The Impact of Tech on Borrowing and Lending

The digital age and the accompanying tech are transforming the landscape of borrowing and lending. Consider that in August 2023, fintech lenders held $50 billion in loans and 7.6 million accounts, smaller than banks but larger than finance companies. Median fintech account balances averaged $4,371, akin to banks’ $4,154 median.


These numbers show that using technology in lending and borrowing leads to more accessibility, efficiency, personalization, and better outcomes.


Let’s take a look at some of the ways tech has already reshaped the industry. 

More Accessibility and Streamlining

Digital lending platforms have made it easy for lenders to reach more customers worldwide. Potential borrowers who struggle to access loans now have many options online. Gone are the days when borrowers had to find a local lender to achieve their financial goals.


Digitization has also streamlined the borrowing and lending process. Until recently, borrowers had to visit physical branches and spend plenty of time waiting around and filling out paperwork. Now, they can quickly apply for loans online and receive rapid responses from lenders. 


Automated systems streamline the process by assessing loan eligibility and making decisions quickly, reducing the laborious nature of approving loans. 


Personalized Loan Products

Not every borrower fits the same mold. Some would do well to apply for FHA loans, while others might benefit from personal loans. Often, a customer’s needs don’t align with a one-size-fits-all approach. Instead, digital lending platforms enable customers to access personalized loans tailored to their requirements. Some of the benefits of customized loan products include:


  • Fast funding: Many personalized loans provide financing quickly. Sometimes, the borrower will receive their funds when their application is approved.
  • Flexibility: Unlike traditional specific-purpose loans, funds can be used for many purposes. 
  • Customized loan terms: Borrowers can agree to loan terms that align with their financial circumstances. 

More Efficiency With Artificial Intelligence (AI)

Implementing AI systems within the finance sector dramatically reduces the administrative burden on lenders. Turnaround times are consistently decreasing, and customers can be onboarded seamlessly. 


Time-consuming tasks, like risk and compliance evaluations, can now be done by AI in seconds. This speed leads to a more positive customer experience for the borrower. It can also help with better customer retention and referrals. 


AI also powers predictive banking, which involves collating and analyzing raw data. AI can extract insights from massive volumes of data to make fast and efficient lending decisions. Plus, it can detect fraud and prevent it from occurring. 

Trended Data Analysis

Trended data provides lenders with historical records of borrowers’ credit behavior. This includes data about payment amounts, credit card balances, and payment dates. By assessing this data, lenders can make more informed decisions when approving or denying loans for borrowers.


The issue for lenders is the sheer volume of this data, making it complex to analyze. Fortunately, tech solutions such as data analytics software and machine learning techniques help to structure, standardize, and analyze this data quickly. 


This means lenders can more easily predict market timing, manage changes in risk, and make better lending decisions. 


Peer-To-Peer (P2P) Lending

Digitization has led to a boom in P2P lending platforms that remove the need for traditional financial intermediaries. They enable businesses and individuals to borrow and lend money online, providing an alternative to conventional lending. 


Online P2P platforms directly connect lenders and borrowers and allow them to set the rates and terms of the transactions. These platforms have created a surge in the popularity of P2P lending. 


They’re particularly beneficial for borrowers who cannot secure a traditional loan or are looking for lower interest rates. However, they also benefit individual investors who want better returns on their cash savings than they get from conventional banking products. 


P2P lending is also highly flexible, and many platforms cater to specific types of borrowers, like small businesses or individuals with unique loan purposes. 

Enhanced Cybersecurity

With so much customer data now online, cybersecurity is naturally a huge concern for both borrowers and lenders alike. AI and machine learning (ML) tech are being used to predict and prevent potential cyber threats within the lending industry. 


Technology like APIs, blockchain, and Strong Customer Authentication (SCA) have also been implemented to protect customers and business assets as the lending sector shifts towards open banking. 


Tech helps address heightened regulatory and compliance measures and secures all apps, storage facilities, networks, and devices from cyber threats. 

Final Thoughts

Although many core principles of borrowing and lending remain the same, tech is undeniably revolutionizing the industry. Implementing different technologies, like AI and ML, leads to greater personalization, efficiency, and accessibility. 


This benefits borrowers and lenders who can take advantage of streamlined processes, faster decision-making, and more secure lending practices. 


Without question, tech will continue to reshape the world of borrowing and lending. This will result in more collaboration between innovators, regulators, and consumers, leading to a better marketplace for all involved. 

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