Technological advancements have changed the face of the credit system in our world. It has become very easy to acquire a loan right from your mobile phone which is a great improvement on the rigorous process associated with conventional banking. To borrow money from a conventional bank, you have to undergo a very long and arduous process that may end up with your loan request being rejected.
Conventional banks examine your credit history and demand proof of income. After that, they will ask you to supply lots of information after which a credit analyst will be assigned to examine your files just to find out if you are able to repay the requested loan. The analyst will determine your ability to pay back the loan based on the information you provided in your response to the innumerable queries and all other information the bank asked you to provide which may include physical copies of bank statements. At the end of his analysis, the credit analyst will pass a recommendation to the head of credit based on his findings. The head of credit will work with the analyst’s recommendations to produce a term sheet that will state the amount and terms of the loan.
After the loan application has been approved by the bank, it is forwarded to a credit administrator whose job is to ensure that the loan gets to the customer who made the request. At the end of this long arduous process, a lawyer comes in to ensure that the covenants attached to the loan are executed, after the lawyer’s job is done, a credit monitor will come in to hold you to the terms of the loan, ensuring the regular payment of agreed amounts and interests. In case you fail to repay your loan, the banks always have a remedial officer waiting in the wings to enforce the repayment of the loan.
The process is a long and unsustainable one. It costs you more than just your time as the cost of processing is added to the final credit pricing. Is there a better alternative to this long and arduous process? The answer lies in ‘Open Banking’.
The idea behind open banking is hinged on the creation of systems and data that are mobile-based and allows third party users to easily plug-in and utilize the database. This increases the financial institution’s financial capabilities. To reduce the length of the loan process, a financial institution can outsource its credit scoring to third-party engines using Application Programming Interface (API) integration, it permits the institution to make automatic appraisals and credit scoring. The automation of appraisals and credit scoring improves the speed tremendously.
To achieve the above, institutions need to improve their systems and data to make it mobile and interoperable so that they can be accessed by third parties. Weza.io are already utilizing such systems at this time. Financial institutions can use Weza.io’splatform to validate credit scores. In this scenario, Weza.io acts like a secondary reference point. Weza.io could provide white-labelling for institutions. White-labelling comes with full end-to-end systems, back-end loan systems, and a dashboard to help monitor performance. End-to-end systems come as an app package while the back-end loan system offers a credit scoring engine and the built-in fraud mitigation algorithms.
Fraud has grown to a near pandemic level especially with regards to small loans. Fraudsters who understand the tech scene very well can easily clone one’s identity and register using another mobile SIM Card or phone line. With that new mobile SIM Card that bears your identity, they can go ahead to carry out fraudulent activities. Beyond committing petty frauds with the SIM Card bearing your identity, these individuals can apply for mobile loans which they do not intend to repay thereby exposing you to several risks. They may close off the doors to legitimate loans for you because of their fraudulent activities. The aspect of such fraudulent activities that continues to befuddle most people is that it is end-to-end which means that the fraudsters often have a mole helping them in the company.
In the face of this menace, certain platforms have been able to install powerful mechanisms with the aim of obviating the fear and likelihood of fraudulent activities.
Weza.io is one of these platforms. They embed algorithms that can detect and alleviate the effects of fraud thereby cutting down on identity and data theft. Weza.io’s platforms check data points to scrutinize authenticity. To bring an end to internal fraud often orchestrated by company employees, Weza.io has automated the lending decision process and the final disbursement of funds. Since it is automated, human involvement has been reduced to the barest minimum. Open banking is the future and Weza.io is leading the charge.