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According to the ABA Banking Journal, approximately three-quarters of financial institutions (FIs) are now leveraging digital channels to serve both new and existing clients. Over 70% of FIs have adopted or are in the process of adopting digital loan origination methods for personal loans. Additionally, 73% have the ability to prepare loan documents electronically, and a similar percentage have made investments in eContracting/eClosing technologies. Lastly, 55% of FIs have embraced at least one digital content repository or eVault.
With the global digital lending platform market growing at a CAGR of 14.3% from 2023 to 2032 and expected to reach $46.4B by 2032, online mobile loans have been a buzzword for banks over the past few years.
In this article, we will delve into factors driving changes in the lending-centric consumer financial services landscape and what to look for in a mobile lending solution in case you want to implement the technology in the operations.
Primary drivers of growth in mobile lending
Digitally savvy Millennials & Gen Z
The emergence of tech-savvy Millennials and Generation Z consumers in the financial markets has triggered a significant transformation in consumer ideologies and behaviors. These cohorts prioritize "instant gratification" and heavily rely on digital conveniences like online food delivery, ride-hailing services, and e-commerce for their essential needs.
Hence, they expect the same speed and convenience in their financial management, demanding remote and frictionless loan processes on digital and mobile devices.
Consequently, to remain competitive and attract these demographics, there is a pressing need for short and long-term financial products tailored to their preferences and behaviors.
Data collection & analytics
With mobile lending, lenders now have the capability to thoroughly analyze users' spending patterns and repayment histories with remarkable precision. Leveraging these extensive datasets, the financial sector can unlock substantial value:
- Creating additional revenue channels through data-informed offers and suggestions.
- Providing customers with improved services and heightened security measures, like card fraud detection and more
- Effectively assessing lending risks by gauging repayment probabilities.
- Utilizing Machine Learning methodologies to match relevant cardholders with suitable merchants.
- Delivering market intelligence to clients while bolstering engagement and fostering trust
- Offering highly flexible terms and competitive interest rates
The need to reduce costs & enhance operational efficiency
With end-to-end automation of loan processes, from loan application, credit scoring, loan disbursement, repayment and collection, mobile loan online empowers lenders to reduce the loan processing and approval time. As employees spend less time on in-branch loan applications, banks can deduct paper-based costs, resulting in lower overhead. Meanwhile, you will have more time to find new borrowers and loan opportunities which will lead to increased profit margins.
What capabilities should you look for in a mobile loan solution?
Seamless virtual customer onboarding process
The days of having to visit a bank branch to open a loan account are long gone. With KMS Solutions’ Loans on Phone, the process is now fully automated. Users can easily provision new accounts using feature phones with integrated mobile network operators or the eKYC-integrated mobile app on smartphones. This enhances the user experience significantly, requiring fewer device interactions.
Sophisticated scoring engine
The module is a key component to analyzing, classifying, scoring, and deciding on the credit limit and risk proportional to the loan application. The scoring engine attributes include multiple data sources, fraud detection, a flexible scoring framework, and a secured AI-assisted recommendation engine.
The digital scoring engine should adhere to the bank’s credit policy. These predefined parameters, set by the bank, can be adjusted in real time to facilitate precise loan processing across different risk appetite levels. Utilizing predetermined scoring formulas, the user receives a score for their loan application. Subsequently, in accordance with the bank's specified criteria, the application is either approved or denied.
KMS Solutions’ Loans on Phone solution provides valuable and comprehensive insights by leveraging a range of information from third-party sources and data within the bank while adhering to the rules and formulas specified by the bank.
It employs AI/ML models for the processing of loan approvals. Our platform works to categorize users, allocate credit limits, and assess risk factors. Additionally, it filters eligible loan products for users and determines the likelihood of approval by the bank while maintaining manageable risks.
Executing the rule engine with all defined rulesets and associated data. The scoring also utilizes defined ML models and LLMs to answer the loan request for the probability of approval and risk level. Based on the insights generated by the scoring process, the credit decision is made with a holistic view and high confidence.
Furthermore, any suspicious data points or activities detected beforehand (e.g. IPs in strange range, multiple devices, etc.) in provisioning and validation steps could be used and combined with credit-related information to detect and identify fraudulent users or transactions before the scoring process. The fraud scoring can also be retrieved from external sources by trusted partners for complete fraud detection.
Built-in the cloud
Cloud-based is advised for mobile loans as they’re highly scalable, and easily adapt to accommodate a growing loan portfolio or surges in demand.
Our Loans on Phone can be deployed on multi-cloud platforms (AWS, Azure, Google GCP) with a cloud-agnostic approach, handling user onboarding, validation, and scoring by the powerful, flexible scoring engine through various stages with AI-assisted credit recommendation for credit decision securely tracked by audit trails.
Our high-level architecture also has the applications layer, which includes the loan app for end users, the app for operators to manually handle fraud, loan, and lending business, and the portal for admin to do configuration and back-office functions along with BI/Reporting for management.
KMS Solutions Loans on Phone Benefits
Improved Digital Experience
With a fully automated account opening and straightforward customer journey that allows customers to complete the process within 1-2 minutes of entering the app and taking a loan with a few clicks, our solution offers a frictionless digital experience and enhances efficiency in routine operations.
New customer base acquisition
Having a modern loan on phone solutions with cutting-edge features, you can target mass and young customers. Also, as a cloud-based solution, KMS Loans on Phone supports the rapid expansion of the customer base.
Confidentiality & security
Based on user attribute information (ID, name, photo, etc.), blacklist, and rules set defined, our fraud detection mechanism scans through each user and activity to detect abnormal activities and send notifications for appropriate prevention measures to keep your operations secure.
Additionally, 2FA authentication is used for transactions to keep the customer and login process safe, utilizing data encryption and cloud infrastructure for security.
The Verdict
The mobile lending landscape will continue to be shaped by technological innovation and evolving market expectations. As digital credit processes still developing, opportunities to break into this untapped market are still open with banks and financial institutions.
The leading lenders will have to offer users a faster, more convenient, and transparent service with digital customer data sourcing, remote approval, and a data-driven repayment initiation mechanism.
At KMS Solutions, we have developed a proven Loans on Phone solution offering small-ticket loans on a large scale to serve customers’ quick and short-term loan demands in an efficient and convenient way. Having an experienced development team with extensive knowledge in the financial domain, we've been at the forefront of successful digitization efforts for numerous clients, resulting in tangible improvements in process efficiency, security enhancement, and scalability.
If you're planning to digitize and automate your lending processes to unlock new revenue streams and reduce costs, contact your experts for a free consultation
