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    Digital Lending vs. Traditional Lending: Key Differences

    digital lending vs traditional lending

    Today, the use of mobile devices has become more widespread than ever, and the dramatic development of digital technology has forever changed our daily lifestyles. People now prefer purchasing and selling something online because of its convenience. However, due to a huge number of stringent requirements from banks, small businesses and individuals are struggling to be qualified for loans. 

    To support people’s needs and fulfill the funding gap, modern banks have launched many powerful tools that are greatly valuable to their customers, including Digital Lending. So, what are the purposes of Digital Lending that can be used for financial inclusion? 

    In this post, we’ll talk about the benefits of Digital Lending and explain 7 outstanding advantages when compared with the old fashion Traditional Lending.

    In fact, the products offered by traditional lending and digital lending are somewhat similar, but their application and processes are completely different in the following points:

    With Digital Lending, documentation is reduced

    Traditionally, hard-copy paperwork is a must when customers enter a bank. For most people, it’s a big problem to prepare complicated documents such as detailed business plans with financial data, business summaries, and investment information for businesses or personal income tax returns, legal documents, or other personal information for individuals.

    But thanks to digital lending platforms with the data given by customers, borrowers’ creditworthiness can be easily accessed. Many predictive models and algorithms are used by these platforms to derive useful insights on the borrower to assess their creditworthiness and their ability to repay the loan. Furthermore, these digital lending platforms, with the help of eKYC solution, can considerably reduce the reverse time for processing loan applications by making the verification process paperless.


    With Digital Lending, the loan process is now within minutes

    The amount of time spent on traditional lending methods could take forever because of the wait for checking hard-copy documents’ authenticity or getting approval from many different departments.

    But thanks to Digital Lending, that complicated process is no longer needed and the entire flow of lending could be completed in next to no time. For instance, Buy Now Pay Later is now a payment method that can provide users with a really quick process of lending and disbursal. With just a national ID and almost 15 minutes of processing, people can buy a thing they want without worrying about the available cash that they currently have.

    With Digital Lending, the location is not really a matter

    Another disadvantage of traditional lending is the distance. Back then, commuting between bank and house for paperwork does actually cause trouble for some people. It’s even worse if the borrowers are living in remote areas.

    But now thanks to Digital Lending, borrowers sometimes don’t need to step out of the home. With just a few taps on their mobile application or clicks on a computer with an internet connection, now everything could be done from everywhere.


    Read more: Top Digital Lending platforms for Vietnam's banks

    With Digital Lending, the flexibility of time is a revolution

    In the past, when it come to transferring money or lending a loan, the first thing to be done was to commute to the digital bank, in many cases, “physical presence” must be made in the bank’s office within business hours established by the bank. In reality, the “banking hours” are also coincided with the working hours of several companies or businesses. Because of that, asking for “work permit” to go to the bank could be a real barrier for many people.

    But thanks to Digital Lending with round-the-clock service, the flexibility of time is a big plus point. Instead of going to the bank during business hours, borrowers can apply for a loan any time of the day without any time constraints.

    With Digital Lending, the comparison between vendors is easier than ever

    Just imagine this, in the conventional lending method, how much time will it take to go from bank to bank to get all information? Having to visit various banks to compare deals seem like a cumbersome process.

    But thanks to Digital Lending, customers can access various lenders and as a result, they can compare deals easily before finally settling for the loan they find the best-suited.

    With Digital Lending, the facility of re-payment is re-defined

    Just come to think of it, besides many things people have to remember in their daily life, now the loan has appeared and become a burden in their memory. So, how can they remember all of the information about their loan and the date when they need to repay it? And another pertinent point is, the disadvantage of traveling between home (or even workplace) and bank to reimburse the loan could also bring a lot of additional problems for the end-user.

    But thanks to Digital Lending, all of the aforementioned problems could be solved in just a blink of an eye. A notification reminding how much is the loan and when will it need to be repaid or a few clicks to process the re-payment could facilitate and make the life of customers much easier than before.

    With Digital Lending, information security is on a new level

    The more personal information and data stored in the paper, the greater threat of losing information could happen. And besides the security issue, the problem of retrieving or restoring information under hard-copy formloan could be seen as a drawback as well.

    But thanks to Digital Lending, a loan online is completely secure as customers don’t need to share any personal information with anyone. Additionally, two factors authentication required before processing anything stands a paramount position in the duty of customer information and monetary security.


    In today’s commercial lending phenomenon, the benefit of Digital Lending has played a pivotal role in evading cumbersome red-tapism usually involved while availing loans offline in a traditional setting. However, besides many advantages, the full technology approach sometimes could be a barrier for those people who are in the older generations and the time for education on using purposes is required. But in conclusion, the positive sides of Digital Lending could easily outweigh the drawbacks and by far, it should be the new definition of lending.  

    At KMS Solutions, we provide an all-in-one Digital Lending platform that helps banks automate the entire loan cycle.

    Learn more about our Digital Lending platform