The cost of the BNPL revolution

With the recent announcement of Apple’s entry into the BNPL sector, companies that have rubbed shoulders with the new wave of online lending will no longer be the kings of their kingdom. Online loans have become mainstream and even domestic with new entrants to the market, especially Paypal and eBay.

But what are the advantages and disadvantages of this new online credit revolution? Is it good for the economy and the small customer? Or is it just fueling an irresponsible spending movement among the younger generations?

Q: What are the main drivers of the online fintech lending revolution?

The COVID-19 pandemic has been a major driver of the fintech online lending revolution. This has affected businesses in terms of both the shortfall and the need for new capital to fund possible substantial upgrades to premises, products and the route to market. This has reduced in-person business and triggered a complete transition to e-commerce and remote working for many, which for some companies is the first time they’ve had to switch to a digital-centric approach.

While this has preserved or opened up new sources of revenue for some businesses, it is not without both challenges and costs, and some have not seen these benefits. Loans have proven to be a much-needed lifeline for businesses, and according to a McKinsey 2020 investigation, nearly a quarter applied the business rate relief and deferral of tax payments, with fewer applying for loans, claiming statutory sickness benefits and seeking protection from eviction.

Q: Are the increase and decrease in online lending good for the business economy or problematic?

In an attempt to speed up the provision of support loans, the government lowered credit checks for loans below £ 25,000, leading to an increase in fraud through duplicate applications, identity theft, inaccurate self-certification and organized crime. In addition, for some companies, these loans only delay the inevitable, with missed or late payments having a negative effect on future credit.

However, when done properly, online loan can be very secure. Yolt Technology Services (YTS), the leading provider of open banking services, recently made its proven and tested Account Information Services (AIS) available to UK commercial lenders to deliver enhanced data insights and to support the credit decision-making process. With built-in bank-grade data security, YTS’s enhanced AIS data information can help commercial lenders make faster and better decisions about creditworthiness and affordability.

YTS hopes to allay concerns about risk and availability of finance by providing improved insight into data on new loan applications, which should ultimately lead to faster, safer lending decisions with a clearer view. associated risks in addition to a more up-to-date data set that can be used for identification and affordability purposes.

Q: What new online lending technologies are disrupting the market?

Real-time data from AIS can offer a more accurate way to calculate credit risk and ensure repayment plans are right for the business. This can speed up integration at a time when delays could lead to business liquidation. AIS therefore has the potential to save thousands of businesses across the UK by making financial data sharing secure, real-time and reliable.

Last month, YTS launched a Cashflow Analyzer, a solution powered by AIS that gives credit underwriters more in-depth information about the cash flow of credit applicants and customers to streamline and simplify assessment processes. affordability. The tool enables real-time and historical analysis of up to 18 months of customer transaction data and presents a one-stop solution for businesses that may have experienced fluctuating sales and income due to the impact of Covid-19 and therefore deemed ineligible for various forms of credit.

With no onboarding period or technical input required, lenders can access the out-of-the-box white label solution quickly and smoothly through the YTS Cashflow Analyzer portal to perform immediate affordability checks.

Main image credit: Getty

Leon Muis, Commercial Director at Yolt Technology Services, is an Open Banking and PSD2 expert. He describes himself as a “FinTech and retail banking professional with extensive international experience and analytical mind”.

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David A. Albanese

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