Personal Loans Simplified - All that matters (Part 2)
If one is offered a pre-approved loan that means the individual doesn’t need to go through initial screening which a borrower may otherwise have to go through. Technology and analytics have played a critical role here. Banks have been successfully able to analyze customer detail and transaction patterns to bring out offers which would benefit customers.
The evolution of credit bureaus over the last decade has made it possible for bankers to get timely information about consumer’s risk profile, enabling the latter to develop a better product offering. However, verification of critical documents is still required in most cases as a prudent underwriting practice.
Pre-approved loans over the last few years have become popular as is evident from the rise of the share of retail loans in the overall outstanding loan books of banks. Benefits offered by a pre-approved loan have played an important role in this. Here are some of the compelling benefits offered by pre-approved loans:
Initial screening of a customer’s credit history and profile is done through analytical models. Thanks to the usage of the latest analytics, the processing time has drastically decreased for these loans. Today, one can acquire a pre-approved personal loan with a few clicks on the net-banking or mobile banking app.
Thanks to the availability of customer information with Banks and Bureaus, the amount of documentation needed for processing a loan can be reduced significantly under the pre-approved model. This reduction in documents further results in better turnaround time and superior customer experience.
Ease of availing
Today pre-approved loans can be availed by customers through multiple touch points of the Bank and this has resulted in a significant growth in this segment. Customers can now avail of a pre-approved loan through their Bank’s net banking, mobile banking etc. without the hassle of visiting a bank’s branch and going through a long process of documentation.
The impact of digital technology on unsecured finance
The impact of technology in this space has helped in shifting the power in the hands of the customer. Products like Personal Loans have evolved as direct to customer products thus pushing sales growth and achieving cost efficiencies at the same time.
With the emergence of alternate data and API based lending models, Banks and NBFCs today are looking at ways and means of analyzing customer information and come out with meaningful product propositions for the customer. While pre-approving a Personal Loan for existing Bank customers have been a successful model over the years, financiers have successfully started developing models to extend the same benefits to customers who do not have such relationships with the Bank.
With the high volume, high-frequency data that is available to the banks, they can analyze customer behavior better than ever before. This is supported by the data available from credit bureaus and a good algorithm which can assess a customer's creditworthiness in a matter of minutes – not hours or days.
Along with the product propositions, the touch points of product delivery are also going through a lot of evolution backed by the technology advancements. In addition to the preferred medium of availing a loan through Bank’s net banking or mobile banking platforms, new touch points like Chat Bots etc. are also gaining prominence.
For example, YES mPower BOT from YES BANK can assess a loan application in real-time. If you request for a loan through this chat bot, it would ascertain your creditworthiness in a matter of minutes and let you know the loan amount you are eligible for. The features of this unique tool which is available across touch points of the Bank can be availed by anyone and customers need not have any existing relationship with the Bank. Customers can also speak with a product specialist in seconds through a Tap to Talk feature in the chat bot application.
YES BANK’s Project BlueSky is another example of using cutting edge technology and analytics to enrich third party data for pre-qualifying customers across various loan products of the Bank. Under this model, the Bank has been successful in developing pre-qualified product propositions even for new to bank customers across products. The beauty of the model lies in the fact that it can adapt itself basis the type of customer information and variables available, thus making it largely more advanced than the pre-approved models available in the market which need the customer to have a relationship with the Bank.
Written By: Sai Giridhar - Group President & National Head – Consumer Retail Lending and Mortgages, has been a thought leader & brand evangelist in YES BANK, building future ready digital transformational solutions for Lending & Mortgages business in India.