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Fintech firms have exploded onto the financial scene in Singapore and other mature markets in Asia in recent times. Focusing on disruptive technologies like peer-to-peer lending, affordable digital payment solutions, and more accurate risk analysis among other things, these startups are winning over customers by replacing the service delivery model used by traditional banks with user-friendly technologies.
Fintechs, like Bank Bazaar, are lowering the cost of customer acquisition by reducing processing costs, by improving user experience, and by developing stronger APIs that make collaboration with partner institutions easier. They are also offering their partners more points of acceptance of loan/credit card applications and access to more traffic without having to invest in new infrastructure setup.
Customers aren’t complaining either. That’s because they get curated content and information about credit cards, loans, and other financial products at one place. By leaving the grunt work to these fintechs, customers can simply focus on identifying the right product based on their need. With the help of filters, they can make the shortlisting process effortless and quick.
Fintech Companies Are Changing the Process of Loan Offtake
Have you ever heard about Crowdo, Capital Springboard, FundedHere, or MoolahSense? These are peer-to-peer online lending sites through which you can raise funds by sharing your story. These crowdfunding sites are revolutionising the alternative lending space through disintermediation, cost optimisation, quicker delivery, and technology modernisation.
There is no need for paperwork or running. The online mediator simply charges you a brokerage for letting you use their domain.
Players like Skolafund provide deserving students a chance to get funded by potential funders for pursuing education in an affordable manner. They can match profiles and ensure that the right student meets the right funder.
SMEs, often ignored by traditional banking channels, have found their go-to source for funds. Crowd Genie, which started in 2016, is helping SMEs get loans through crowdfunding.
Even for fintechs focused on traditional loans and credit cards, they’re releasing the hidden value in the delivery chain, benefiting all the stakeholders in the process.
If you’re wondering, how information aggregator sites like BankBazaar are making a difference, here is your answer.
Synthesising Information for You
While bank websites can give you information, they can’t always show you the full picture. Comparison sites allow you to compare products, analyse their pros and cons, and then decide. To help you navigate the complex world of personal finance better, they also develop and share tools.
In addition, they focus on knowledge dissemination to help you make better judgements.
Finally, you can submit your loan or card application online even without visiting the lender’s website or visiting a branch.
Lenders are benefitting from this too. Technology is not the strong point of most traditional banks. Through shared resources and knowledge, they’re managing to acquire customers quickly and in a cost-effective manner.
Banks are slowly understanding that fintechs don’t pose a challenge if their knowledge is integrated within the delivery models used by banks. They can feed on each other’s strengths and remove any hurdle that was affecting delivery of value and service to customers.
A Singapore Business Review report says that the Monetary Authority of Singapore (MAS) has said that banks can save up to 10% of their costs and improve their operating income if they collaborate and synergise with key players in the fintech space.
How Are Banks Responding to the Changing Environment?
According to media reports, 41% of the population in Singapore have ditched traditional banking channels to count on the new-age financial companies.
Some of the possible reasons are:
Regulatory red tape.
Complicated forms.
Too much focus by lenders on credit history and past records.
Higher turnaround time with loan and credit card approvals.
Less flexibility.
Less scope of personalisation due to the massive traffic volume they handle.
Inability to handle and analyse big data.
Massive budget appropriation for publicity and advertising but little understanding of how customers search for financial products online, and how this data can be used to run targeted advertising campaigns.
Since banks have realised some of the drawbacks of their current practices, they’re turning their attention to fintechs. In order to capitalise on their technological prowess, top banks like DBS, OCBC, and UOB are running fintech accelerator programmes to provide funding to these companies for business expansion and research.
How Do Fintech Firms Screen Potential Defaulters?
Loan and credit card companies are always wary about the potential fallout of loan default and rising net performing assets on their financial health. Despite their reliance on credit checks and other records, they can’t always determine an accurate risk rating for a potential loan seeker.
Fintechs, on the other hand, use machine learning, artificial intelligence, and cognitive analytics among other things to evaluate the risks a potential loan seeker poses. This keeps human errors and subjectivity at bay.
When dealing with fintech firms, many customers know that they might get their loan or card application sanctioned in hours instead of weeks. Disbursal of funds is almost instantaneous and effortless due to use of advanced applications and networks.
