Lending is evolving quickly. While just a decade ago, obtaining a loan was a time consuming process that was mostly handled by the banking institutions, today the lending scene looks completely different. Alternative lending is booming. Today it is possible to access funds in a matter of minutes from the comfort of your couch. In P2P lending, the borrowed funds do not even belong to the facilitating platform.
Nevertheless, even with the current level of development, there remains significant room for improvement.
Today it is nearly impossible to imagine how a business could operate without a proper online presence. Mobile lending is something that a lending institution needs to consider if it is to see itself in business tomorrow.
The behaviour patterns change drastically. A year ago, google search volumes via mobile devices have surpassed desktop searches. On top of this, it is possible to see a smart phone icon next to the website URL. This tells us that the phone is associated more with the network connection than a regular laptop.
As a lender, you no longer need a mobile or a responsive version of the website. It is essential to have an app so you can serve your clients the right way. When it comes to payday loans, mobile apps become even more important. Typically your client needs the funds instantly and if your lender cannot offer it today, another one will tomorrow.
Do you remember the last time you registered on a website? Probably a while ago. Today, users are used to saving time by signing up with their Google, Twitter or Facebook account. The reason is simple - the comfort. You no longer need to remember various passwords that come in different formats for each website, logging in with Facebook (or any other social media account) sets you just two clicks away from accessing the website as a registered user.
Why should this be any different in a lending environment? Probably because lending involves handling money and this is a regulated field. Nevertheless, why wouldn’t a lender want to access the KYC data obtained by a regulated institution? Authenticating with a bank account entails a lightning-fast identification process for the online lender.
While mobile apps and instant KYC can certainly speed up the on-boarding process, a lender is not simply interested in issuing more loans. The core goal is to offer loans only to the right customers. For years lenders used to obtain their credit ratings from the various bureaus. Is this data accurate? Absolutely.
But the best way to determine the probability that a client will repay a loan is by directly assessing his or her financial history. Banks have been using this data for years to determine mortgage rates, credit card offers and so on. If a lender can obtain transactional data from a user’s bank account, it becomes fairly easy to analyse these transactions and determine how trustworthy the person is.
Luckily for the online lending sector in Europe, Payment Services Directive 2 was positively voted for in October 2015. This means that, in at most 2 years’ time from now, any lending, payment or other company will be able to obtain unrestrained access to a user’s bank account, providing that user has provided his or her consent. In this way, any online lender will be able to obtain powerful data for instant KYC and detailed risk assessment through the help of such technologies as Kontomatik’s banking API. Beyond this, a simple authentication process should power up the on-boarding of the clients via mobile apps.