Rapid digitalization, accelerating internet penetration and the global pandemic have heightened business operations and customer expectations. No industry or sector is immune to the transformative effects of digitalization, not even the financial industry “deep in the paperwork”.
The addition of the suffix tech to finance has changed the way the financial industry lends and borrows. With fast approvals, short-term lending via mobile phones, instant digital lending, and transparency, the fintech industry is filling the gaps in the traditional lending process.
The emergence of online lending platforms, peer-to-peer personal lending, and other innovative financial technology models have brought financial security and independence within reach of previously underserved customer segments.
These online lending platforms and fintech start-ups are leveraging advanced technology and data science to innovate, streamline and secure the lending process. Along with many security and privacy challenges, technology and data science are also making digital lending safe.
CONSUMER CREDIT HISTORY
For as long as anyone can remember, banks and traditional lenders have relied on credit scores and collateral to assess the creditworthiness of borrowers. But as technology advances, many lending institutions are leveraging trend data to assess a consumer’s credit history. A credit score most often serves as a simple snapshot into a consumer’s credit history.
Trend data allows lenders to understand a borrower’s behavior over time, whether it is improving or deteriorating. As a result, they are able to get a holistic and detailed view of the consumer’s credit history instead of just dismissing them based on credit score.
IDENTITY AND CYBERSECURITY
As the bulk of transactions go digital and consumer data continues to grow exponentially, cybersecurity and identity protection are becoming increasingly critical. In the age of data ubiquity, platforms collect consumer data across various touchpoints to deliver an omnichannel experience.
Therefore, it becomes difficult to manage these digital identities and ensure cybersecurity. Digital lending platforms are deploying security protocols and technologies like artificial intelligence (AI) and blockchain to bolster their cybersecurity and prevent identity cloning and hacking. By integrating these technologies, it becomes easier to detect and expose data threats and establish trust and transparency with their customers.
Banks are infamous for their time-consuming loan application and approval process. As a result, consumers find it difficult to acquire the necessary funds in times of crisis and emergency. During the outbreak of the coronavirus pandemic, many consumers turned to digital lending platforms for loans.
Given their fast application process and instant loan disbursements, many consumers who were unable to obtain timely loans earlier received the funds quickly. Using advanced technologies, these lending platforms are able to instantly assess consumer creditworthiness and provide quick approvals.
INSTANT LOAN DISBURSEMENT DIGITALLY
In the era of digitalization, where countless services and products are delivered to the consumer’s doorstep, online lending platforms help consumers obtain loans digitally. With their robust networks and secure platforms, digital loan disbursement has become safer and more reliable. Consumers can receive instant loans with just a few clicks via their mobile phone. These digital lending platforms operate 24/7 and provide seamless, paperless loan disbursement for short-term consumer needs.
With the huge piles of data available today, it is extremely easy to gain insight into confidential customer financial data. As transactions become digital and remote, managing and protecting data becomes difficult for credit institutions.
With the help of biometrics, one-time passwords (OTPs) and AI, online lending platforms are building a secure and robust framework to ensure that valuable consumer data is not exploited. By embedding data security at every phase, these platforms address traditional data challenges and rethink security architectures.
As the world continues to evolve and our lives become increasingly digital, modernized technologies are streamlining tedious lending and borrowing processes. But as fintech rides the wave of technological transformation and digital innovation, safe and secure lending becomes imperative to improve the customer experience.
With the help of advanced technologies, data science and digitalization, the loan market is moving towards change. By leveraging advanced technologies, fintech platforms can establish privacy and data security to make digital lending safe and ubiquitous.
(The author of the article is Artem Andreev, Country Head, RupeeRedee, FincFriends and DFI)
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