A research conducted by Cornerstone Advisors revealed that mid-size banks with assets worth $500 million to $50 billion spent approximately 0.22% of assets on IT only of 2020, according to Forbes Media. Technological advancements are changing how businesses operate and deliver services and products to consumers. With the ever-evolving demand for quality user-experience from corporate and consumers, industries, the finance sector needs to keep an eye on innovations to meet consumer demands. As financial institutions continue embracing fintech, there are specific areas where incorporating technology like machine learning in financial services can help improve the consumer experience.
Personal Credit Scoring
Credit scoring plays a significant role in the consumer’s financial life, including whether they are eligible for a mortgage, student loan, auto loan, and opportunities like employment and housing. Credit scores also reflect the amount of interest rates a consumer pays on credit cards and loans. Although consumers understand how credit score impacts their creditworthiness, very few people know how creditors calculate a credit score, and who has access to credit reports. Credit score calculations usually include payment history, debt burden, type of credits used, request for new credit, and length of credit history. This method only gives an estimate of creditworthiness and not actual data based on consumer behavior. Additionally, a lack of accurate data may inhibit the calculation of current scores, resulting in an inaccurate representation of creditworthiness.
Machine learning and big data are some of the technologies changing the credit landscape drastically by analyzing credit scoring in a more sophisticated method. These technologies use trended data like velocity, direction, the magnitude of changes, and tipping points to see the bigger picture. Evaluating trending data helps predict future values based on previous behaviors. There is a likelihood that even the smallest purchase combined with behavioral patterns will influence consumer financial wellness.
Access to Loans is Easy
There is a significant change in the lending industry, thanks to advanced technology. Fintech companies are using data and technology to make lending easier, faster, and affordable. Borrowers can now access loans on their mobile phones without worrying about high-interest rates. In the past, borrowers were limited to take loans due to strict requirements and high-interest rates. Incorporating technology in financial services has enabled lenders to provide a variety of loaning options that give consumers the pleasure to have more control over their finances. Fintech has disrupted the lending process in various ways. A good example is the introduction of peer-to-peer lending. Unlike traditional borrowing, this method does not require a deposit. Individuals earn interest by lending to others instead. Other lending technologies modernizing loans include online lending, mobile wallets, consumer financing, and loan aggregators.
Fast approval of loans is another impact technology has on consumer financing. Traditional banks take weeks or months to approve loan applications. Fintech lenders approve loans and provide the requested funds within 24 hours or less. Furthermore, the loan application process is fast and straightforward. You only need a computer or mobile phone with internet services to apply for a loan on the lender’s website or a mobile app.
Tech’s Influence in Personal Finance Management
With advances in technology, personal finance management is more convenient than ever before. You can easily monitor your spending habits, create a budget, and set financial goals using mobile money management software. Besides, you can download budgeting templates from the internet, and use online calculators to calculate your expenses. There are plenty of money management apps one can utilize to budget, pay debts, or save money depending on their financial goals. Many mobile management applications are AI-driven. They will help you manage finances efficiently and at the same time, provide suggestions and ideas to handle finances better based on user information and behavior. New tech innovations will continue shaping the future of financial services across the globe. Some changes expected include more lending options, easy access to credit data, and personal finance management will become more convenient.
While these changes improve the consumer experience, it is vital to remain flexible to change and adapt to new financial strategies. Also, tech devices like smartphones and laptops have more advanced security features like facial scanners and fingerprints, which give you the pleasure to make online transactions from anywhere. Access to personal finance information is one click away as long as you have a smartphone and a reliable internet connection. Whether you need access to personal loans, budgeting template, financial advice, or need to transact money, technology allows you to do so without leaving your location.
Security is a concern for both fintech companies and consumers. As the world embraces the digitization of financial services, a data breach is on the rise. Fintech companies are already incorporating AI-driven systems like biometrics to prevent fraud in all areas in the banking sector. Nonetheless, consumers should also take the necessary steps to ensure their financial information is safe.
