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How Fintech Is Transforming The Underwriting Process

The new world of digitalization creates challenges for finance companies, as they begin to adopt the technology. Fintech is a major part in this industry and it’s changing many parts including underwriting. This shift impacts every aspect of the financial sector-and as more people use these technologies everything from banking to investment has been transformed at an ever noticeable rate.

We all know that the basic underwriting process involves conducting research and assessing the creditworthiness of an individual eligible for a loan or an insurance. Underwriters usually have to go through a lot of documents to decide the credibility of a person. Since this is a manual process, it can take up to weeks or even months for completion. 

Since the entry of new-age Fintech companies in the financial sector, the dynamics of the underwriting process has changed. These companies deliver customized credit solutions, with better and faster customer engagement, using the latest innovative methods like Big Data, AI and Machine learning.

 

Fintech to the rescue

Fintech companies utilize technology to make the best out of the data that’s available. Through the use of big data applications and a well calibrated platform they can gather transactional data from multiple sources quickly and easily. This data can be aggregated into machine learning algorithms and results can be obtained in as little as a few seconds time. 

While, the traditional underwriters reject loan applications of customers who are new to the process due to insufficient data. Fintech companies make use of the alternative credit scoring to benefit these customers. This process involves extracting data of the borrower from multiple sources and analyzing them into buckets or segments. These segments can now be used as touchpoints to slowly help the individual finally secure a loan in the future through the use of automated follow-ups, remarketing and cross referencing.

Fintech companies are also heavily utilizing Artificial Intelligence to develop their own credit rating mechanism. There are Fintech companies who use abstract data from social media to better understand buying behavior and characteristics of borrowers in order for them to introduce more creative and relaxed ways to repay loans. Most companies also use psychometrics and digital verification to evaluate the creditworthiness of the customer.

The Fintech industry is definitely changing the financial landscape. 

One of the major ways this will be seen is through efficiency and effectiveness improvements to traditional processes that are currently being done manually. As these companies grow, they can replace many existing systems with newer technology-based solutions that do not require much human involvement for completion.


*Curious to know more about Fintech and how disruptive technologies are shaping the way we work, live and interact? Head over here

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