How are Fintech Startups bringing Innovation in Financial Services

People’s perspective towards technological advancement in financial services has changed since last year. Many people have adopted online interactions in all aspects of their lives, including the mortgage industry. There are many reasons for adopting Financial technology solutions by consumers. In a report of Business Insider Intelligence, Fintech consumers found it easy to set up an account.

Figure 1: Top reasons for adopting Fintech solutions

Two out of three people did their financial transactions online in 2020. Financial corporations are investing in digital technology as they understand that innovation will keep them afloat. Innovation in Financial Services has helped people to have access to affordable homes. Online mortgage counseling is provided by Fintech firms so that homebuyers are aware of their options before buying a property. How Fintech Startups have disrupted the mortgage industry is in our earlier blog. Here, we will discuss how Fintech Startups and innovation in financial services are transforming the Mortgage Industry.

Fintech Startups and the Mortgage Industry

Incumbent financial institutions (about 88%) believe that part of their business will lose out to standalone Fintech companies in the next five years. Fintech Startups harness innovation in financial services and achieve business growth. According to Statista, Fintech Startups are the most populous in technological fields globally.

Figure 2: Distribution of Startups worldwide by industry

Fintech startups provide an easy-to-use mortgage calculator that helps borrowers figure out their monthly payments. Borrower’s details like home price, downpayment, taxes, insurance, and interest rates are accounted for while deciding mortgage payments. Fintech startups have advanced client portals that allow seamless loan application processing from pre-qualification, approval to loan closure. Explanation about Fintech Startups is preventing loan defaults is in our previous blog. The technology used by Fintech Startups includes Python, Django, NGINX, Gulp, among others.

The leading Fintech Startups provide services relating to mortgage loans with the best offers. They help customers in comparing different mortgage lenders and help them choose the mortgage lender of their choice. Fintech Startups use AI and Machine learning techniques for easy loan application processing. Customers can use both the web and mobile versions of the Fintech startups platform to research a property and apply for a mortgage with an interactive AI-powered dashboard. Some of the Mortgage Fintech Startups help in the buying and selling of homes with no hidden payments. Some other Fintech Startups provide home loans to customers and issue unbiased mortgages even to borrowers with no credit history.

Soon with the advance of technology, Fintech Startups will mature into established companies.

Innovation in Financial Services

Artificial Intelligence (AI), IoT (Internet of Things), Big Data, Cloud computing, and blockchain technology are the driving force for innovation in Financial Services. Big Data is used a lot in the financial services industry. IoT and Big Data are giving valuable insights to fintech companies concerning customers’ needs. AI-enabled innovation in Financial services helps mortgage applicants make the lending experience seamless and borrower-centric. Financial institutions are using cloud computing to store and process large amounts of data of customers. Customers are given internet-based access to their accounts through mobile device apps and websites.

The benefits of innovation in Financial services are varied, and some of them are:

• Mortgage loan processing is made smoother- Users get a step-by-step guide for seamless loan application processing. It reduces manual updating of data, including documentation, thus increasing productivity.
• Simplification of captured data by AI-Loan applicant’s details like addresses, income, credit score is stored and tracked for loan processing.
• Customizable financial services-Mortgage lenders upload customer’s borrowing habits with the help of API-led applications. The entire lending process is automated that optimizes the customer experience making it easy-to-use.
• Interactive dashboard with chatboxes and voice assistants- help the borrowers fill the relevant forms for the mortgage loan processing.

Also, innovation in financial services facilitates automation in the loan processing system. One such innovation in the financial services sector is cloud-based Mortgage LOS. This innovative cloud-based Mortgage LOS is giving a much-needed boost to the Mortgage Industry.

Cloud-based Mortgage LOS and its benefits

Cloud-based Mortgage LOS uses cloud computing technology for better management of the loan Operating Systems. Its customer support services run 24/7 and provide extra security to lenders and borrowers. Cloud-based Mortgage LOS improves customer satisfaction by involving less manual intervention, paperwork, and costs. It also saves processing time. The complex documentation process is streamlined with automatic sharing, storing, and updating of documents. Cloud-based Mortgage LOS can be easily configured and is available to the user instantly by using Blockchain technology, there is communication between the lender and borrower. Its use for authentication and verification of the borrower’s details. These details include the borrower’s history, creditworthiness, and finally, closure of loans. Cloud-based Mortgage LOS involves less operational costs and high process efficiency. Customization of the Mortgage LOS is according to the user’s requirements.

Conclusion

Innovation in financial services has benefited the mortgage industry by streamlining mortgage loan processes. Fintech firms are making the existing processes for homebuyers more efficient by using automation and advanced technologies. The potential of Fintech startups in the home lending sector is increasing steadily, with the economy recovering. inflooens has the best, state-of-the-art Mortgage LOS, which is causing transforming the Mortgage Industry with its scalable and super-fast outcomes.

5 ways Fintech Startups are Preventing Loan Defaults

Lending is a risky business. Whether your business is large or small, managing cash flow is a challenging task. When Mortgage lending companies are giving a loan to any customer, they are taking on a huge risk. Even though loan applicants undergo thorough eligibility checks, there is a chance that the lender might not be able to recover the money if the customer faces unemployment and/or loss of income. According to the Mortgage Bankers Association’s (MBA) National Delinquency Survey, the delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 7.65 percent of all loans outstanding at the end of the third quarter of 2020. Nonetheless, the 90-day and over delinquency rate continued to grow and reached its highest level since the second quarter of 2010.

Figure 1: Mortgage Delinquency Rates

Further, due to the current pandemic situation, there is an increase in job losses resulting in reduced revenues. Customers are forced to seek external financial support. This calls for a robust system to achieve timely recovery and avoid delinquencies. At this point, the collection of debt through automation comes into the picture. FinTech startups are leveraging a large amount of available customer data to automate the whole process of Mortgage CRM and Mortgage Origination. Let’s look at the 5 ways in which Fintech startups are proving to be a game-changer for preventing loan defaults.

Machine Learning in Mortgage CRM for Debt Recovery

The process of lending money and recovery of debt has been made easy by Machine Learning (ML). FinTech startups use ML to streamline the process of lending. The credit models used can deal with every stage of lending, for example preparing credit score, credit history, eligibility for loan/ loan amount, risk management, and debt collection. ML also helps to comply with regulatory rules and guiding principles. Therefore, ML is a huge advantage for lenders dealing with the repercussion of loan defaults. At the same time, it is beneficial for customers too, by providing the current tech-savvy customers speedy access to loans with a negligible amount of paperwork. inflooens is the smartest mortgage CRM that uses AI and ML to streamline the mortgage lifecycle.

Bulk Automated Messages to Stay Connected with Customers

Automation can be used to send reminders and messages to borrowers for payment of loan installments. Lenders can opt to include debt amount, date of payment, website link for secure online payment options in the messages. These messages can be sent via text or email depending on the customer’s channel of choice. Automated messages not only help in reducing delinquency rates but also help in improving customer service. Fintech startups are including the feature of automated messaging in mortgage CRM platforms for ease of business. inflooens Mortgage CRM allows automated follow-ups and transparency throughout the mortgage process.

Automated Tools Helps to Analyze Customer Payment Cycles

FinTech startups have developed mortgage CRM platforms that use technology to provide lenders information about the best time to connect with the customers and the most appropriate channels of communication. This makes it easy for lenders to recover debts by contacting customers at the right place and right time. Further, the technology also helps to pin-point irregular payment cycles and identify risky customers. Machine Learning can use advanced algorithms to predict delinquency and help in mitigating lending risk. inflooens provides a reliable and efficient mortgage origination platform that helps in reducing risk and enhancing customer experience.

Customers can select preferred language

Many mortgage lenders operate worldwide or have a varied customer base in their given locations. This can lead to language barriers and difficulty in communication. With Automated Customer Service portals like IVR or applications, Fintech startups are enabling customers to customize their experience. They can select their preferred language which eases the communication process. This in turn makes the collection process smoother and also reduces the cost of following up with the customers over and over again. Nonperforming loans are not only a hassle to deal with, but they are also costly because they need an investment of resources to service without returns.

Image 2: Cost of loan servicing

Personalized payments plans

The FinTech startups help the customers build their payment plans. Here, the customers can set their debt payment dates which are, say, within the week of their salary day, without any human intervention. The customers can also opt for lower monthly payments if they happen to lose a job. Since technology is customer-centric, the customers can take control of their finances. Even cases of forbearance and cash-out refinancing are made easier to deal with by FinTech Startups. We have discussed both these topics at length in our previous blogs. inflooens is the best mortgage CRM that provides information at your fingertips and makes the personalization of payment plans faster and simpler.

Conclusion

The FinTech startups are developing automated tools that extract, corroborate, and process all amorphous data and give systematic reports to reduce operating costs, increase accuracy, and reduces default levels in a fully verifiable and transparent way. They provide tools that are proving to be a win-win situation for mortgage lenders as well as borrowers resulting in increased efficiency, enhanced customer experience, reduced loan defaults, and eased debt recovery. The digital debt-recovery solutions are being used to streamline their lending businesses and collection processes.