Financial services are using FinTech to streamline their lending processes

By Puja Sharma

Consumers expect financial institutions to offer truly customized experiences across channels, products, and lines of business. To deliver differentiated and hyperpersonalised customer experiences, more than digitizing and customizing front-end processes is required. By utilizing technology, back-office processes can be transformed to deliver a consistent, seamless customer experience across the entire lending lifecycle, regardless of the entry point. In addition, this allows for the optimization of efficiency and cost throughout the entire lending process, according to a recent survey by EY.

FinTech is enabling financial services to drive efficiency throughout their lending processes. Through APIs, banks can automate and streamline data collection whenever possible, eliminating the need for borrowers to provide asset, employment, and collateral data. By validating both the data and the processing documentation, FIs can reduce fraud and operational risk while making more accurate credit decisions that are delivered faster – almost instantaneous for card and auto products and significantly shorter for mortgage and home equity loans.

Digitisation has been one of the most widely adopted strategies in financial services to improve core processing capabilities and offer better consumer services and insights. In addition, these organizations have reportedly increased their sales percentage by focusing on the digitalisation of their financial services. A study has revealed that investments in financial technologies witnessed notable growth in 2018, which was almost twice that of 2015.

In addition, more than half of these investments have been associated with lending and payments. Digitisation in the lending landscape has helped organisations and their customers with better loan management decisions as well as rapid application and disbursement processes. Thus, the increase in the focus of organizations on digitalising their financial services to achieve business efficiency and enhanced outcomes drives the growth of the digital lending platform market.

According to Federal Reserve, about 49% of small businesses applied for loans across the globe from various nonbanking and banking institutions. The ease of applying for loans for borrowers and numerous other benefits for lenders, such as automated loan management and rapid approval, are shifting their attention toward digital lending, thus driving the digital lending platform market growth.

In the future, lenders will change their underwriting and monitoring practices to maximize credit decisions while emphasizing creditor- or borrower-level monitoring, stress testing, and operational flexibility. In this situation, it is necessary to aggregate and analyse data in real-time.

To enhance the efficiency of relationship managers and enhance the customer experience, most banks are now focusing on predictive analytics across the product life cycle. In addition to credit scoring, machine learning (ML) and artificial intelligence (AI) provide more meaning to unstructured data. It is expected that automated credit scoring, widely used in retail banking, will gradually extend to corporates, especially when banks can integrate spreads and other data into their credit rating models to automate the process.

Key highlights

• To put the customer at the centre of the lending model, data is the most valuable asset available.
• Personalized experiences and curated product bundles must be considered by lenders to meet the needs of multiple customers.
• To improve customer value propositions, financial institutions should work together across the entire lending ecosystem and break down traditional silos.
• Digitisation in the lending landscape has helped organisations and their customers with the better loan management