By Mr Praveen Paulose, MD & CEO of Celusion Technologies
The lending ecosystem plays a pivotal role in the financial landscape, facilitating the flow of capital from banks to individuals and businesses in need. As such, it holds a central and transformative position in the industry with important implications for consumers and businesses. It can extend financial services to consumer groups that require it for their enterprises by providing them with loans.
The lending ecosystem, pre-automation
Before technology and the advent of automation in several processes within lending, the ecosystem was predominantly characterized by manual, human processes. In the pre-automation era, loan applications were done manually and had to be obtained in person. Individuals/ businesses would be required to physically visit banking corporations to fill out paper application forms and submit numerous documents accompanying their loan requests.
In applicable cases, this would generally include proof of their income, credit history, and collaterals. Loan officers would then manually review these submissions to assess the creditworthiness of these individuals/ businesses and only then approve their loans accordingly. This process was highly time-consuming and would often become subjective, heavily relying on the bias of loan officers.
Another challenge came in the form of credit scorings, which were more often than not based on information that needed to be more extensive. Moreover, these systems did not factor in different data sources with real-time knowledge from customers. This left corporations in the dark when making decisions in loan approvals. Lenders also relied on historical data and traditional financial metrics to assess the risks associated with loan applications. Their limited access to real-time data analytics reduced their capability to make more informed decisions. Risk assessment also often needs more power to predict.
This greatly restricted loan servicing, which would take long to complete. This led to delays in individuals/businesses accessing the funds they sought. From the borrower’s point of view, they were limited to local banks and credit unions to approach for loan applications. This meant they were restricted from accessing a broad range of lending opportunities/ services.
These challenges in the lending ecosystem pointed to the growing need for automating several processes that would benefit both lenders and loanees. Technological advancements, especially those in recent years, have revolutionized the lending ecosystem in fintech. Today, lending ecosystems must be digitally empowered to automate and optimize their services.
Technology-driven automation in the lending ecosystem
Automation significantly reduces the time taken to process loans. This is made possible due to robust algorithms and automated writing systems that can accept, assess, and review submitted documentation by customers. Individuals/businesses today can avail loans much, much faster thanks to a sped-up loan disbursement system. Moreover, these systems offer incredible accuracy with the help of sophisticated data analytics that assess credit risk, leading to more objective decision-making for loan applications. Automation also allows lenders to conduct more comprehensive risk assessments with different data sources, resulting in better-informed processes.
The improved systems in data analytics also mean that banking corporations can offer consumers more personalized services. Individuals/ businesses can now get loans that truly suit their needs in a way tailored to their experiences. These services are also directly and entirely accessible online. With the help of automation, customers can get support whenever they want, from wherever they are. All of this with the full assurance of protection of their essential information. This is made possible with the help of automated systems that have robust security measures to protect sensitive data and mitigate the risks of data breaches, identity theft, fraudulent access, and more.
By harnessing the power of automation, the lending ecosystem can help organizations streamline operations, provide a more seamless experience, and offer enhanced security, among other benefits.
