Innovativeness is becoming the key factor of the lending companies’ effectiveness. Chatbots, blockchains, and solvency assessment based on Big Data — all of these technologies are changing the industry of online lending. Let us explain how it is happening.
Blockchain
This is an encryption method used to represent the transaction, trade, and contract data in the cryptographic form. The information is cyphered by blocks that are linked with each other. Blockchain technology requires the sequential read of information from old blocks to create a new block. All blocks are stored in a blockchain and form a constantly updated database. There is no way to delete or rewrite block from this database. Moreover, it is “limitless” since it may include an infinite number of transactions. This is one of the main features of the blockchain.
This technology allows making noncash payments even more safe and faster. With the help of it, lending companies will be able to improve the processing speed of client requests and cut costs.
How does it work in practice: in April 2018, the BBVA Spanish bank issued the first loan of 75 million euros with the use of the blockchain technology. Negotiations were completed in a few hours. Usually, such big loans are only issued after days or weeks of discussions.
Big Data
How traditional banks issue loans: the client comes to the bank office and applies for a loan. It is examined within a few days. Bank manager checks the credit score of a potential borrower, their information on income and loan application form. The final decision about granting a credit is made based on these minimum data.
How companies that use Big Data technology issue loans: after receiving the loan application, the analytic scoring system starts searching and processing large datasets about the potential customer. They are taken from both open and specialized sources such as credit bureaus databases. The system uses hundreds of parameters to assess the solvency of customers. It analyzes information from social networks, loan company’s website user behavior data, telecom data intelligence, Google search history, and many more. Such a system is much more accurate than the assessment of customers' credit risk based on the data from credit bureaus alone.
How scoring is implemented all over the world: according to Forbes, only 15% of companies from the Fortune 500 list are using Big Data scoring right now. However, the Big Data implementation costs will increase by 29% each year, according to the magazine.
Chatbots
The first prototype of chatbots appeared back in 1966, when Joseph Weizenbaum, an artificial intelligence expert, introduced ELIZA — a computer program, which was capable to simulate a conversation between a client and a psychotherapist based on the technique of active listening.
Nowadays chatbots are being implemented everywhere, including loan companies. They help clients to receive information about loan products, apply for a loan, get answers to the frequently asked questions and calculate the loan refinancing requirements.
Using this technology, companies can reduce staff costs and improve the quality of service. Obviously, it is also convenient for customers. They can get answers to most questions at any time of the day or night.
How it works in practice: According to LTP, a quiz from one of the most famous media about payment systems, chatbots meet the needs of loan companies’ clients by 73%. This is the highest rate among all channels of communication. E-mail messages satisfy customers' needs by 61%. Performance of call centers is even worse — they satisfy only 44% of customers.