The future of finance
June 21, 2018 (Investorideas.com Newswire) Alongside technology, the world of finance is developing at a fast pace. In fact, finance and technology are very much interconnected in today's world and making finance more and more digitally focused. We consider what the future of finance might look like.
When you apply for a loan, mortgage or credit card potential lenders will run searches on your credit history to determine your credit score. Of course, the better your credit score, the more likely you are to obtain financial assets. The way this is done is through underwriting.
Underwriting involves an analysis of your initial application and your personal details such as age, employment status, monthly income, whether you are a homeowner or a tenant and whether you receive any benefits. Next, detailed checks will be made on your credit to see if you are an eligible candidate.
However, this process has historically been rather slow. Through the use of big data and machine learning, we should see lenders having a better idea of what makes a better customer and for their machines to be able to process it, without manual underwriting. Subsequently, this should result in faster writing, faster approval for customers and loans being approved much quicker.
Research conducted by the Royal Bank of Scotland claim that blockchain technologies are being used to support a new banking industry clearing system which is very similar to the UK's existing "Faster Payment" schemes.
Blockchain was originally developed for the digital currency "bitcoin", but it has now found purpose within mainstream banking. The blockchain is an incorruptible digital ledger of economic transactions. Blockchain can be programmed to record virtually everything of value, and not just financial transactions.
The blockchain practically cuts out the middle-man involved in transactions, consequently speeding up the process. This means you can forget waiting a whole day or a few hours for an online loan to come through, you can start thinking about a mere five minutes.
Better choice of products
With the rise of the online lending industry, more and more products and deals are becoming available. In the past, those with poor credit score found that it was almost impossible for your loan application to be accepted.
Now, there are plenty of options for those with bad or no credit; most notably in the form of collateral loans or guarantor loans. Instead of traditional online payday loans, we are also seeing more overdraft facilities where loans amount and repayments can be changed each month to suit the borrower.
Lenders are also showing signs are being far more flexible with repayments. Take for example, flexible mortgages. These allow you make additional payments in advance to reduce your future balance, take a break from payments (great for periods which are particularly expensive, e.g Christmas) and make underpayments to make the amount you pay less, then overpay at a later date.
Replacement of money?
With the growth of cryptocurrencies in the last year, we could soon start seeing loans paid out in bitcoin or ethereum and perhaps lower interest rates if they fall under unregulated activity. In addition, the sharing economy shows new attitudes towards borrowing and lending, with new apps dedicated to exchanging good and services instead of money such as massages, meals and artwork.
Daniel Tannenbaum is a marketing consultant who has worked with several loan and finance providers in the UK. He is a regular contributor to The Huffington Post, Business.com and TechRound.
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