How automation speeds up the loan market
Financial institutions, acting for borrowers as an alternative to banks, take for their services a higher percentage, but promise speed, simplicity and convenience of the procedure. This is largely due to the automation of many business processes of financial institutions at different stages of lending.
Evaluation of the borrower
The main task of a microfinance organization is to quickly make the right decision whether or not to lend to a particular borrower. In fact, this is the main expertise of the company, on which depends the success of the entire business. Already many companies use special computer programs for this task. They are called scoring systems or decision-making systems. The potential borrower is automatically assessed according to a large number of parameters, resulting in an assessment of all risks and ready decision. Such software gathers information about the borrower from a variety of sources such as credit bureaus, payment systems, location services, etc.
Large players develop software on their own, but for many this is done through outsourcing, that is, it is more profitable for a financial organization to buy software from a supplier than to develop it yourself from scratch. Major players in the market (about 90%) are companies FICO and SAS.
The evaluation of the collateral
In the case of secured lending, in addition to assessing the potential borrower, it is necessary to assess the collateral. Today’s financial startups automate this task as well. For example, the platform SHIFT.cash deals with loans secured by car titles. The creators of the project have developed an automated system for evaluating cars by using a special algorithm. Thanks to the built-in big data analysis module (Big Data), the system instantly analyzes all market information of a particular region, on the basis of which it provides an estimate for liquidity and value of the vehicle. The automation of assessment of collateral, as well as a number of other processes, allowed to turn the entire project online. Thanks to the developed algorithm, it became possible to scale to the markets of other countries. At this stage, the program is tested in several European countries, but is going to enter the international arena.
CRM-system
One of the main drivers of credit market development is the creation of companies whose work is fully online. That is, the borrower has the opportunity to fill in an application for a loan online without leaving his/her home, and then automatically when approved to receive borrowed funds to your card.
This was made possible by the introduction powerful CRM-systems by powerful financial companies in which the workflow is carefully thought through. In particular, basic software allows for downloading data from the Bureau of credit histories, sms-informing of borrowers of due and past due payments, etc., creating settings for each loan product, drawing up contracts, etc., many processes are done automatically, so there is no need for an office and a large number of employees.
The interaction of the parties
Another important process in the field of credit, which was also subjected to automation, is the interaction of different market participants with each other.
For example, the first step of the whole process is to attract traffic of potential customers. Often, this function is outsourced by financial institutions to companies specializing in lead generation, that is, collecting loan applications through numerous channels. The result is something like an online storage of loan applications, from where companies already buy these applications and process them.
P2P lending is based entirely on process automation. This type of lending involves the direct interaction of individuals (borrower and lender) through an automated online platform. Through it, the parties agree on the terms of the loan and carry out the transaction, and the site receives a Commission for it. By the way, this niche has already been populated by platforms that work with cryptocurrencies, which means that it is possible to do transactions from one point in the world to any other. Among them is the platform btcjam.com, www.bitbond.com and others.
In addition, there are services that simplify the process in terms of interaction between investors and financial institutions. One of them is the Blackmoon platform. It connects financial institutions with potential investors. Information about verified loan applications from the company is available to Blackmoon. The platform analyzes the profitability when investing in loan portfolios by a variety of parameters and determines whether it fits the investor’s stated conditions. The platform itself takes a percentage of the invested funds and net profit of the investor. The platform works with large investors: ready to invest from $ 500 thousand.
“Automation of business processes is extremely important for financial institutions. Firstly, the speed and convenience of the service, in fact, is the essence of such companies. Secondly, although automation is expensive at the stage of implementation, in the medium term it pays for itself due to savings in the rental of premises, the work of employees, intermediaries and so on,” says Thomas Novak, the Creator of the SHIFT.cash platform.
