How Online Lending is Paving the Way for Online Banks
Why is Online Lending so Popular?
It was only a matter of time before the magic of the world wide web sprinkled some of its fairy dust on an industry that has refused and resisted change for quite some time – banking. Up to now, the concept of online banking has consisted of a faster, more convenient way to interact with your original banking provider. Things are changing dramatically though as online lending seems to be the beginning of the sector’s entire overhaul.
Let’s have a look at what has made online lending so popular.
Seamless Application Process
The payday loans industry is growing larger and stronger by the minute, giving people access to short term personal loans with monthly repayments. How does that differ to a traditional bank? The ease and immediacy of the process. Forget about physically walking into a bank, wait in line, fill out stacks of papers, sign an even bigger stack of papers only to find out that your bid’s been rejected.
If you have a laptop and an internet connection, you can enter your personal information and apply for a loan in no time. Loan amounts and income will obviously affect the credit checks performed by the online lender but all in all, you’ll know if you’re eligible within minutes. Take that and compare it to the painstakingly long process with a traditional bank and you can see why the online lending industry is booming.
Spoiled for Choice
To add to that, the abundance of online lenders will give you an array of options to choose from and as we very well know, whenever supply for a service is high, it means that prices (in this case interest rates and terms and conditions), will be competitive in the favor of the consumer.
Avoid the sales pitch
We’ve all been there: going into a shop with a very specific thing in mind only to end up navigating a whirlwind of sale pitches for other products on offer, up-sells and special discounts. No thanks. It might seem like a little thing but the immediacy of the online applications process goes a long way when you need money and you need it now.
No-Strings-Attached Rate Estimates
Online lenders will not give you a hard time in the early stages of the loan’s eligibility process. Without having to commit to anything or take a hit on your credit score, you’ll have an estimate of the loan rates. Traditional banks usually require a thorough check at this stage of an application, making it challenging to proceed before you even begin.
The popularity of online lending and the exposure it gets is acting as the front cover for a much deeper change. Online lending might just be the tip of the iceberg.
Online Banks are Here to Stay
Yes they are. All you have to do is look around you and realize that the current, legacy banking system has been under attack for quite some time.
Cryptocurrencies, P2P fintech platforms and money transfer services have been springing like mushrooms over the past couple of years utilizing the power of the Internet and confronting the glaring weaknesses of brick and mortar banking. The first step for these companies was to specialize in a specific banking niche and make a name for themselves by dominating that space. But it seems like now is time for step number two.
Revolut’s successful bid for a banking license is breaking new ground as it will now be an authorized and regulated financial institution with the ability to issue loans online, open bank accounts and perform a wide range of traditional banking functions. A one-stop-shop that combines the benefits of online banking with the safety and options of a traditional bank.
Banks have traditionally controlled the value chain from beginning to end and been able to resist change because they were holding all the chips. Things have changed drastically though, as we now live in an era where fintech companies have embraced an open source banking structure with cloud analytics, APIs and mobile apps taking center stage.
The public is now more educated and subsequently more demanding. The banking monopoly is a thing of the past as people are now enjoying the fruits of a lethal combo: high-end, secure, technology and low cost service.