A bank makes money from its lending verticals more than other areas of service. Different loan products serve niche stretches for changing the demands of borrowers, fueling the growth of banks and lenders. In the age of big data and information, the borrower is clear-sighted about what he wants and needs from his bank. He is willing to experiment with the technology if that is saving his time and offering a functional and purposeful experience.
In this rapidly changing landscape, banks cannot continue to maintain the present state of affairs. They have to acknowledge the need to move to digital lending software that can automate the loan origination process in an end-to-end manner with unparalleled accuracy and efficiency. On the contrary, fintech companies that are unencumbered by the barrier of the legacy lending process are revamping a change for a better customer experience. Change is constant and adopting an AI-powered tool that eases the lending function is a safe strategy for the banks if they don’t want to be behind fintech companies in the future.
Banks are realizing the importance of automated loan origination solutions provided by the fintech companies that are helping small businesses in a good way. In recent years SME lending has enabled financial inclusion of an otherwise less serviced segment. The growth of SME lending is helping fintech realize the untapped potential of business solutions that can be offered to local small businesses. Let us see how fintech will supercharge SME lending growth in the future:-
Understand SME Needs
Small businesses don’t have a big infrastructure and cannot onboard a financial consultant. They prefer looking up to their lender for all their day-to-day financial requirements. The SME-needs is a space that cannot be serviced similarly to a large turnkey project. The market share for small businesses will gain traction for a fintech company that understands their core basics and helps them as if that business belonged to their own family.
Understandably, the lending company needs to spend quality time getting the basics right to serve SMEs better. They cannot lose sight of the fact that these business owners may not have all the expertise required to run a business. However, they are good at what they do, and that translates into real sales. For example, a local pizza joint that is frequented by many in a small town may be owned by a not-so-financially-knowledgeable person. Nevertheless, the owner knows to dish out a good pizza and offer his loyal customer base a competitive price.
In the above-mentioned case, a lender has to hand-hold the local business owner in helping them streamline their financial data. SME owners have varying financial literacy and they may find it challenging to use the digital interfaces of the bank. Automated lending solutions that cater to every product offered by a fintech company, will help borrowers in this regard. The easy-to-use interfaces that can integrate all the needs of SMEs into one platform translate into more quality loans being absorbed by this market.
Unified Single Interface
Loan origination software is flexible and can be designed to serve all categories of lending businesses. Fintech companies use automated services in a single platform that can sell core lending services with other customized solutions that meet SME businesses’ needs. The automated AI-charged digital lending services offered by a fintech company will be a key differentiator for prospective borrowers, who can compare services online in different influencing channels.
The speed and efficiency of SME lending service through a unified platform and its after-service once the loan is approved are just the basics that a good automated digital lending product will offer. But what it results in is freeing up the time of the lender, which can be employed for qualified personalized attention to the borrower throughout the term of the loan. Engaging borrowers in different stages of the loan provides them with the awareness that they get only for a high fee that their business cannot afford. This knowledge helps them deal with situations in a better manner and focus on translating into cutting costs and bolstering sales.
The Fintech Advantage
A legacy banker spends more time with large corporations’ commercial loans. These corporations have all economies of scope and scale to organize their financial data in one place and meet the lender’s covenant agreements well in time.
Whereas SME businesses often lack the financial and technological literacy that is required to compete in a digital age. They need the expertise of a financial advisor who understands the needs of a small or midsize business.
Fintech companies have realized the gap created by banks and large lenders who prefer serving giant corporations and the business needs of SMEs. They have designed their automated lending solutions to serve the requirements that are typical to any small business. They even get the local authorities’ support as this initiative helps local small businesses thrive through changing dynamics of businesses.
The Fintech companies don’t push the products to small businesses but create long-term partnerships with them by understanding their core business functions. Their automated lending solutions are seamless, efficient, and borrower-centric. The use of advanced API systems helps them make credit assessments that range beyond the outdated credit scoring methods.
Fintech companies realize that helping SMEs with not just lending products but offering business solutions impacts a win-win situation for both the enabler and the end-user. They offer additional solutions like accounting, tax services, and human resource software to SME operators for an affordable fee.
The future of lending will be interesting as the world will witness a shift from traditional legacy banks to automated data-driven options that focus on SME growth. It is the genesis and growth of a new sector that is here to stay and enables small businesses to avail of loans to scale their growth. Old-school banks have to either move and give way to Fintech companies or join them in offering similar unmatched automated loan origination solutions to small businesses.