Lenders must simplify and expedite the credit approval and underwriting processes to compete in today's high-paced financial markets. These enhancements often require cutting-edge software and technology to make fast and accurate decisions, automate the process wherever possible, and provide top-notch security features. However, hitting all these objectives at once can be a complex endeavor. To meet this challenge, lenders might consider deploying digital lending at the point of sale where financing becomes available when a consumer initiates a purchase.
What is a Digital Lending Platform?
A digital lending platform allows financial institutions to provide borrowers with a better customer experience by offering them immediate access to financing options at checkout. These options include installment loan products such as buy now, pay later (BNPL).
Digital Lending Point of Sale: Top Ten Features
The top ten features driving the rise of digital lending are as follows:
- Customer engagement. Throughout the financing process, digital lenders employ digital channels and leverage consumer data to create an easy, convenient, and personalized customer journey. Outbound and inbound communication, as well as account management, are all part of this process. Lenders provide personalized notifications to customers based on their behavior.
- Quicker decisions. While applying for financing through a bank might take anywhere from a few days to many months, digital lending apps can provide borrowers with feedback in a matter of minutes. It improves decision-making speed and lowers the process cost. Management does not need to enlist a large staff to verify application forms and make decisions.
- Higher chances of loan approval. Traditional lenders use credit scores to award loans, and they typically reject would-be borrowers with no or poor repayment history. However, that customer's approval chances would improve significantly by engaging a digital lender who utilizes alternative scoring data and focuses less on credit history.
- Powerful analytics. To assess the loan applicant's background, digital lenders use innovative technology. Lenders can access and leverage digital data to make underwriting decisions that are faster, better automated, and precise.
- Cloud computing. Cloud computing gives quick access to data for regulatory reporting, risk reduction, analytics, greater flexibility, enhanced security, and more accurate compliance procedures.
- Biometrics technologies. Security has long been a top priority in financial services, but biometric technologies have taken safeguarding to another level. Face scanning, fingerprint scanning, iris scanning, and voice recognition allow for authentication, contactless transactions, and enhanced data security.
- Mobile features and e-signing. Millennials run their day-to-day lives through their phones, and they expect that routine to include their banking services. This expectation makes mobile security a critical fixture in digital lending. Procedures such as SSL certificates and e-signing provide users with that higher level of protection.
- Digital payments. Digital payment features such as touchless payments, mobile wallets, and mobile point of sale (mPOS) technologies steadily replace physical channels.
- Artificial intelligence and machine learning. To pick an acceptable lending strategy, banks traditionally used a variety of internal credit scores based on quantitative data points and specific subjective considerations such as market forecasts. However, innovative non-linear statistical models now help lenders pinpoint patterns and financing relationships that indicate consumer creditworthiness and risk levels.
- Customer acquisition. Digital lenders acquire customers through a combination of digital marketing tools and onboarding channels supplemented by planned physical touchpoints and referrals. These tools verify consumer identities through digital channels that access government and private sector certified documents.
What Lies Ahead?
FinTech companies continue to play a crucial role in repairing the pandemic-ravaged economy as digital lending disrupts the customer journey spectrum, including credit evaluation, underwriting, risk monitoring, and collection. It should provide new opportunities in the financial sector in the coming years.
Popular predictions for the future of digital lending include the following:
- Cost savings from FinTech models will continue to drive financial product innovation.
- Data from non-traditional data sources will further enhance underwriting and credit evaluation models.
- Evolving data and analytics will promote expansion into new customer segments and novel business models.
- Increased scrutiny and regulations in non-traditional lending models will further protect borrowers.
Don’t Miss Out On The Digital Lending Transformation
Merchants are taking more of their business online, accelerating the need for digital lending at the point of sale. Companies have increased their technology expenditures in cloud-based products and services, and digital sales have gained traction. Banks benefit from digitizing the lending process in various ways, including better decisions, more extraordinary client experience, and significant cost savings. To better organize the digital loan process, financial institutions will continue turning to digital lending solutions. Don’t miss out!