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.
Data protection is one of the top concerns in the banking industry, especially for lenders who rely on digital platforms to originate accounts and manage payments processing. The problem gets more complex – and more difficult to control – when employees use third-party document sharing platforms, and lenders engage in open banking systems.
P2P lending isn’t a trend. It’s an entirely new delivery vehicle that’s here to stay. Borrowers have already pushed peer-to-peer loan volume close to the $1 trillion mark, but launching an infrastructure that supports investor/borrower matching can still be a complex undertaking. Alternative and digital lenders who understand online origination and payments processing are the ones to be well positioned to succeed.
Running a small business is hard enough as is. But the reality we live in is such that in addition to the challenges of finding customers, paying rent, controlling quality and delivery of goods or services, one has to deal with the fact that more or less 60% of invoices are paid late. The idea behind factoring and invoice financing is to give a helping hand to businesses that struggle with this issue.