A new breed of entrepreneur has created an untapped niche for digital lenders. These upstarts left their corporate positions to start lucrative new business ventures from a shared workspace or a home office. They’re an interesting mix of people with one thing in common – a bright entrepreneurial spirit. It’s all good news for alternative lenders, because you’re their first choice for business funding.
This is a guest post from the Clutch.co team
Launching and managing a lending business can be quite an undertaking. But there are plenty of ways to make it easier. A comprehensive and intelligent technology stack should be your first step when it comes to building a successful and productive loan operation. It could prove to be one of your most important decisions.
2020 is right around the corner, and it promises to be another dynamic year for the financial industry. Savvy lenders are already in full planning mode, strategizing new ways to overcome a variety of business challenges. We’re optimistic that digital lenders will find creative workarounds for their obstacles. And maybe even say, “Wow. That was a blessing in disguise.”
Digitalization leaves no industry untouched. In the last decades, lenders, traditional and alternative, have been on the lookout for new technologies to take them ahead of the competition. Software that would make credit decisioning and loan management safer, faster, and cheaper. Naturally, AI has been a focus for most.
As lending niche entry barrier lowers due to the development of FinTech, competition grows. Big banks have established names and loyal client bases going for them, and alternative credit providers keep improving user experience, simplifying onboarding, and lowering interest rates. That leaves new lending market players in a tricky position where they have to compete both among themselves and with the big banks. But with the right groundwork, outperforming banks and your fellow alternative lenders is possible.
Consumers choose speed and convenience over price, even when it comes to their finances. That’s why successful lenders strive to deliver instant approvals, and 1-day funds transfers. They’re training borrowers to expect quick action with every application. Can your lending operation approve loans at warp speed, without sacrificing credit quality?
To get into the real lending game thirty years ago, one needed immense resources. And not just loads of cash available for crediting, but also money for opening and maintaining offices and branches, originators, servicing managers, underwriters, collectors, analysts, etc.
From a regulator’s standpoint, it makes good sense to scrutinize lenders. Especially those that use online channels for account origination, funds transfers, and payments processing as this niche isn’t yet as well-controlled as brick-and-mortar businesses. That’s why it makes equally good sense for lending professionals to hardwire regulatory compliance into their business model and product design. Savvy lenders are learning to leverage compliance as an asset, instead of a necessary evil.
Open banking has turned financial services upside-down and inside-out. These data-driven programs cater to consumer needs and wants, instead of pushing out prepackaged products and services. What started as a regulatory directive in the UK has opened up a whole new world of opportunity for consumers and innovative lenders.
Proper borrower identification is a crucial part of any lending operation’s customer due diligence. No matter the jurisdiction, taking care of borrower identification safely and accurately will have an enormous impact on regulatory compliance as well as the overall portfolio health.