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Unlocking the Instant Economy for Lenders: The four pillars of success

February 2020 Modulr

The lending landscape is rapidly evolving. Open Banking has changed the game and with this evolution, competition is now more fierce than ever. Challenger banks, crowdfunding, peer to peer (P2P) and peer to business (P2B) lenders are all competing for a corner of the market.

As a result, organisations are on the lookout for any advantage that could give them even the slightest edge over their rivals and improve the value of their offering. This is where the Instant Economy comes in. 

But just what is the Instant Economy, and what role does it play in the lending market? 

The Instant Economy describes a collection of forward-thinking companies who choose to integrate and use business services (such as payments) in new and flexible ways to  drive operational efficiency and deliver superior and immediate customer experiences. 

With open access to banking transaction data via APIs, lenders are innovating to deliver better customer experiences and simplifying loan applications, approvals and repayments.  

To take full advantage of the Instant Economy, lenders are embracing four key areas enabling them to unlock new opportunities and deliver more convenient and reliable lending facilities. 

Back office automation 

Manual payment processing is expensive and time consuming, so it’s not surprising that lenders are automating back office processes at every opportunity. This is helping them to not only improve efficiency, but also enhance the service they deliver to their customers and unlock new levels of scalability in their lending operation. 

Automation lies at the heart of instant payments and repayment reconciliation as it helps to reduce errors and is not limited by the speed of human input.

When these benefits are combined with improved efficiency and reduced costs, it’s clear that automation is critical to being competitive in the lending sector moving into the future. 

To take advantage of the opportunities automation presents, forward thinking lenders are choosing to integrate with payments platforms designed to enhance inbound payment reconciliation. By allowing lenders to open an account for each individual borrower, customers are able to repay money directly into their own account.

These repayments are automatically reconciled with the correct account for the loan, eliminating the need for any manual processing. 

Instant payments 

The lending experience is more important than ever, consumers and businesses alike now expect to receive services at the point of transaction, and are prepared to pay a premium for such convenience. With this in mind, it’s easy to understand why lenders are making major efforts to reduce the time between loan application and payment. 

Some companies, using the Faster Payments network, are disbursing funds to their customers just ten minutes after the application has been submitted which is a significant competitive advantage.

Lenders who can progress from manual disbursement processes to real time API-driven loan disbursement will be able to supercharge their growth and profitability. 

Customer experience

The payments sector is moving fast and with more competition than ever before, the customer experience will become a key differentiator that will ultimately separate the winners from the losers. Lenders that can offer quick and easy to access funds through a simple application and repayment process will be greatly rewarded as customers prioritise convenience over cost. 

This convenience needs to empower the customer and allow them to borrow 24/7, while also offering a range of repayment options. The more flexibility lenders can offer, the more they’ll be able to service the needs of their customers.

Lenders who make the most of these opportunities and provide a flexible high quality lending experience will be able to charge higher rates and realise greater levels of profitability. 

Reducing risk 

In the past, it was normal for lenders to use a single loan disbursement banking partner, but this posed several risks. If the banking partner experienced issues or scheduled downtime, it meant that their ability to service their customers was compromised.

Fortunately, now with digital API platforms, lenders can set up multiple accounts with several banking partners, alleviating the impact it poses on the end lending experience. 

Lenders who fail to tap into the Instant Economy and adapt will struggle to compete with an increasingly fierce market that’s relentlessly improving the customer experience.

By ignoring opportunities presented by the Instant Economy, slow moving lenders will struggle to offer a compelling proposition and will be forced to modernise to keep up. 

The lending leaders of the future will embrace these four key areas of the Instant Economy to deliver a world-class customer experience that puts convenience, automation and technology at the forefront of their offering.

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