The fintech industry is changing the way people can get loans. It is allowing consumers to leverage technology to apply and secure loans. For example, you can use instant personal loan apps to get a loan in a matter of minutes.
The Fintech industry
So what is a fintech company? A combination of two words – financial and technology, the fintech industry refers to companies that deliver financial services through technology.
The power of fintech lets you get a loan in a matter of minutes. No more standing in lines or waiting for loan approval.
8 Ways Fintech is Changing The Loan Process
- Different Lending Models
Fintech companies changed how one can lend or borrow money. Traditional banks accept deposits from customers and extend loans to others. They also charge borrowers more interest than they pay to the savers.
On the other hand, fintech models created a platform where one can earn interest by lending money to other individuals. In exchange, fintech companies take a small fee for brokering the connection between the lender and borrower.
Fintech models don’t require deposits. All the borrowers need to do is tell a compelling story about why they need the loan. Peer-to-peer lending does not need any collateral. Contrarily, traditional banks do not care about your personal story unless you have some collateral.
- Faster Loan Disbursement
In the past, loan approval took a very long time. And once approved, loan disbursement took longer. This meant that the applicants had to wait a really long time to get the money after they applied for the loan.
Fintech companies disrupted that process. Now, fintech lenders can analyse the portfolio of an individual within minutes. Once the loan is approved, the loan amount gets disbursed almost immediately.
- Focusing on Millennials’ Attitudes
Millennials prefer to put technology to work rather than wasting time on mundane tasks. They don’t want to visit banks, stand in lines and deal with all the paperwork. Apart from that, they don’t want to wait for months to get the loan approval. Fintech appeals to them as they can get the loan through their mobile devices within minutes.
- Faster Approvals and Funding
If you want a loan approval that takes less than 24 hours, then fintech is the way to go.
Unlike traditional banks, fintech companies offer faster approvals and funding of loans. Some fintech companies deliver loans just a few minutes after the approval.
- Data Utilization
All the fintech companies offering online loans use a large number of data points to determine if the borrower can repay the loan or not.
Earlier, the lenders just used PayPal or eBay to look at the amount of sales businesses were posting. They would offer loans based on sales data.
However, fintech lenders now incorporate data from Amazon, Facebook, Yelp, LinkedIn, etc. They use the collected data and determine the borrower’s creditworthiness and the likelihood of repaying the loan.
- Offer Diverse Financial Products
Fintech companies started by offering peer-to-peer lending. Soon after, they stepped into the online marketplace with unique financial products. These included student loans, personal loans, mortgages and consolidation.
Some fintech companies even offer factoring loans, invoice financing, and business lines of credit. This helps in product expansion in the banking and lending industries.
- High Security Assurance
Security is the primary concern for any borrower using online lenders. With that in mind, fintech companies offer high security.
Fintech companies use authentication tokens to check the information from third-party websites. They can use these tokens to just view the data from other sites but cannot save them. They are committed to protecting the integrity of their customers’ details.
- Embrace More Borrowers
Thanks to their lending model, it is possible for fintech companies to offer loans to more borrowers and widen their customers base.
Now, small business owners, students and other consumers who struggled to get loans from traditional banks can access the money from fintech companies. It has especially benefited small businesses as they can get lines of credit or small loans without collateral.
Fintech is here to stay. So the next time you want to apply for a loan, forget about going to the bank physically. Just reach out for your smartphone and get the loan within minutes.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap. Shiv is a true finance geek and can be reached at [email protected]