Keeping up with the latest trends in Fintech has become imperative for small business lenders if they want to stay ahead of their competitors, increase their profit, have more efficient operations, and grow their business faster.
And this is because the use of new technology has transformed the world of small business lending, especially after more companies transitioned to more of an online presence during the pandemic. Now, lenders are easier to find within a nearby area, and business owners can shop for alternative finance providers without leaving their houses, increasing the competition.
Additionally, finance providers started using the latest technology in the market to streamline the entire lending process, ensure the application process is done in a matter of days and the business loan process is faster, smoother, and more transparent than before, which improves the borrower’s experience from start to finish.
So, what technologies are playing an essential role in transforming small business lenders? And how do they help? Let’s go deeper into the 8 top trends for small business lenders.
1. Mobile and Online Solutions
According to studies, approximately 60% of small businesses* believe they need to start applying mobile solutions to succeed in their fields. And, for lending companies, it is also true that to provide a more seamless process and a better lending experience to enhance the lenders-borrowers relationship, they have to embrace the advancement of this technology.
So, let’s mention some of the advantages lenders can get from implementing mobile solutions in their business:
- Potential borrowers can get their questions and inquiries answered faster and in a more personalized way, which will, in turn, make them feel more confident about getting a loan from the lending business.
- Lenders can use mobile apps to schedule instant messaging reminders to be sent for the next upcoming payment.
- Borrowers can be asked to authorize the pull of their bank statements for underwriting through their mobile devices.
- Saves customers time and effort when applying for loans.
- Lenders can gather client data and gain valuable insights that would help extend their marketing efforts or for renewal forecasting.
That being said, providing applicants with mobile solutions has become necessary so small business lenders can stay competitive in their industry.
2. Artificial Intelligence and Machine Learning
Artificial Intelligence (AI) and one of its branches, Machine Learning (ML), have been trending for years in the fintech industry, and small business lenders are taking advantage of their continued advances and increase in popularity** to improve the loan process experience.
So, what roles do they play in the lending sector?
- AI can improve customer relationships by providing personalized experiences to borrowers, increasing retention, and making applicants trust lenders are legit.
- AI speeds up the loan process from application to approval to a matter of days, compared to traditional bank loans, which can take weeks.
- AI helps lenders better evaluate applicants’ creditworthiness to make more accurate credit decisions.
- ML algorithms help in fraud detection by sorting through customers’ transaction history and personal data to find red flags.
- ML can browse through the applicant’s data from nontraditional sources to supplement the usual underwriting criteria for a more extensive credit evaluation.
- It can help businesses predict when a payment is due or invoices will get paid.
- ML can be used to automate every part of the loan process, reducing cost and time.
3. Chat and Virtual Assistants
A lot can be said about the importance of providing merchants with a convenient and quick way to engage with financial institutions so they can get their doubts answered when shopping for the best loan deal.
Even though merchants are drawn more to the immediate and accessible approach of online loan applications, they still crave genuine human interaction and the fast response time to their pain points that they could get from going to a lending business office.
To that point, live chats, chatbots, and virtual assistants had become an integral part of the game, providing lenders with several important key factors to improve their business customer experience.
- Lenders can deliver quick responses to potential borrowers to alleviate their doubts and worries and increase their confidence in getting financed.
- Chatbots and virtual assistants have made the loan process more accessible and personalized.
- They deliver a genuine human interaction to make the online process more personal and make potential borrowers feel more comfortable.
- They can help inform borrowers about their existing loans, keeping them in the loop about the stage of the lending process.
- They help small business owners from getting stuck in the application process.
4. Big Data Analytics
Today, data is the power behind everything. Everyone can reap the benefits of the abundance of online and offline information to make better business decisions, from big corporations to small businesses.
In fact, according to an IBM Business Tech Trends Study, 75% of small businesses are planning to invest in big data analytics over the next two years. So, more and more companies are becoming data-driven, and the lending sector is right there too.
Before, the lending industry was very limited by data; now, with all types of data available, from transaction data and consumer data to social media data, lenders have more information to make better decisions.
So, how can lenders use big data to their advantage?
- To get to know their customers better and create a more sophisticated segmentation to offer loan programs, incentives, and fees that are better suited for them.
- They can customize offers according to the borrower’s credit history and profile in real-time.
- Reduce the risk of getting a borrower with past erratic and financial behavior that could default on the loan.
- Create a better collection strategy based on different data sources like account activity and debtor demographic to better understand your customer and maximize the collections efforts.
- Validate the client’s identity and authenticity to avoid the probability of fraud.
- Use real-time data to prevent potential fraud scenarios, even after the loan is approved.
E-Signatures are one of the technologies trending up in the lending industry, making the loan process seamless and straightforward. It offers lenders and borrowers alike the freedom of flexibility they need when creating financial agreements. Changes can be submitted quickly, contracts are easily amended, it improves lenders’ and borrowers’ communications, it’s faster, and it saves the company time and money.
This is a stark contrast to what used to be the process for lenders: sending the documents through fax or mail and waiting to receive them back and then having to double-check the signatures before moving on the loan process. And, as technology evolves, lenders can expect more benefits from using their e-signature of choice.
- Increase transparency by tracking a document better as it moves from signee and helps safeguard the loan documentation.
- It helps lenders to take immediate action if the loan is stalled in the signing process by sending reminders and notifications or sending it to a different signee.
- Saves the cost of printing, paper, printer maintenance, mailing services, and more.
- E-signatures offer more security to avoid documents being altered, forged, stolen, lost, or misplaced.
- It provides signature verification and storage. It can have signatures cryptographically bound to the document while offering high standards for signer identification.
- Documents can be signed in minutes from anywhere, anytime, using smartphones, tablets, or any mobile device.
- Streamline the signature process and enhance the productivity of your organization.
- They fully comply with the industry’s leading certification bodies like21 CFR part 11, ESIGN, UETA, and others.
- Minimized human-made errors by offering features like mandatory field completion, specifying the leading signers, or providing personalized instructions on the documents.
6. Scalable Cloud-based software solutions built on your CRM
Technology has improved the loan application process, making it faster and easier. And there are some tools that are essential for small business lenders to be on top of their game, like CRM and Cloud-based software.
According to studies, it is expected that 64% of businesses’ infrastructure will be on the cloud by 2026***. For lenders, using cloud-based software that streamlines the complete loan origination process is very beneficial for the business. This is especially true if it is built on top of Customer Relationship Management (CRM) software like Salesforce and offers the ability to integrate the multiple siloed software systems your organization normally uses to create a single unified system.
So, by implementing a system that brings the best from your CRM and cloud-based loan origination software, your organization can enjoy all the benefits of a unified system. You get a centralized place from which you can track, and analyze data, check the stages of the loan application, manage multiple applications at once, and measure all key metrics of your customer relationship and outreach.
There are other advantages lenders can get from these advancements in technology, like:
- Use the cloud to store information to remote and secure databases to avoid depending on your physical devices’ storage room.
- You can access the information from anywhere and at any time, just with an internet connection.
- Organize client data in one accessible location.
- Cloud-based providers are governed by strict regulations to keep your data safe and secure.
- Cloud-based software can be scaled or increased in capacity as your business grows and meet the demand during the high loan origination activity periods.
- You don’t have to worry about maintaining or upgrading your software, as the cloud service provider does this.
- It allows you to connect new technology with older systems to add new functionality without replacing your existing core services.
- By integrating your systems, you can input more data quickly, reduce errors and save time you would spend on manual processes.
- Ensure the consistency of your client’s information in every platform by having the data automatically updated everywhere.
- Enables better lending decisions and improves underwriting productivity.
- With cloud-based loan origination software, you can eliminate unwanted delays in the process and reduce human errors and time-absorbing manual tasks for a better user experience.
- Improve the collaboration of your loan department to get approvals faster and without so much hassle.
- Get a centralized location to keep track of the loan origination progress.
- More reliable. Your business can minimize the risk of downtime with the implementation of automated rules and backup and recovery plans that come with the cloud service.
Finally, by using the right cloud-based loan origination software with the right capabilities, lenders can reach faster loan approval rates and make the lending process more convenient, simpler, and secure.
7. Credit Reporting Software.
Credit reporting is an important step that helps lenders assess the creditworthiness of small businesses. By leveraging AI and machine learning, fintech companies can innovate how lenders evaluate credit scoring to speed up credit applications. This can result in many advantages.
- By doing a more intelligent assessment, lenders can unlock capital to more businesses that were rejected because of old metrics.
- Make credit reporting faster and more accurate.
- Minimize the risk of borrowers defaulting on loans by quickly filtering bad applicants or potential red flags.
- Connect real-time data from borrowers from different credit bureaus.
Learn more about the benefits of improving your credit reporting processes from our latest article.
Even though cloud-based technology has changed the way small business lenders operate, it has also increased the importance of cybersecurity. The move to digital lending exposes borrowers and financial providers to being targets of a cyber attack or theft of personal and confidential information. So, investing in cybersecurity tools is needed to keep your system safe.
Fortunately, most cloud-based providers have protocols in place that protect clients’ data against hackers and technology to avoid these risks. Still, by investing in this and using the best practices on cyber safety, lenders can gain many benefits.
- Mitigate the risk of getting a security breach in your software.
- Build loyalty with your clients by boosting their trust in your brand.
- Get protection against internal threats.
- Reduce violations that can slow down networks and affect your business’s productivity.
- Minimize the downtime it takes to fix a breach and restart the operation.
- It is more cost-efficient, as it helps save the money and valuable information lenders would lose if they were dealing with a cyber-attack.
Financial Technologies are constantly evolving, becoming more sophisticated every day. They improve how small business lenders operate, making their businesses easier to find in a high-competition field. They help assess the creditworthiness of borrowers better, they regulate to reduce the risk of cyber-attacks and give borrowers more confidence and trust in their decision to get financial help from a particular entity.
So, being on top of new upcoming advances in the fintech industry is critical if you always look to have a technological advantage over your competitors. Especially if you can get a system that encompasses everything you need, technology-wise, in one place.
If you want to know more about how to improve your small business lending processes, contact one of our subject matter experts and find out about our products and services.
- *Ressa Kimmons. “Should your startup invest in a mobile app?” eteam.io. Jan 14, 2020. https://www.eteam.io/blog/should-your-startup-invest-in-a-mobile-app
- **”75 Must-Know Customer Experience Statistics and Trends for 2022” smith.ai. Oct 23, 2022. https://smith.ai/blog/customer-experience-statistics
- *** “Infographic: The Biggest Biz IT Trends of 2021” impactmybiz.com. Dec 03, 2021. https://www.impactmybiz.com/blog/infographic-biggest-it-trends-2021/