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cloud based lending software

5 Ways a Cloud-Based Lending Software Can Transform Small Business

Lending Lifecycle Management

The Micro, Small and Medium Enterprise (MSME) market has been disadvantaged in the traditional banking ecosystem. Due to various factors, banks have prioritised credit to corporations and big businesses over small businesses.

According to statistics, India has a total of 633.9 lakh MSMEs in India, comprising 630.5 lakh micro-enterprises and 3.3 lakh small businesses. The rural-urban distribution comprises 324.9 lakh businesses in rural India and 309 lakh businesses in urban areas.

The lack of access to credit has driven small businesses to borrow from money lenders despite being charged higher rates. In terms of sheer numbers, this trend signifies a potential loss of revenues for lending businesses.

However, the situation is gradually changing due to the role played by digital technology in the lending ecosystem.

In this blog, we delve into the key barriers lending businesses face in processing loans for small business borrowers and how using cloud-based lending software is revolutionising small business financing.

Lending to Small Businesses: Some Challenges

Let’s first understand the key challenges experienced by lenders when underwriting for small business borrowers:

1. Lack of Credit History  

Traditional bank lenders weigh the creditworthiness of borrowers based on their previous credit history. Hence, those borrowers unable to demonstrate a credit history, such as small businesses, are denied credit opportunities.

2. Lack of Assets

Borrowers who can leverage assets as collateral have a chance of getting access to credit sans a credit history. However, many small businesses do not possess assets.

3. Diverse Needs 

Banks typically offer standardised products for borrowers. They prefer to serve loan applications of larger ticket sizes. However, small businesses have diverse needs. Thus, a one-size-fits-all approach does not fit. They may also require small loan amounts. Service providers were not equipped with the right technology to serve their needs.

What Is Cloud-Based Lending Software? 

Cloud-Based Lending Software is a comprehensive financial statement analysis solution which helps lenders accurately assess a borrower’s risk profile, irrespective of the scale of the business.

The solution leverages a mix of technologies like automation, cloud computing, optical character recognition, Artificial Intelligence (AI), and Machine Learning (ML) to completely automate all underwriting processes while addressing the current challenges of lenders.

Besides delivering efficiency, accuracy, and speed to the end-to-end financial analysis process, the software’s capabilities are completely transforming the borrowing narrative for small businesses.

Today, banks, neo-banks, and non-banking financial companies (NBFCs) are leveraging its benefits to tap the small business market and turn leads into lifelong customers.

5 Transformative Benefits for Small Businesses 

Here’s a look at how the smart use of cloud-based lending software enables lending businesses to serve small business borrowers effectively.

1. Accurate Cash Flow Analysis 

Since small businesses lack a credit history and substantial assets, cash flow lending is a potential solution for this audience. With access to bank documents, cloud-based lending software can comprehensively and accurately analyse the daily operational cash flow of a small business.

The software can categorise all transactions and enable lenders to know how much is being earned in revenues, what are the operational costs, and if there is any profit. Furthermore, the software comes with cross-analytical capabilities.

This functionality lets lenders cross-reference a borrower’s sales-related bank transactions with their Goods & Services Tax Returns (GSTR). This is a fool-proof method to determine the actual revenues of a business and its profitability, as sales and GSTR must correspond.

These capabilities enable lenders to pave the way for more cash flow lending, which can serve small businesses with a healthy bottom line.

2. Customisation of Products 

Most small businesses require loans of a small ticket size. On the other hand, the needs may vary drastically based on the growth stage of the business.

The use of cloud-based lending software enables the automatic customisation of loan products based on the financial information accessible.

Hence, it can tailor terms and conditions based on the real-time needs of a business, thus making loans more affordable and relevant to a small business’s needs.

3. Reduction of Errors and Omissions 

Cloud-based lending software enables end-to-end automation of the financial analysis process, not just the analysis process.

For instance, the software can scan over 700 types of documents, categorise all transactions into multiple categories, and deliver a creditworthiness score within minutes.

The workflow does not require extensive human intervention, except for higher value, strategic input. Thus, lending businesses can run with lean teams, reduce errors, duplications and omissions, and scale up operations quickly.

4. Quicker Turnaround on Loan Approvals 

Small businesses that require financing are usually hurrying to meet their borrowing needs. They apply to multiple lenders simultaneously and tend to jump at the first opportunity. Hence, lenders need to respond quickly and efficiently.

Cloud-based lending software allows them to process loan applications quickly, accurately, and efficiently.

5. Builds a Data-Driven Lending Culture 

Small businesses may not have the assets and the valuation of larger businesses and corporations. Hence, they encounter many biases and prejudices when attempting to access credit or capital.

The use of tools like cloud-based lending software brings a scientific approach to the process, with data driving the decisions rather than personal opinions and instincts. Businesses can collect massive amounts of data, which gives a more realistic understanding of the financial reality and potential of small business borrowers.

They can develop the right mindset and, in turn, products to meet their needs and unlock more relevant credit opportunities in the future.

Key Takeaway

By harnessing the benefits of cloud-based lending software, lending can effectively serve small businesses and turn them into long-standing customers. As small businesses scale, they can potentially deliver the business of a bigger ticket size to the lender.

Lenders making early investments in technology can grow their small business audience and cultivate a new pipeline of business.

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.

coding in loan management system

The Impact of Coding in Loan Management System

Loan Origination System

Coding is an integral part of many everyday transactions and interactions for most people. It powers activities ranging from making payments on E-commerce sites, booking a cab or using Bluetooth in the car.

As per a study by IBM, 65% of organisations use coding to reduce manual and repetitive tasks.

As coding becomes pervasive across industries and sectors, its impact has been the most profound in the financial sector.

In the digital lending landscape, coding offers numerous benefits to lenders by helping them automate and streamline the steps in loan processing and develop comprehensive and personalised loan management systems. Let us explore in detail.

Operations In The Lending Lifecycle That Benefit From Coding 

A Loan Management System is a digital tool to help lenders automate and streamline the loan life cycle, beginning from the onboarding stage and going on to the monitoring and repayment stage.

Apart from streamlining the process, LMS also helps lenders with valuable insights and analysis for loan monitoring, provides comprehensive reports and helps in compliance.

Below are four examples of specific functions where coding helps lenders improve their functioning:

1. Customer Onboarding

Coding helps make the onboarding process faster and more efficient. It helps extract loan application data from the lender’s database and calls for additional data from third-party service partners. Customers also benefit from this streamlined process; the loan processing is faster and more customer-friendly.

2. Credit Scoring

Coding enables the creation of more accurate credit scoring models by automating data collection and analysis. Collecting data from alternative sources and analysing large volumes of data manually is challenging and time-consuming, but automation makes it possible.

3. Loan Portfolio Management

Coding also allows lenders to develop loan portfolio management tools, which assist lenders in tracking and managing their loan portfolios more efficiently. With coding, the risk of errors is reduced, and customers can get quicker access to their loan statements and responses to their queries.

4. Loan Calculators

During the loan application stage or even before applying, applicants can benefit from using loan calculators to check their monthly instalments for a particular amount they may desire to borrow. Loan EMI calculators help customers assess if they can pay the instalments comfortably or not. Developing these customer-friendly and helpful tools is possible through coding.

Impact of Coding in Loan Management Systems

Coding is the cornerstone for designing a robust loan management system. Choosing a well-designed and robust LMS is critical for a lender; well-coded software allows the lender to automate the entire lending process. Here are some important aspects:

1. Balanced Credit Risks

Coding enables the development of automated risk assessment models that leverage artificial intelligence (AI) and machine learning (ML). These models assess the risk associated with each application quickly and more accurately. Data-driven decisions help lenders avoid high-risk applicants without denying a loan to eligible customers and allow them to balance their credit risks better.

2. Enhance Efficiency and Accuracy

Lenders can automate most manual tasks related to loan processing by employing loan management systems. Automating steps like collecting applicant information, interest calculation, and loan document generation helps reduce errors and time taken and improves overall efficiency.

Finezza’s Loan Origination System offers Automatic Document Identification, which helps with data extraction of KYC documents, which makes the process more efficient.

3. Simplified Compliance

Lenders have to meet various regulatory guidelines and submit timely reports as per the policies laid down by statutory bodies. Coding also makes compliance easier for lenders.

Automation helps in timely and more efficient compliance by automating report generation, deadline tracking and monitoring regulatory changes.

4. Improved Borrower Experience

Coding improves the overall borrowing experience and empowers the customer with convenient self-service portals and prompt credit decisioning.

Eligibility and loan calculators help customers gain better insight into the loan approval process, and they can make more informed decisions about how much to borrow.

Applicants can track their loan application status, pay online, and choose from available payment options as per their choice.

5. Better Insights Into Loan Portfolio

Comprehensive loan management systems offer valuable insights to lenders into their loan portfolios. It helps them identify trends in delinquency rates or customers who are a default risk and better NPA management. Lenders can make better decisions about lending practices and risk management using these valuable insights.

Coding in Loan Management System: The Road Ahead

Coding has enabled fintech companies to innovate and introduce products and services, often challenging traditional banking channels.

Coding is also helping fintech become more accessible to people through the internet and mobile devices. Fintech and NeoBanks do not have to bother about compliance-related issues or complicated organisation hierarchies, which makes them agile and quick to innovate.

Innovative digital solutions like the Loan Origination System help fintech collaborate with banks and create a symbiotic relationship. Fintechs have to partner with banks owing to the licensing and regulatory requirements; banks gain from these partnerships through growing their customer base, and customers benefit from last-mile penetration and personalised products.

The Loan Management System software can help manage NBFCs and banks collaborate and offer ingenious solutions co-lending model, introduced by the Reserve Bank Of India (RBI)

Finezza offers comprehensive solutions to help lenders improve their performance and operation with the help of well-coded, robust tools.

Credit Underwriting Software

Choosing the Right Credit Underwriting Software for Lending Needs

Lending Lifecycle Management

Underwriting is an important process in lending operations. A lender’s ability to predict creditworthiness seals the fate of the loan. Whether it will be repaid promptly, or become a non-performing asset, or worse still result in loan fraud, is an outcome of underwriting efficiency.

Manual underwriting interventions are no longer sustainable, no matter how many resources companies invest in this process. Underwriting teams need access to the right technology to help companies keep pace with their goals of capturing greater market share while doing so swiftly and accurately.

The global loan origination software market, valued at $ 3.9 billion in 2021, is expected to grow to $ 9.5 billion by 2030.

Adoption of such cutting-edge credit underwriting software by forward-looking lenders can help them transform operations and keep pace with market demands.

In this blog, we outline key features in underwriting software, which value-add to a lender’s tech stack and help them gain a competitive edge in a crowded market.

What is Credit Underwriting Software?

A credit underwriting software is an end-to-end financial analysis solution, which aims to accurately gauge a borrower’s risk profile. A combination of technologies such as artificial intelligence (AI), Machine Learning (ML), cloud computing, automation and optical character recognition, has helped technology specialists develop a powerful solution to current lending challenges.

Use of this software is helping bring more efficiency and accuracy to the underwriting process. In turn, this approach reduces the risk of loan fraud and the rise of a lender’s Non-Performing Assets (NPAs). Low-risk, creditworthy borrowers can also be identified among a pool of loan applicants, who may or may not possess assets.

Today, a mix of banks, non-banking financial companies (NBFCs), and neo banks are leveraging underwriting software to solve their needs.

7 features of cutting-edge credit underwriting software 

Here is a snapshot of the direction in which credit underwriting software is evolving. Lenders are advised to seek these attributes when choosing the right platform for their operations.

1. A User-friendly Interface 

Underwriting teams tend to be made up of financial professionals and accountants, not techies. Hence, the interface needs to be user-friendly. Members of the underwriting team must be able to leverage the software, with ease, and arrive at underwriting decisions, quickly.

They must be able to reach out to the platform’s customer service quickly, in case of issues, and get solutions to ongoing challenges.

2. Cloud capabilities

A lender’s platform of choice must come with cloud capabilities. The best approach is to choose a platform that comes with a subscription-based pricing model. In this case, lenders are not stuck with the need to buy and upkeep on-premises software and hardware.

This is a cost-effective solution that stores data securely and makes it accessible on demand. With the adoption of hybrid and remote work, lenders can offer authorised access to team members in geographical locations, thus simplifying workflows.

Teams can work collaboratively, in real-time on the same projects, and close loan applications, quickly.

3. End-to-end Bank Statement Analysis 

A key deliverable of lending software is that it must be able to paint a comprehensive and realistic picture of a borrower’s financial status. The bank statement analysis is completely automated from end-to-end, right from automated data entry to offering a creditworthiness score for every borrower.

This process eliminates several manual processes traditionally performed by underwriting teams, thus completely freeing up their bandwidth for higher-value decision-making.

4. Stellar Fraud Detection Capabilities 

Another benefit of superior lending software is that it must be able to help lenders predict potential fraud early on. The software does this in multiple ways.

For instance, it must be able to detect unusual patterns in transactions which could be reg flags for irregular activities. It must be able to detect inconsistencies in documentation, which can be a red flag for fraudulent documents.

Identity fraud is another type of loan fraud where a borrower is impersonating another individual or business. A good lending software can weed out inconsistencies in nomenclatures, and other telltale signs.

5. Customisation of dashboards

A key benefit of credit underwriting software is that all transactions can be segregated into inflow and outflow categories, and further on under categories such as salaries, EMI repayments, and revenues.

Hence underwriters can leverage an extensive amount of well-categorised data to understand borrower trends and needs in detail.

This is a valuable resource to help businesses formulate strategies to grow their businesses and establish realistic goals.

6. Implementation of Compliance Requirements  

With financial regulatory authorities constantly introducing new guidelines, lenders must be able to implement these requirements with little effort.

A no-code lending software enables underwriters to make adjustments without needing to write fresh code, every time there is a change.

This is an important feature, as adherence to compliance translates to money saved in terms of penalties, as well as avoidance of a permanent shutdown due to non-compliance.

7. Evaluate Potential to Scale  

As businesses continue to scale, the lending software must be able to keep pace with its scalability needs. However, some lending solutions lack the flexibility to shift seamlessly between a small operation to a massive one.

Lenders are forced to choose one or the other to meet their real-time needs.

However, shifting from one ending software to another is not a sustainable shift. The best approach is to partner with a technology specialist, which offers flexibility of scale within the same platform.

Borrowers can seamlessly go from 50 borrowers to 50,000 and beyond, based on the pivot. The subscription costs will vary based on real-time needs, but this is the most cost-effective option.

The Takeaway

Smart use of tech-enabled solutions such as credit underwriting software, can help businesses streamline their operations. They can predict potential loan fraud and NPAs, and increase their audience pool with effective underwriting processes.

Lenders can partner with a technology specialist, and access the best technological solutions for their express 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.

tech in finance

6 Ways Tech in Finance is Transforming Microfinance Institutions

Embedded Finance

The microfinance sector has evolved rapidly since Muhammad Yunus pioneered the movement around three decades ago. India, one of the fastest-growing economies in the world, banks on microfinance for sustainable growth and economic development due to the significant rise in the number of micro, small, and medium (MSMEs) seeking swift, organised, and streamlined access to credit, loans, and financial services.

The average loan size dispersed to Indian MSMEs was 9.74 million Indian Rupees in the second quarter of 2023 – the highest-ever recorded, indicating the sector’s robust growth.

The growth can be attributed to a few factors, including the entry of tech in finance and a gradual shift away from field-officer or branch-led lending. Adopting fintech tools has paved the way for swift loan origination, improved customer experiences and service, accurate fraud detection, and opened the doors to data analytics for enhanced prediction and risk assessment.

This article explores the role of tech in finance, especially in revolutionising the operational capacity of microfinance institutions and what we can expect in the future.

Current State of the Indian Microfinance Sector

The Indian microfinance sector grew by 21% in the financial year 2022-2023, with a total of Rs 3,19,948 crore dispersed against Rs 2,53, 966 crore in the financial year 2021-2022.

Microfinance institutions (MFIs) and NBFCs dispersed the lion’s share, lending Rs 1,24, 063 crore, closely followed by traditional lenders, including banks. These figures indicate the sustained demand for microfinance services in India.

The Government of India has been instrumental in driving this demand and transforming the face of the Indian microfinance sector. For example, over 500 million bank accounts have been opened thus far under The Pradhan Mantri  Jan-Dhan Yojana (PMJDY), which was rolled out in 2014.

Additionally, tech adoption in finance accelerated further with the Digital India program aimed toward converting India into a digital economy.

India’s push toward a digital financial model is aided by Aadhar, enabling financial technology (Fintech) to roll out electronic ‘Know Your Customer’ (eKYC) authentication services.

Tech’s Impact on Microfinance Institutions

The onset of tech in finance has opened up many opportunities for MFIs, allowing them to improve client outreach, operations, and decision-making. It will continue to transform how financial services are delivered.

Let’s explore how MFIs leverage technology to improve efficiency across the value chain. 

1. Promote Awareness

The role of tech in finance is pivotal in boosting product awareness among Indian microfinance users by joining hands with incumbent MFIs. One way Fintech companies add value is by building chatbots to help customers determine whether they are eligible for a loan.

Many companies also leverage augmented reality (AR) to assist customers with low literacy in interpreting complex written material. 

2. Efficient Customer Onboarding

Tech in finance is also revolutionizing customer onboarding, making it easier for lenders to verify customer information, evaluate creditworthiness, and streamline the application process.

The advent of new-age Fintech solutions has enabled Aadhar-linked KYC, e-documents verification via the DigiLocker application, and video identification. Furthermore, MFIs are also leveraging artificial intelligence (AI) and machine learning (ML) to automate customer onboarding, fraud detection, and customer authentication. 

3. Judgemental Scoring Models to Underwrite Loans

Many MFIs collaborating with fintech firms rely on judgemental scoring models, wherein critical insights over the past year are converted and evaluated to facilitate real-time decision-making.

Additionally, tech in finance is also enabling the use of ML to assess unstructured data points covering social and behavioral attributes and financial data. 

4. Loan Disbursement

Cashless disbursements through RTGS/NEFT/IMPS and Aadhar-enabled Payment Systems (AePS) are becoming increasingly popular as more and more MFIs are undertaking 100 per cent cashless disbursements. This microfinance technology offers host-to-host banking to enable real-time loan disbursements. 

5. UPI and Aadhar Pay

Unified Payment Interface (UPI) and Aadhar Pay are becoming increasingly popular among MFIs as smartphone penetration is at a record high in India. Many buy-now-pay-later (BNPL) companies primarily catering to the GenZ and millennials allow their customers to repay loan amounts through UPI.

Alternatively, borrowers can also use Aadhar Pay to repay loans at kiosks equipped with the BHIM Aadhar App and biometric devices. 

6. Leveraging AI for Fraud Detection

Around 58% of AI applications in the finance sector are used to curb fraudulent activities. The technology primarily leverages data analytics and advanced algorithms to spot anomalies, track patterns, and, most importantly, fraudulent activities.

ML algorithms allow AI systems to learn from past data, respond to evolving fraud techniques, and detect suspicious activity accurately.

Parting Notes

Tech in finance is crucial in transforming India’s microfinance sector. While the demand for microfinance services continues to march upward, the average loan size dispersed by MFIs is also rising, indicating its crucial role in aiding India’s economic growth.

Government initiatives coupled with the entry of a host of Fintech startups have laid a solid foundation for turning India’s aspirations of becoming a digital economy into reality. The increasing partnership between Fintech startups and MFIs will redefine how microfinance services are delivered.

Finezza offers a wide range of products, including bank statement analyser, credit bureau data analysis, and loan origination systems that enable MFIs and financial institutions to make informed decisions. Our document identification framework facilitates swift and automated document verification.

Book a demo to learn more!

Invoice financing

Challenges of Invoice Financing for Lenders and its Alternatives

Embedded Finance

There is usually a delay between the sale and receiving payment, which, for some businesses, takes longer to settle. To counter this issue, companies offer credit services to boost their sales, edge out competitors and build better customer relations.

However, in the meantime, the business also needs to continue its daily operations as usual, which requires a substantial amount of cash. This mismatch between inflow (from sales) and outflow (expenses) can result in a liquidity crunch or a working capital crisis for the business.

A U.S. Bank study revealed that 82 per cent of businesses failed due to poor cash management and lack of working capital.

Multiple working capital finance options are available for businesses, which allow them to run their operations smoothly. Invoice financing is one of the short-term finance options that helps firms manage their cashflows effectively. Just as its benefits, however, it comes with a few challenges for the lenders.

Read all about these challenges and how lenders can overcome them.

What Is Invoice Financing?

Invoice financing is a finance option that makes available future cash flows for present-day use to a business. This mode of finance unlocks the capital tied up in invoices that act as collateral against which the lender extends credit.

The business borrows cash against approved, unpaid invoices; the lenders pay the invoice value after deducting some margin and applicable fees. On receiving payment against these invoices, the borrower repays the advance amount, along with interest and charges, if any.

Challenges In Invoice Financing For Lenders

All lending comes with some risks, even if it is against some collateral, as in the case of invoice financing. Let us focus on four challenges faced by lenders when financing invoices.

1. Credit Risk

In invoice financing, the responsibility to collect the dues rests with the lender. If the customer fails to pay the amount on time due to insolvency, shortage of funds, or other reasons, the lender and the business will face losses.

Therefore, invoice financing comes with the risk of non-payment of dues, especially when it involves customers with poor credit ratings.

2. Fraud 

Another risk lenders face while financing invoices is the risk of fraud. The company may present a fake invoice to the lender as collateral and seek funds against it, or in some instances, they may offer invoices of companies that do not exist.

This may lead to a company providing finance against an asset that does not exist. The lender will discover this months or weeks later when on the invoice due date.

3. Complexity

Each industry has its own set of norms and intricacies which lenders may not be aware of. The lack of in-depth understanding of the business and the company’s financial situation may result in poor management of receivables for the lender. 

4. Concentration Risk

Focusing too much on a few clients can pose challenges for the lender if the client goes out of business or faces some financial challenges. This is known as concentration risk and can impact the lender’s cash flow and profitability.

How Can Lenders Overcome These Challenges?

Invoice financing is a valuable source of funds for MSMEs and powers their growth and profitability. It is a revenue source for lenders, albeit with its challenges. So, what can lenders do to mitigate this risk? Automation offers a solution to all these challenges in the following ways:

1. Improve the Review Process.

Reviewing invoices and clients before financing is a time-consuming and tedious procedure. Evaluating data from numerous invoices, credit notes, and receipts also makes the process prone to errors. Any mistakes or omissions at this stage could be costly for the lender.

Automation accelerates the review process and makes it more efficient and accurate by eliminating errors and enabling the processing of vast amounts of data in a much shorter span.

2. Mitigate Fraud

The best way to reduce the chances of fraud is to gather data from multiple sources. Application programming interfaces (APIs) help lenders gather insights from numerous sources and furnish critical information that helps mitigate fraud.

Finezza’s entire suite of solutions is available in the form of easy-to-integrate APIs that allow lenders to access information from several sources.

Loan management solutions with digital credit assessment, credit-collection analytics, and early-warning systems help detect and prevent fraud.

APIs and timely reporting are two instruments that can help working capital lenders reduce their risks extensively.

3. Credit Assessment and Risk Modeling 

Data-driven solutions help lenders conduct exhaustive credit assessments and risk modelling. Integrating external data, like payment histories and industry trends, enables more accurate credit decision-making.

Apart from reducing default risk, it also allows lenders to have a more competitive pricing model commensurate with the customer’s risk profile.

4. Real-Time Monitoring and Predictive Analysis

Loan life cycle automation enables lenders to manage invoices and their portfolios in real time. Leveraging machine learning algorithms can help detect early warning signals of potential delays or defaults in invoice payments.

Accessing real-time data and timely reports like the borrower’s ageing report will help predict risk and take the necessary steps to manage it.

Moreover, Predictive Analytics is a great tool to help identify potential risks which are likely to occur and take timely actions to minimise them and reduce credit risk when financing invoices.

Finezza’s credit bureau data analyser, an AI-powered solution for lenders, helps manage lending risks based on pertinent credit data points.

5. Better Portfolio Management

Loan management systems (LMS) help lenders scale up their operations seamlessly. A good LMS should enable the lender to diversify their product ranges and enter new markets without much lag. A well-diversified portfolio with a mix of products and not focused on a few clients helps lenders reduce their concentration risk.

Regular monitoring also assists lenders in managing their portfolios, keeping them diversified and improving their yield.

The Takeaway

Invoice financing is a valuable source of funding for businesses as it helps them operate smoothly and is a vital revenue stream for lenders. Invoice-based financing provides lenders with good-quality credit and high returns.

Technological advancement and innovation offer lenders solutions to help them overcome the challenges they face in invoice financing and make it more rewarding.

Finezza’s loan management solution leverages the latest technological innovations that make invoice financing more efficient and help lenders overcome the challenges associated with this financing option.

Book a demo to discover more.

cloud based lending software

6 Market Trends in Cloud-Based Lending Software: Decoded

Lending Lifecycle Management

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. 

The Takeaway

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.

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