In the last five years, the lending industry has grown increasingly competitive, with banks, lending platforms, payment apps, and non-banking financial companies (NBFCs) competing for a piece of the pie.
Simultaneously, there’s great potential for data-driven, future-thinking lenders to accelerate growth by capitalising on under-tapped market opportunities. For instance, the Micro, Small, and Medium Enterprise (MSME) market continues to be underserved. This is because lenders are struggling to cater to their unique needs.
There’s also a growing demand in the small loan market for ticket sizes of less than INR 1,00,000.
Though fintechs have grown their market share in this segment from 50% in the Financial Year (FY) 2018 to 77% in FY24 (up to September 2023), they have only scratched the surface.
This is where the adoption of cloud-based lending software can be a game-changer for lenders. The smart use of this revolutionary technology can help lenders streamline operations, make data-driven decisions, capitalise on market opportunities, and drive revenues.
What is Cloud-based Lending Software?
The lending cycle comprises multiple steps, such as underwriting, loan disbursal, collections, and debt recovery. As large volumes of data are generated throughout the cycle, it is no longer sustainable for lenders to scale through manual processes.
Cloud-based lending software is a superior lending solution that automates the entire lending lifecycle end-to-end. This solution empowers lenders to make data-driven decisions that deliver more value to borrowers.
Lenders can leverage this single, unified interface to assimilate, analyse, and manage data. They can harness the power of predictive data analysis to boost business outcomes.
This solution combines the power of transformative technologies such as Artificial Intelligence (AI), Machine Learning (ML), cloud computing, Optical Character Recognition (OCR), and robotic automation. It comes with multiple features and benefits that can help lenders build a competitive edge in an increasingly competitive field.
Cloud-based Lending Software: 5 Strategic Shifts
Ambitious lenders looking to scale quickly without increasing risk can consider making the following shifts:
Automate and Optimise Operations
By automating the entire lending process, lenders can bring more efficiency and speed to the lending lifecycle. They can also eliminate errors, omissions, leakages, and duplication of data.
The adoption of superior cloud-based lending software such as Finezza, for instance, enables lenders to automate the process of data recognition, extraction, and segregation with the use of OCR and automation technology. The software has the capability to extract data from over 700 formats of documents. This shift reduces human intervention and the potential challenges that come with it.
Build a Data-driven Lending Culture
The adoption of cloud-based lending software enables lending teams to access data anytime from anywhere. More importantly, it allows lenders to process large volumes of data within minutes and make data-driven decisions.
Using AI-powered predictive analysis enables lenders to make market forecasts while also predicting market opportunities and future borrower behaviour. They can customise dashboards and extract detailed reports based on real-time borrower and market needs.
Predictive Bank Statement Analysis
Bank transactions offer deep insights into borrower habits, cash flows, and behaviours. However, analysing bank transactions is a challenging process, which can be simplified with the use of cloud-based lending software.
This solution enables the segregation of transactions into inflow and outflow categories and data into sub-categories. For instance, interest, capital gains, and revenues fall under the inflow category, while salaries paid, penalties, and expenses fall under the outflow category.
By segregating data into over 50 to 60 categories, lending software can automate the underwriting process, making it more accurate and efficient. The software can also recognise and flag unusual banking patterns. Based on a borrower’s data, the software allocates a creditworthiness score to help lenders make accurate underwriting decisions.
Strengthen Compliance
As regulatory bodies become more stringent with lending guidelines, lenders must be in a position to adopt new rules quickly and effectively. Failure to do so can invite penalties, investigations, and potential shutdown due to non-compliance.
The use of smart technology such as cloud-based lending software can help lenders automate the process. This is a foolproof way to ensure compliance across the lending cycle. More importantly, lenders can execute changes quickly, and comprehensively with limited human intervention.
Offer Customised Solutions
Traditional lenders tend to be rigid in their loan product offerings. By doing so, they miss out on opportunities to serve a wider spectrum of customers. Taking a more dynamic approach and customising loan products can prove to be a game-changer for lenders looking to capture greater market share.
However, manually customising solutions is time-consuming and unsustainable.
The adoption of cloud-based lending software enables lenders to automate this process and offer relevant products to borrowers. By customising products, lenders can offer more affordable products, which prevents borrowers from plunging into debt.
This software also plays an important role in transforming the debt recovery process. For instance, it offers customised solutions based on borrowers’ real-time payment capabilities. This approach can help lenders recover debt much faster. It can also retain customers who may face a temporary cash flow crisis, which can be resolved with timely intervention.
Key Benefits of Cloud-Based Lending Software
The adoption of cloud-based lending software empowers lenders to scale faster without increasing risks. Here’s a snapshot of key areas of impact:
- Lenders can deliver a faster turnaround on loan applications and scale faster.
- AI-powered financial analysis helps reduce underwriting risk, which translates to a lower risk of borrowers turning into Non-Performing Assets (NPAs).
- The software also enables lenders to detect loan fraud early on and avoid consequences such as investigation, investment of resources in legal and PR services, and potential shut-down.
- Lenders can follow regulations to the core and be compliant, thus avoiding penalties and a halt or shutdown of operations.
- Lenders can function with lean teams and cut costs on human resources. They can redesign job roles to comprise more strategic work that drives scalability goals.
- Businesses can become more inclusive and design relevant offerings for new audiences, such as first-time borrowers.
The Takeaway
The adoption of cloud-based lending software can help forward-thinking leaders harness the power of automation, AI, and cloud computing. They can work more efficiently with lean teams, make data-driven decisions, reduce costs, decrease the incidence of loan fraud and Non-Performing Assets (NPAs), and drive up profitability.
The best approach is to partner with a technology specialist and access AI-driven, cloud-based, cutting-edge solutions that service your needs.
Finezza offers a comprehensive set of tools and solutions to manage your lending portfolio. Our end-to-end lending management solutions are trusted by brands like ftcash, Hiranandani Financial Services, gromor Finance, and UC Inclusive Credit, to name a few.
Finezza’s intuitive bank statement analysis software is geared to analyze bank statements with speed, and accuracy and detect potential fraud.
Book a demo to know more.
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