The banking sector is one of the world’s oldest businesses today. The way we bank now has changed compared to how we used to bank in the past. In less than 20 years, the mobile banking technology was introduced to us. Since then, technology has been evolving at high speed. Not only have the developments and improvements in technology changed how people seek bank financing and loans but has also changed the process banks are using to approve loans.
How has banking technology changed the way loans are being approved today?
Connecting borrowers and lenders
Unlike before when banks had to advertise on radio, television, and billboard about their services and then wait for potential clients to walk into their office and fill a loan application form, the internet today offers a platform where borrowers and lenders can communicate freely without having to visit the bank premise. Internet technology has made it possible for the borrower to access loans from lenders who are thousands of miles away.
The internet has also made it very easy for the borrower to do their research on the best options available by accessing case studies and reading reviews on potential lenders.
Technology has changed how banks evaluate a client’s creditworthiness
Back in time, getting a small business or personal loan was an arduous task. It meant loads of paperwork, meetings, and bureaucracy. Usually, it would take months before your loan was approved. Now, with the change in technology, getting financing and loan approvals has been made manageable to the extent of getting sorted within minutes. Unlike before when banks had to rely on metrics such as personal credit score and collateral to determine whether a person or business was credit worthy, today technology has been formulated in such a way that a person’s financial status report is formulated based on thousands of points such as transactional data and public records.
This process is usually done within minutes of feeding the borrowers personal details into a computer. This technology is also beneficial to borrowers who might not have been able to meet the rigid traditional banking requirements.
Simplified loan application
Technology has done away with the numerous loan application forms that one had to fill by replacing them with secure online application forms that are quick and easy to fill. The manual application was time-consuming, especially for banks when retrieving clients’ data. Technology has made it easy for bankers to access data within few minutes and make decisions faster.
Approve loans faster
Before, credit approval used to take weeks or even months. With the changing banking technology, loan approval can be done within a matter of minutes or hours. This is a huge benefit to both parties since it is easier for the banks to access borrowing records of the borrower making it easy for them to decide whose loan request to approve and whose to decline. Most borrowers appreciate the fact that they can get a quick “yes” or “no.”In case a borrower gets a “no,” they are able to look for other options fast.
Tracking loan payments
In the past, loan repayment was made once a month on specific dates. This used to be a burden to borrowers due to the lumpy loan payments they had to do at the end of every month. With the changing technology, borrowers are now easily able to use to their mobile banking applications to repay their loans in flexible payment that help to spread the cash flow burden evenly over an entire month.
In addition, borrowers can check for their current loan balances hence giving them an opportunity to build strong credit profiles.
Regardless of the thousands of kilometers between a borrower and a lender, the internet makes it possible for these two parties to communicate regularly and frequently through emails, websites, social media, newsletters, and informative articles.
Technology has opened up the banking industry to many more business opportunities. However, the more banking technology advances, the more competition it faces. Services that could only be provided by banks such as international money transfer are now being provided at cheaper rates by other independent businesses. The bank is being forced to change its way of working so as to keep up with the banking demands of today’s society.