Why Data is the New Gold in Digital Lending Era

In this digital era, every financial institution is adopting digital solutions to stay ahead of the competition and meet customers’ new expectations. In this scenario, the COVID-19 outbreak has sped up digitization for the banking sector, leaving many financial institutions with only one possible way: leveraging the latest financial technology in their everyday operations.

Undoubtedly, those financial institutions who adopt digitization, tend to thrive in this journey while those who don’t, get left behind. Though today many traditional banks and alternative lenders are transforming their business, they don’t know how to improve their digital interactions to streamline their operations and positively change their borrowers’ lives.

So in a world where digitization is the only way to survive and where there is cut-throat competition, the key to market differentiation is data. Data is the new gold and can hugely benefit the financial and lending sectors.

The Power of Data

Data is one of the most essential things for digital lending because lenders process enormous quantities of data every day while serving their customers. This data lets lenders engage the right customers with the right lending solutions at the right time.

Earlier, this data was used for analytics and traditional reporting for lenders. However, thanks to innovative financial technology, lenders can use financial data to:

●       Collect robust, real-time, and accurate financial, accounting and banking data for quick decision making.

●       Generate intelligence in the form of cash flow predictive models

●       Check the creditworthiness of a borrower

●       Offer customized lending products

●       Improve quality, transparency, and security

●       Get a 360-degree view of customers and the lending operation

Today, this financial data is collected through multiple resources through an organization and analyzed and used to generate actionable insights for desired outcomes. Artificial intelligence and machine learning are used to assist with the process. Data can help lenders know their borrowers better, understand their needs, and ultimately drive increased loan activity, profitability and efficiency.

Quality of Data

To get the best results, financial institutions need to develop their data model and keep an eye on the quality of data. Today, there is a plethora of single financial data APIs are available for lenders but not all offer quality data. That’s why lenders need to research and compare a variety of APIs before choosing one.

Having quality financial data is a must to get a better understanding of the borrowers and their businesses. The better the understanding of the business, the better operations, and services of lenders. Financial institutions can find opportunities to improve underwriting processes, identify bottlenecks in internal processes, and offer fast and easy funding.

Quality of data means accuracy, precision, validity, and reliability that has the power to give the right information to lenders. It implies a great knowledge of borrowers’ funding needs and also their preferences and goals. By leveraging AI and using predictive cash flow data or predict future events, a financial institution lets a borrower or business know if their borrowers could repay the loan amount in the near future. By doing so, lenders can better determine the creditworthiness of their borrowers, reduce the credit risk, boost profit and position themselves as trusted financial advisors.