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Changing With the Times: 4 New Trends Reshaping Business Lending

Wednesday, June 10th, 2020

Retail bank lending has increased significantly in the decade following the 2008 financial crisis thanks in part to non-bank lenders.

These firms have taken advantage of tech to improve the ease and speed of access to capital, competing fiercely against traditional loans.

This cut-throat competition and the changing needs of tech-savvy borrowers have inspired further innovations in the world of lending.

Loan seekers now look beyond nice-looking APRs and product terms. And whether a lender wins or loses depends on the front-end (originations) and back-end (collections) of its loan process.

So what are some of the innovations shaping the lending environment?

  • The digital advantage. Traditional lending still depends on creating partnerships with other third-parties to maintain a steady influx of loan requests. Digital lenders, however, use a direct approach to attract borrowers to their platforms. They depend on digital marketing tactics, like paid-for ads, to attract potential borrowers.
  • Attract and Convert. As soon as a would-be lender reaches the website, the goal is to get them to complete the loan request. And while this is not easy, many lenders use these two strategies to reduce abandonment;
  • The use of informative videos and chatbots to engage potential borrowers
  • A simple application process that ensures a borrower to complete the request in a few steps.

New-age lenders believe in attracting customers with lucrative offers and prompting them to complete the application immediately.

  • Instant underwriting and verdict.  Immediate decision-making is another advantage today lenders have over old-school financiers. While traditional sources will take 24 hours or more to scrutinize your request and decide, non-bank lenders are working to approve loans in minutes as borrowers would love it! And this can only be achieved by implementing the following;
  • A complete application & data/credential collection process.
  • The knack to source official bureau data in real-time, and make decisions based on it.
  • A well-thought-out auto-decision-making process.

Today lenders can make automatic decisions thanks to data science, which is becoming an increasingly useful tool in the sector.

  • Pay in many different ways. Today borrowers hate restrictions when it comes to loan repayment. Smart lenders are enabling this by supporting as many payment methods as there are. This kind of flexibility encourages a hassle-free settlement process. One digital approach, common among MCA providers, is the use of apps like Plaid to deduct an amount from a borrower’s bank account when repayment is due.

Final Words

The retail lending environment is transforming rapidly, and traditional lenders must pace the shift to these digital methods or come second to their relatively new counterparts.