The Future of Credit: Redefining Underwriting Strategies + Latest Fintech Developments in SEA
Hello Finance Leaders!! 👋
Welcome back to another edition of Finance Bulletin; your weekly Fintech & Innovation Newsletter!
Today we will be discussing how data-driven underwriting processes are changing the way lenders assess the creditworthiness of their borrowers.
The Indonesian lending market is undergoing a transformative shift as a result of the synergy between tech and lending practices.
Lenders today are constantly looking to gain a competitive advantage to increase their lending books.
With the rise of digital payments, internet and mobile banking, customers also have changed the way they interact with their banks.
Gone are the days when lenders would just have to rely on credit scores to determine a borrower's creditworthiness; This archaic process simply takes a lot of time and is prone to fraud.
So, how are lenders evolving to improve their underwriting processes?
Digitization has facilitated financial institutions and lenders to leverage data and automate the delivery of their products or services.
With more data and computing power, lenders now have a clearer picture of their borrowers.
The inclusion of AI/ML and data-driven credit models has significantly improved their decision-making. This includes improved fraud detection, proactive risk assessment, underwriting and collection.
Data-driven credit underwriting on the rise
With an internet penetration of around 70%, set to reach 85% by 2025; the number of internet users in Indonesia is increasing rapidly and so is their digital footprint. This has opened up access to alternate data sources; vastly improving the credit assessment process. Compared to traditional lending models, where banks used to manually verify documents for credit assessment; data-driven credit models have been a game changer. These models, as we mentioned earlier, go beyond typical financial figures allowing the borrower to have access to a more tailored loan product even without a strong “old-school” credit history.
Future-proof your current credit underwriting process
Now that you understand the need and importance of tech & data-driven underwriting process; Here are a few tips that you can implement to avoid getting left behind.
Tips for an improved underwriting process
Traditional financial documents like bank statements are important, but they might not help you establish a clear picture of your borrower’s financial health. Make sure to utilize data from all possible sources like govt records, and e-commerce profiles and even verify phone numbers to check for possible frauds.
The major impact of data-driven underwriting processes is visible with the availability of personalized loan offerings. Lenders no longer have a “ one-size-fits-all” approach towards borrowers. Make use of various data points to provide a personalized financial solution to the borrower.
Underwriting is an iterative process. As such lenders should use tools to build and test their underwriting models before implementation. This process of constant learning and iterations not only improves your loan offerings but also sets you apart from your competitors.
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How is PowerCred revolutionizing credit underwriting?
We strongly believe that the conversion of unstructured data from various sources to structured meaningful insight is the key to building great financial products. With that in mind, we empower lenders with advanced data solutions to help verify borrowers's identity, assess their creditworthiness and ensure proactive fraud defence.
We do this by seamlessly integrating with your existing credit engine enabling you to make more informed decisions
Bottom Line
Lenders and financial institutions in 2024 are in the race to be digital-first. And in Indonesia, borrower expectations are only increasing day by day.
To keep up, lenders should prioritize their resources to focus on customer retention with the help of digital platforms to simplify their lending processes.
This will not only facilitate easier access to lending products for borrowers but also support a more inclusive and diversified lending portfolio for banks and other lending institutions.
Not sure where to begin? book a meeting, we would love to get you started.
Enough shop talk!! Time for some Quick Bites
QuickBites
Bite-sized fintech headlines for the time-crunched finance leader.
That’s all for this week. See you in the next edition!
Keep Innovating.
Team PowerCred :)
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