Data Driven Innovation: 3 Ways Financial Services Businesses Are Increasing Innovation
Businesses produce data every second, while some of it can help an organization make data-backed decisions about business activities, much of it will sit in data warehouses never to be seen again. But some companies have become data masters and found ways to use data not just to innovate but create change within their industry.
While data has millions of potential uses and is being used in many applications, here are three ways that financial services businesses are using data to innovate within the industry:
Using Data to Decision Loans Faster and Improve the Customer Experience
We live in an ‘on-demand’ generation, where instant food, instant entertainment, and instant answers aren’t just possible, they’re expected. This is one area where financial institutions are still lagging behind, as many financial services applications still take days or weeks to be processed. Whether it’s securing loans for purchases or applying for a mortgage there is frequently a long wait for approval. By maintaining this slow system loan providers run the risk of clients securing a loan through another provider before they’ve even processed the paperwork.
Many businesses are challenging this process by harnessing the power of data throughout the application process. Take Lenda for example, their mortgage application process is currently two weeks from start to finish and relies on data integrations to establish risk levels and meet compliance needs.
Using Data to Expand Loan Approvals to the Underbanked
The Consumer Financial Protection Bureau reported that in the US alone there are 45 million individuals who do not have sufficient credit history to generate an accurate credit score. The demographics of people within this group are broad, from recent college graduates to high earning immigrants. While it’s easy to argue that these aren’t the ideal candidates for credit, especially if you base the risk factor on their non-existent or unacceptably low credit score, many of these individuals are strong candidates for credit when the risk analysis looks beyond traditional credit scoring.
Banking for the underbanked, or credit-invisible, is something that traditional banking institutions have steered away from, as assessing the risk of issuing credit to people in these circumstances is more than their decisioning processes could handle. So, for many, the only credit solution was high-interest loans from non-bank institutions. However, numerous fintech businesses are successfully bringing fairer banking solutions to the underbanked.
Using Data to Power the Growth of Small and Medium Businesses
SME business loans have always been a tough segment for the financial industry, with businesses often lacking adequate financial history or the necessary capital to secure funding through traditional risk decisioning processes. The use of data in decisioning SME loans is no longer restricted by available technology, in fact just about any data source can be integrated into a risk decisioning process, from online business reviews to transactions on third-party sites. With a talented risk team and the right decisioning technology, data can significantly improve the accuracy of a business’ risk-decisioning process without creating delays.
Using Data to Benefit Your Business
Data Driven Financial Service Companies have 3 key things in common:
- They’re using data to reduce risk
- They’re using data to grow their business
- They’re using data to improve the customer experience
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