5 ways digital credit is changing banks from the inside

The approximate time banks & financial institutes take to make traditional lending decisions stands anywhere between a month or a little more, with the time-to-cash extending a couple of months further. However, quite the contrary can be said about digital lending where things are much, much faster; where the time-to-lend and time-to-cash can be brought down to a lighting-fast – 24 hours! For the banking industry, such transformations are a great way to attract & retain customers, enhance revenue growth, minimize the incidences of application fraud and achieve significant cost savings especially when it comes to lending loans to SMEs and corporate. The recent pandemic has also triggered the trend of ‘less touch time’ which is all the more reason why banks should look digital.

But digital does not mean a complete takeover by machines in the total absence of human intervention, it rather means enhancing common processes such as digitizing credit proposal papers and automating annual reviews to improve both, time-to-yes and the quality of service. For some banks, digitization could mean focusing their ‘human’ time on building relationships with their most valued customers while automating processes like low-risk credit line renewals – the applications are many. Let us see at least 5 ways in which a digital credit is changing the banking game for the better. This article is brought to you by CRIF – a leading credit bureau in India.

1. Captures user information more conveniently

   Document filling is one of the most time-consuming & cumbersome steps while onboarding a customer and registering their information. It also happens to be an area that is most likely to have manual errors such as incorrect spelling or misplacements considering the nature of hand-written documents. Physical proximities add to the time too. As such, digitized platforms provide a highly enhanced user experience.

2. Quick & Calculated decision making

   Instant loan approvals require a faster evaluation of borrowers. Long delays in loan evaluation and approval process can mean losing out a customer to a competitor. Automated Decision engines use complex algorithms based on measurable user derived data which includes their past spending patterns, their credit history, credit information report, credit score, buying behavior – all things which when analyzed by a human would take significant time and skills to come to a reliable conclusion about the creditworthiness of the customer.

   An example can be mentioned about a bank in Scandinavia who recently published the results of running its decision engine solution on all applications from the past five years. The tests showed that the automated engine based on data-driven assessments and a structured credit framework was better and far more consistent at predicting default risk than manual assessments had been.

3. Displays extraordinary vigilance in fraud detection

   Antifraud solutions software – which falls under the umbrella of digitization – also identifies the legitimacy of the customer and can smell suspicion and raise an alarm before-hand, saving you from potential (huge) losses. Advanced behavioral analytics using AI and multilayered cloud-based security systems make accounts hard to breach and ensure that they are continuously monitored for any abnormal activities.

4. Overcomes the limitations of organizational silos

   Digitization necessitates the introduction of a cross-functional team that collaborates with business, risk, IT, and operations. Multi departmental collaboration helps strike the balance of customer-journey and business objectives with robust credit decision making and risk control. Centralization of the teams expedites the customer journey and minimizes touch-points.

5. Promotes financial inclusion

   Traditional lending heavily relies on parameters such as credit scores fetched from credit information companies for making lending decisions. But what about those who don’t have any score, credit history, or are borrowing for the first time? Using advanced analytics and AI, it is now possible to predict the behavior of a customer using unconventional information such as social media posts, utility bill payments, and other alternative data.

As of today, there are multiple digital lending frameworks that can be easily integrated into the system of a financial lending company. In an ever-evolving world, these solutions are highly customizable and offer end-to-end services to help a business best it can be. CRIF credit bureau has been recognized amongst the top FinTechs and is a leading provider of solutions for predictive analytics, decision automation, and loan management software. If you have not yet visited us, contact CRIF for a credit report today!