How Blockchain is Revolutionizing the Lending Industry
One question loan customers should be asking is this: “What are my loan servicers going to provide for me other than a loan?” Common belief suggests that loan providers are not obligated to give their customers options, but what is increasingly being brought to the loan provider’s attention is that to remain competitive in their field they need to do more for their customers. Unfortunately, there are so many obstacles to overcome if they want to do this. Between growing issues in the security sector and ease of access – not to mention client information – the most basic issues loan servicers are running into when it comes to providing additional product choices for customers is this: Until recently, there has not been a dedicated platform that could make all these changes happen.
But when blockchain technology was introduced over a decade ago, it began to revolutionize the ways lending and finances in general could take place. With rapid technological advancements becoming even more fast-paced over the coming years, it is likely that these platforms will only become more conducive to the loan buyer’s experience in the future.
Decentralized Loan Application & Repayment Process
A concept gaining traction in many current finance and loan markets is thei decentralization of their current processes using blockchain solutions and DLT (distributed ledger technodlogy). In general, this refers to all relevant data being stored and accessible from more than one place. As the many destructive data breaches that have taken place over the past two years have proven, the potential harm of having sensitive data all in one place can be devastating. Not only is this data stored in various areas it is encrypted into virtually unreadable blocks that would take hundreds of years to slightly start to encrypt. Decentralizing the loan process is beneficial to both banks and customers for the same reason – it provides greater security. When information is stored in blocks and all the transactions on those blocks are accounted for, it means that there is less chance that vast amounts of customer information will be comprised. This saves and maintains a company’s reputation. Upgrading to blockchain platforms shows that companies are not just interested in making a profit from customers, but also in keeping customer information safe for the long haul.
Reduced Cost of Operation
Blockchain platforms are complex, but such intricacy makes life easier for businesses. One of the ways they provide better services is by allowing for reduced rates of operation. Blockchain provides increased security, which ultimately reduces the need for enhanced cybersecurity and customer service operators. Additionally, it allows companies to save greatly on the platforms through which they do business – as they often revolve around multiple currencies being serviced for multiple countries usually causing confusion and tons of added resources. Companies no longer need to rely on third party applications to service customers worldwide. With blockchain platform technology, it is possible to provide services like multi-national currency support and 24/7 payment periods.
Ease of access is not the only accessibility function blockchain performs. Customer compliance is also important in blockchain transformation. The customer is arguably the most important part of any loan business, and compliance is part of what sets aside good lenders from great ones. While the merits of upholding customer privacy have already been discussed, Know Your Customer (or KYC) practices are important to financial businesses for more reasons than this. They help track and keep illegal monetary transactions from occurring on a large scale. Even though legacy services sometimes allow illegal activities to slip through the cracks, Blockchain’s transaction process holds users accountable for their actions, which simultaneously helps companies crack down on illegal processes more quickly. Money laundering and fraud may be harder forms of transaction in the world of lending, they are not out of the ordinary, and if they are too quickly overlooked, they can lead to greater financial and legal repercussions.
Blockchain technology is complex and unlike any other development currently on the market. Because of that, it is the best choice for lending services. Digital platform transformation takes time, regardless of the process. However, the shift from other digital platforms to a blockchain infrastructure is turning lending into the most secure and easily completed financial processes in the world.