If you’re not reading this article from the screen of your Android, then it’s probably within reach of your hands. For most people, it’s as though there’s an invisible cord tethering them to this device.
It makes sense — after all, your phone does a lot more than just call and text people. It’s your alarm clock, fitness coach, PA, and entertainment system. And now, it can be your bank, too.
FinTech makes it possible to serve up traditional financial services in surprisingly modern ways, creating a digital platform for daily banking tasks. The mobile bank is by far one of the most convenient features of online banking, but it’s hardly the only way you can use your phone to manage your finances. As FinTech continues to evolve, it promises to benefit the underserved when it comes to finding a loan.
Why should the underserved care?
The underserved make up a large population in the U.S. that doesn’t have full access to a variety of financial services. Although they may have a checking or savings account, they often turn to lending alternatives when they need help finding a personal loan.
In most cases, it’s because mainstream banks make it challenging for the underserved to secure financial assistance. They belong to an old-fashioned banking model that relies on a complex set of rules when approving applications.
To a large degree, these criteria focus on an applicant’s financial history to determine their creditworthiness — or their reliability as a borrower. Without a positive financial history, subprime borrowers will often have their applications denied.
These conditions make it hard for immigrants and young people, too
Although this method helps bank review their applications, it does more than just weed out uncreditworthy borrowers. These standards can also hurt the credit thin or credit invisible — people who have yet to develop a robust credit history—even if they’ve always been a reliable borrower.
Immigrants make up a substantial number of the credit invisible. In leaving their country for a new home, they often have to leave their native credit score behind, as the U.S. doesn’t always recognize credit ratings from other countries.
Young people just starting out may also be credit thin, as they haven’t reached a point in their lives when they need credit cards, loans, or mortgages. If they do have a credit card, it may be too new to count towards a score.
Although immigrants and young people may pay rent and other bills on time, their lack of credit means they may not get help from a bank in an emergency.
FinTech provides a new way to borrow
FinTech companies delivering mobile banking options make it easier for anyone to complete day-to-day tasks—from depositing a check to paying bills. Some make it easier to apply for loans, as well.
Unlike traditional banks that have a lot of red tape complicating their services, online lenders have streamlined the borrowing process by moving it online. Whether through web services or an app platform, they make it possible to get installment and payday loans with less difficulty, even if you have a low credit score.
It’s also easier. While a bank may take weeks to process an application, online lenders of short term loans move on a rapid timeline. In some cases, they approve an installment loan after one business day.
Speed and convenience match with today’s needs
FinTech trailblazes ahead on the digital landscape. Consumers are following FinTech as it moves services away from brick-and-mortar branches to an online platform—and the banking world is paying attention. Some of the biggest banks are partnering with FinTech startups to provide the same convenient, digital banking. Soon, any borrower — not just those with poor credit — can apply for a personal loan online, receive it via direct deposit, and repay it by e-payments.