The lending industry worldwide has grown extensively over the last few years. Lenders are on a spree to close the deficit in credit access within the business arena through digital innovation.
As of 2022, the global digital lending platform market was valued at $ 9.56 Billion. It is projected to accelerate at a compound annual interest growth rate of 18.92% and grow to $ 37.77 billion by 2030.
Access to innovative technology has enabled lenders to bring more efficiency and accuracy to their underwriting processes. However, the lending landscape is a dynamic one, demanding that software solutions serve the ever-changing needs of businesses.
In this blog, we decode cloud-based lending software market trends that are helping lenders stay ahead of the curve with market demands.
What is Cloud-based Lending Software?
Lenders need to make key decisions every day based on available borrower data. As lenders scale their businesses, the pace at which they need to make accurate decisions becomes a growing challenge.
Cloud-based lending software is a solution leveraged by banks, non-banking financial companies (NBFCs), and other financial institutions to help them make accurate, efficient, value-based decisions.
The software combines several technologies, such as cloud computing, automation, artificial intelligence (AI), and machine learning, to boost the efficiency of lending operations.
The role of cutting-edge lending software is growing extensively, with more lenders adopting it as the go-to solution to address several challenges.
Cloud-based Lending Software: 6 Market Trends
A snapshot of the direction in which cloud-based lending software is evolving:
1. End-to-end Process Automation
Contemporary lending software is designed to automate the complete financial analysis process, thus wholly reducing human intervention.
For instance, Optical Character Recognition enables text recognition within images, making it easy to extract, store, and process data. In Precisa’s cloud-based lending tool, documents present in over 700 file formats can be fed into the software and analysed within minutes.
2. Centralised Data Access
The cloud computing capabilities of lending software enable easy access to millions of borrowers’ raw and processed data. Authorised lending team members can access the data from any location in real time with an Internet connection. This approach is conducive, especially for remote and hybrid teams.
Thus, decision-making does not stop due to geographical barriers. Moreover, cloud-based lending software typically comes with a subscription-based pricing model, making it cost-effective. Lenders need not purchase and maintain on-premises software and hardware.
3. AI-driven Financial Analysis
The use of AI in cloud-based lending software enables the detection of irregular patterns in bank transactions. The software can also identify fake documents, identity fraud, thus boosting fraud detection capabilities.
These red flags are more challenging to detect purely with human intervention. All transactions can be categorised into inflow and outflow transactions, then further segregated into multiple categories.
Thus, lenders can study data very minutely and splice and dice it as per their specific requirements. The software offers a creditworthiness score based on in-depth financial analysis. The score helps lenders make decisions quickly.
4. Focus on code-free/ Low-code Compliance
Financial regulators continually strengthen their guidelines due to the rise of loan fraud and non-performing assets in the lending industry. Implementing new guidelines is a challenge for lenders.
The lending software industry is responding by introducing code-free/low-code platforms to enable accessible building and maintenance of compliance-focused processes.
Lenders did not invest in customised code, requiring expertise and resources. Code-free platforms allow lenders to quickly adapt new regulations into their processes and stay compliant with fresh guidelines. This approach allows them to avoid penalties and other consequences of non-compliance.
5. Product Customisation
Product customisation is an important capability of contemporary lending software. The one-size-fits-all approach to credit access no longer works, especially with micro, small, and medium-sized enterprises entering the ecosystem.
The software enables seamless adjustment of specs such as interest rates, fees, eligibility criteria, loan tenures, and repayment schedules.
Lenders can also have templates for various loan products to customise a borrower’s real-time needs easily. This kind of flexibility is a win-win for both borrowers and lenders.
6. Cross-analytical Capabilities
Superior cloud-based lending software comes with cross-analysis capabilities, which allow lenders to cross-reference sales-related bank transactions with Goods & Services Tax Returns (GSTR).
Companies must file GST returns for all goods and services sold. Hence, cross-analysis is a fool-proof way to understand the state of a borrower’s cash flows. Cross-analysis capabilities open the doors for lenders to offer cash-based lending to businesses that do not own assets.
Healthy cash flows are a sign of revenues and potential profit. Thus a measure of creditworthiness. Lenders can now authenticate sales transactions more accurately. For instance, they can quickly weed out cases of circular transactions, which defeat the purpose of a healthy cash flow.
Impact of Cloud-Based Lending Software
The use of cloud-based lending software is helping lenders achieve business goals more effectively. Here are the key impact areas:
- Lenders can process more loan applications with speed, efficiency, and accuracy, thus paving the way for the scalability of operations.
- With enhanced fraud detection capabilities, lending businesses can be sustainable and profitable in the long term.
- Lending businesses are more likely to predict non-performing assets early on based on objective analysis.
- Lenders can customise all products and cater to a larger pool of diverse borrowers. They can tap new audiences and capture higher market share.
- By staying compliant with the newest regulations by authorised bodies, lenders can avoid enduring consequences of regulatory defaults such as paying fines and penalties.
- Lenders can run highly efficient operations with lean teams. They can free up human bandwidth for higher-value, strategy-focused tasks.
Lenders must be innovative, inclusive, and efficient in their operations to stay competitive. The use of cloud-based lending software is a game-changer for the industry, helping lenders close the gaps in the credit market and fuel more business.
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 analyse bank statements quickly and accurately and detect potential fraud.
Book a demo to know more.