8 Ways Fintech Has Impacted the Instant Loans

At its core, financial technology – or fintech – aims to introduce new tech that can improve and automate financial processes, from payments to lending. The fintech industry has been exploding over the past decade and continues to grow with every passing year, with an estimated $210 billion invested in fintech startups in 2021.

Although the majority of the fintech revolution has revolved around cryptocurrencies, other parts of the financial industry have not been left untouched. Many new companies emerged to fill the gap for various financial services, such as lenders that offer online title loans.

As a consequence of the lack of ties to any large financial institutions and not being subject to the same regulations, these lenders were able to offer competitive loan products to consumers. Below, we will take a deeper look at how fintech has impacted the instant loans industry.

More Loan Opportunities

With conventional lenders, such as banks and credit unions, you are typically limited to borrowing specific products that they offer – and rarely does it happen that these fit your specific needs. This is not the case with online lenders, which offer a wide range of loan products that allows you to tailor the loan to your particular financial situation.

What it means to you as the end user is that you have a much larger chance of finding a loan that will work for you, whether you need a short-term solution or something more long-term. While conventional banks move towards more flexible lending products, they are still subject to more regulations, meaning they can only move so fast.

Increased Accessibility

Another huge advantage that online lenders have over traditional financial institutions is the accessibility of their products. With a bank, you typically need to visit a physical branch during business hours to discuss your loan options – some banks offer online loans for their customers, but the application process is often more complicated.

In contrast, many online lenders allow you to apply for a loan entirely online in just a few minutes – no appointment necessary. Plus, since most of those loans are rather small, you can even get some of them without going through a formal credit check.

Quicker Funding

With that, the process of actually getting the loan is also quicker with online lenders. Once you have been approved for a loan, the funds can be deposited into your account in as little as 24 hours – often even sooner than that.

This quick funding timeline is crucial for many people who need access to cash as quickly as possible, whether it is to pay an unexpected bill or cover an emergency expense. With a bank loan, the process can often take days or even weeks – if you are approved at all.

Better Data Utilization

Fintech aims to put technology into your finances also when it comes to your solvency. Instead of relying solely on the credit score – which, needless to say, is flawed in many ways – many fintech lenders use alternative data when making lending decisions.

This can include standard aspects like your employment history or bank account balance, but also other means like social media activity or even shopping habits. It leads to a more holistic view of your financial situation and can often lead to better loan terms.

Greater Security

Although online banking isn't anything new, a good portion of banks and lenders still fails to catch up with the latest security technologies – some still don't enforce 2FA (two-factor authentication) for their online platforms, which is by far the most basic form of online security.

With fintech lenders, on the other hand, you can be sure that your data is well-protected on both ends thanks to cutting-edge security technologies. This is essential when dealing with personal data and financial information, which can lead to serious consequences if it falls into the wrong hands.

Peer-to-Peer Use Cases

Let's say you are just $100 short to pay your rent this month and you really don't want to incur any late fees. Taking a small loan would surely help you out, but you probably don't want to go through a formal application process for such a small amount.

This is where peer-to-peer lending comes in – you can take a loan from another person directly, with the deal being facilitated by an online platform. Although this is not exactly a new concept, it has only become possible on a larger scale with the help of apps like Cash App.

Such an approach can be beneficial for both parties – the borrower gets access to quick cash without any hassle, while the lender can earn some extra interest on their money.

New Forms of Payment

While this doesn't specifically concern online loans, it should be noted that fintech companies are leading the way when it comes to new forms of payment. Tech such as one-click online payments have already become the norm in many industries – and that's just the beginning.

As controversial as it may be, cryptocurrencies are also gaining traction as a means of payment, with more and more businesses starting to accept them, creating a new ecosystem of digital currencies. Even if you are not particularly interested in cryptocurrencies, it is hard to deny that they have had a profound impact on the financial industry as a whole.

Improved Customer Service

Finally, it should be mentioned that fintech startups are often known for their outstanding customer service. Since many of them have to fight for every single customer, they go the extra mile to provide an excellent experience and help you with whatever issue you may have.

This is in stark contrast to many traditional financial institutions, where it can often be hard to even get in touch with a customer service representative – and even if you do, they are not always able or willing to help. The difference in customer approach is one of the main reasons why fintech is quickly gaining popularity.

The Bottom Line

There is no doubt that fintech has changed the financial landscape, and online loans are just one example of that. Whether you are looking for a quick cash infusion or a more long-term solution, fintech lenders offer competitive products that can be tailored to your specific needs.