look into an individuals’ credit history to assess their reliability as a borrower. However, the International Monetary Fund underlines that this model is limited, especially when institutions do not have enough access to hard information regarding an applicant.
On the other hand, FinTech solutions do not need access to a person’s credit history to gauge their trustworthiness as a borrower. These apps use artificial intelligence and machine learning to review clients’ online history and purchases. This data is more advanced and inclusive compared to relying on one’s credit history, which has been criticized for promoting racial bias.
The Payment Process is Convenient for Both Lenders and Borrowers
FinTech is so convenient that borrowers do not need to set up an appointment or drive for miles to deliver their payments. Once your borrower is ready to pay off their loans, they just need to access their phone to clear their monthly dues.
Furthermore, Marcus points out that automatic loan payments can be configured by clients so that their bills are instantly deducted from their bank accounts each month. Since their payments are automated, lending businesses won’t have to send out numerous reminders or suffer from late dues. This makes the lending process smoother and worry-free for both the lender and the borrower.
FinTech Services are Digitally Secure
Plenty of businesses and clients hesitate to use online financial services because of privacy issues. Due to the rising cases of identity theft, many individuals sacrifice too much time and effort using traditional banking methods in the hope of more security.
However, FinTech solutions do not only use innovations to make the process fast and efficient, these technologies also ensure that each transaction is digitally secure. Case in point: PCI-compliant mobile payment providers are required to use encrypted servers to protect both the lender’s and the borrower’s data. In addition to that, customers’ credit card data and personal information are safeguarded through Card.io technology.
FinTech provides a lot of options and convenience for interested borrowers. As a result, lending businesses that offer digital services can expect rapid growth for the years to come.
Guest Contributor: Jillian Bridges