Most Fintechs depend on credit reports and third-party underwriting systems to assess a customer's risk profile. In terms of loan amount or interest rate eligibility, the level playing field leaves little room for aggressive play
Fremont, CA: Lending Alternatives or Alternative Business Lenders Fintechs have steadily eroded Banks' share of SME loans, to the point where Fintechs now fund nearly 80 percent of SME loans. Low cost of capital, higher risk tolerance, better service in terms of processing time and documentation involved, and the fact that SMEs are increasingly tech-savvy millennials provide Fintechs with significant leverage to use technology to disrupt the way loans are issued and serviced. In order to obtain a loan, 48 percent of SMEs believe they do not need to speak with a loan officer.
Many Fintechs, in their efforts to focus on acquiring customers as well as funding sources to meet newer loan demands, tend to put technology challenges on the back burner and end up compromising by not making the needed changes or adopting short-term workarounds.
Here are some of the technology challenges faced by Fintechs:
Dealing with Other Stakeholders Besides the Borrower
To process a loan, many Fintechs employ third-party sales agents. A loan may be taken out by the borrower to purchase an asset that is represented by a broker. Most Fintechs do not provide a portal or medium for various stakeholders to view collateral value, loan details, commissions due and due dates, certificates for claiming tax rebates, and so on.
Customer Acquisition
Most fintech companies depend on credit reports and third-party underwriting systems to assess a customer's risk profile. In terms of loan amount or interest rate eligibility, the level playing field leaves little room for aggressive play. Top fintech companies are beginning to use unconventional sources such as social media to gather more information about their customers and build analytics around the data to create newer risk models to supplement traditional methods.
Business Rules Management
The majority of fintech companies manage rules using business logic coded into software. Changes in business rules as a result of regulatory changes necessitate IT effort, and some of these changes occur so frequently that a significant bandwidth of IT support is dedicated to constantly tweaking these rules and creating newer rules.
A Loan Origination System based on a Rules Engine enables even business users to create, track, and modify rules. Because the rule engine-based rules are created by the business users themselves, the IT team's engineering and user testing efforts are reduced.
See Also : Top Fintech Solutions 2021
