Technology has completely changed the way we live, from socializing to shopping to dining and so many other things. It is also turning the financial services industry on its head. Over the last few years, fintech startups have been emerging in the market, utilizing technology to make it easier for consumers to make payments, invest, and even take out a loan. Consequently, this development influences how people consume loan services, especially personal loans. In fact, the market for personal loans in the United States is on the rise. In 2018, the total amount of consumer loans gained an additional 17% compared to the previous year. According to TransUnion, the main reason for this rapid growth are fintech institutions.
Fintech institutions accounted for about 38% of all personal loans issued in the country. This is a huge leap compared to the prior years, in which they only accounted for 5%. Furthermore, fintech institutions come in several shapes and sizes, with various companies that often target specific borrowers or purchase categories.
Fintech is used to define a new tech that seeks to improve and automate the use and delivery of financial services. Also, it is used to aid consumers, businesses, and companies in managing their finances better. This is done by utilizing specialized algorithms and software that are used on computers and even smartphones.
Fintech is used to describe different financial activities like depositing a check using your smartphone, money transfers, managing your investments, raising money for a business startup, or by-passing a bank branch for a credit application, most likely without any assistance from a person. Moreover, about one-third of the consumers opt to utilize fintech services (at least two or more), as stated by EY’s 2017 Fintech Adoption Index.
Most financial startups have similarities when it comes to fintech practice. They are all developed to challenge traditional financial services providers by serving an underserved segment, being more nimble, and offering a faster service.
For example, CreditNinja caters to borrowers who have poor or bad credit. They offer them personal loans with a fast application process, favorable terms, and interest rates. They also tend to help these borrowers improve their credit scores.
Financial technology companies are mostly characterized as being startups developed to threaten the existing larger financial corporations and other financial models that are less affiliated with technology. However, some larger financial corporations now recognize the need to apply software solutions and are heading to fintech to improve and increase their financial service offerings.
In recent years, global investment in fintech has been booming as well. This platform now comprises a multi-billion dollar industry. However, startups still dominate this industry, which usually offers technological and easier solutions to financial products and services.
The following are the benefits of getting a personal loan through the help of fintech companies, and they are also the reasons why personal loans are booming:
Many believe that time is money. Most people don’t have the patience or the time to wait a couple of days (usually three days or more) just to take out a personal loan from traditional banks. With fintech companies, borrowers can access a faster and quicker loan application and disbursement process (usually within the day). This is achieved by using AI and machine learning algorithms instead of running hard credit checks when assessing whether or not the borrower can pay the loan back.
Less Hassle and Documentation
Back then, financial information and identity checks were an issue. However, the same is not true to this day. Thanks to fintech companies and their artificial intelligence (AI) and machine intelligence (MI) learning tools to help with personal loan applications.
Fintech companies can accommodate those who have poor credit scores. This is because most of them rely on their own alternate data analytics and algorithms to evaluate your loan application besides just looking at your credit score. Moreover, they can even help you improve your credit score.
Cash In Emergency
Traditional bank loans tend to offer a couple of days before you can get access to the loan amount you got approved for. However, thanks to fintech companies, the approved funds can be transferred to your account immediately. This usually takes within a few minutes or on the day of your loan approval.
Flexibility and Payment Options
Most traditional bank loans offer zero flexibility and payment options. On the other hand, with fintech companies, you have the option to choose what best suits your current financial situation. This is because they provide a product for each requirement you qualify to best fit your personal needs.
Fintech pertains to the integration or merger of technology into the services and products of financial companies in order to improve their delivery and use to potential consumers. It provides a convenient and faster way where people can manage their finances and access funds. Fintech is a rapidly growing industry that will continue to shape how we manage our finances.