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The credit system of the future



The credit system of the future poses new challenges

The credit system of the future poses new challenges

For decades, the vast majority of banks have followed a certain principle, for example when it came to granting a loan. However, it is now becoming increasingly clear that the age of digitization has also entered the area of ​​finance and that there will be significant changes in the area of ​​credit in the future. Banks and other lenders face major challenges here, as they sometimes have to change or even completely change their entire business model or business activity. But what will the future credit system look like in detail and what changes will result for banks and perhaps also for customers?

Changes in several areas are essential

Changes in several areas are essential

The increasing digitalization means that traditional lenders and banking institutions face major challenges. In addition, there are other developments that also lead to banks having to rethink the financing sector and adjust their business policies. Examples include general economic policy developments and demographic change. One of the main requirements is certainly that the financial products have to be tailored even more individually and more specifically to the respective customer, which is already the case with some banks. Different areas are affected by the development and the changes to be made, which can be summarized with the following keywords:

  1. loan processing
  2. individualization
  3. credit check
  4. decision-making

As can be seen from these catchphrases, it is above all the processing of a loan application with all associated work processes that will have to change significantly in the future in the financing area at some banks and have to adapt to modern times. But the product range will also have to be tailored even more individually to the individual customers and customer groups in the future. In the following, we would like to explain in more detail what the future credit system is likely to look like in these areas in a few years at the latest.

Trend in loan processing

Trend in loan processing

In many cases, both classic branch banks and direct banks have special loan processing that is carried out by experts. In the case of credit institutions with a branch network in particular, it was previously common for loan processing to consist of many forms and manual activities. This includes, for example, the clerk writing letters, filing contracts, and performing other operations that involve paper. Exactly these activities will look different in the future due to the advancing digitalization, which is synonymous with a considerable reduction in paperwork. Loan processing must definitely change and adapt to the new challenges. Of course, the increasingly paperless society does not stop processing in the area of ​​credit, so that more and more manual processes are automated and digitized.

One of the main reasons why more and more banks have to push this automation process for loan processing is the increasing cost pressure in the credit area. Here, modified work processes and automated administrations can bring about a significant reduction in the cost of loans. Another example is a more flexible time market software, which helps with the design of new financial products, for example. In addition, however, it is also necessary for banks to process information internally faster and more efficiently. This certainly includes, among other things, that, for example, a loan agreement is not processed by several clerks. This not only delays the schedule, but sometimes significantly increases the amount of work involved.

In summary, the following changes in particular will take place at many banks in the area of ​​loan processing in the coming years:

  • increasing automation of work processes and administration
  • Digitize and automate work processes to reduce costs
  • faster and more efficient processing of internal information
  • Use of various software offerings, for example time market software

Individualization is becoming increasingly important

Individualization is becoming increasingly important

Another characteristic that is already becoming increasingly important for banks in the area of ​​finance is individualization. This means less internal work steps, such as when processing loan applications, but essentially it is about tailoring offers and products very specifically to the numerous different customer requests. Some banks have already started to design very individual and special financing products and offer them on the market. For example, new types of credit are created that are tailored to specific customer groups or financing needs or that have special properties.

As can be seen from the list, more and more banks are not only offering the “global” installment loan or a real estate loan, but are also designing more specific types of credit that are geared towards customer groups or a specific purpose. For example, car loan is offered specifically for customers who want to finance the purchase of a new vehicle. Student loans and civil servant loans, on the other hand, are forms of loan that are aimed specifically at a specific customer group and their needs.

This individualization will have to increase significantly in the coming years, if only for the reason that the banks can continue to assert themselves in the area of ​​finance. This is also necessary because the customers themselves are becoming more and more enlightened and critical, so that it has become more difficult to win over the customers. In addition to very good service, favorable conditions and an offer that can be called up at any time, it is in particular the individualization that can make a major contribution to the bank being able to present an all-round good offer on the market.

Credit check via social media

Credit check via social media

For the bank, a very important part of the processing in the credit area is the applicant’s credit check. Regardless of whether you want to take out a loan in the bank branch or opt for an online loan, the loan is only granted on the condition that the lender has yours Creditworthiness considers sufficient. In addition to checking the creditworthiness, the credit check by the lender is therefore a central element of every loan processing. Usually, it is the following factors in particular that are used in such a credit check:

  1. Pivate credit checker information
  2. Applicant’s income
  3. collateral
  4. family situation

In addition to these criteria, there will also be other factors in the area of ​​creditworthiness checks in the future that will serve as a source of information for banks and can thus help to correctly assess the customer’s creditworthiness. Of course, it is again the Internet in this area, in particular the area of ​​social media, that will play a more important role in the credit check in the future. Some banks are already using the large amount of information that they can access about their customers, especially on social networks. What modern credit comparison portals have been doing for some time could also become increasingly common in the future in the banking sector: The credit check can be used through information from the area of ​​social media about the customer in order to be able to carry out an even faster and, above all, more effective credit check ,

However, some experts also see this development as a danger, because of course such information about the customer, which can be found, for example, on the leading social network Facebook, is by no means always neutral and objective information. Since loan officers are only human, there is a risk of being influenced positively or negatively by certain posts in the customer’s Facebook profile, although in principle they have nothing to do with the customer’s creditworthiness. Nevertheless, the development is likely to be unstoppable, because the banking system of the future will be increasingly influenced by the Internet and also by social networks.

Decision-making processes by credit institutions must become more efficient

Decision-making processes by credit institutions must become more efficient

Another essential component of what the future credit system could look like, in addition to loan processing, progressing individualization and changes in the area of ​​creditworthiness, are also the decision-making processes that are carried out by banks and lenders. The initial situation is that almost every consumer can now access cheap capital via the Internet. Even customer groups that were regularly rejected by banks ten years ago can get a loan on the World Wide Web, such as:

  • People with a negative Pivate credit checker entry
  • pensioner
  • trainee
  • housewives
  • low income

Even if applications from this group of people are still rejected by numerous banks, there is almost always at least one point of contact on the Internet where even customer groups with a medium to poor credit rating have the chance to take out a loan. If the banks do not want to lose these customers to special providers, they too have to rethink their decision-making processes or adapt them to the modern requirements of many customers. Among other things, this means that in principle the right financing products must be designed for every type of customer within a few minutes or minutes.

In future, there will in all likelihood no longer be a rigid, flat-rate installment loan that is subject to fixed terms and has little individuality. Instead, the decision-making process of the banks definitely means that either completely new products have to be created or existing ones have to be adapted so that they are much more flexible and can be customized much more quickly. For example, the 50-year-old father with a fixed income and positive Pivate credit checker must be able to find a loan just as quickly and effectively as the 25-year-old low-income earner without a family, who can only pay a low monthly rate.

Of course, these new challenges in the area of ​​decision-making also mean that banks have to work more effectively and flexibly here. In the future, it will hardly be enough for the customer if it has taken several days to process an application and the customer does not know when the application is made whether the loan actually fits his ideas and wishes. Therefore, it should ideally be recognizable to the customer in the future during the application process that the loan is tailored to his needs and that he has a good chance of getting the loan.

The banking system of the future: Many changes will be necessary

The banking system of the future: Many changes will be necessary

From the previous explanations, you could see that the credit system of the future is likely to be significantly different in some areas than in the past in some years. Customers are increasingly playing the pace here, because ultimately they determine how banks have to design their offers in order to remain competitive.

Therefore, the vast majority of credit institutions face major challenges, which will affect both loan processing and individualization in the loan area as well as the credit check, the decision-making process and several other areas. As a customer, you are likely to benefit from the changes and developments, especially since quite a few experts assume that the financing sector in particular will be a customer market in the coming years.

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