FinTech is the delivery of innovative financial products and services through the application of technology, which makes financial systems more efficient. Over the last decade, advances in technology have had a dramatic effect on the Financial Services industry, the participants and services offerings. Technology and its application across financial services, often referred to as FinTech, is continuing to drive change across the industry.
Traditional financial services businesses are faced with new challenges as emerging innovative ideas change how businesses and individuals facilitate their financial transactions.
The Digital Disruption of the traditional lending industry is well underway since the inception of Marketplace and non-bank lending.
Non-traditional lenders have leveraged technology and big data to bring investors and borrowers together and to dramatically reduce the inefficiencies in obtaining a loan and optimizing risk. Some of the key drivers are Simplicity, Transparency, Analytics/Risk and Marketing.
By 2025, it is predicted that more that $1T in loans would be originated by such lenders. This covers a spectrum of MCA, POS, Student, SME, Real Estate and Consumer finance.
Sigma’s offerings via the LendFoundry platform lays the foundation to eliminate traditional retail banks and credit card companies from the transaction by provisioning real-time borrower quality scoring mechanisms towards make good decisions.
LendFoundry has through the years developed a microservices based architecture to “accelerate” scaling and deployment of various components for the full-lending stack. This stack of software, along with the business, compliance, investor management, underwriting, onboarding and risk-based consulting expertise has been a solid offering to enable number of successful lenders to be in the forefront of this disruptive marketplace.
The complete lifecycle of a loan is managed from marketing to servicing and renewal. The Loan Origination System (LOS) tracks the loan from origination to funding. The Loan Management System (LMS) tracks the loan funding, servicing and beyond.
Loan Origination System (LOS)
- Loan Application – Applied via Online Portal, POS, Mobile, Broker, API’s and Fraud and initial credit assessment is performed
- Processing – Based on custom rules the automated underwriting of the loan is performed based on credit reports pulled from various credit bureaus and the bank statements pulled from customer bank
- Credit Decision –The funding amount is decided upon and the risk is priced based on custom defined risk models
- Funding – Post approval, the Business Loan Agreement is generated based on the loan terms and data. The documents can be signed – physically or digitally. The final decision of funding happens upon checking the whole summary of the loan application and paperwork
Loan Management System (LMS)
- Onboarding – The approved loans from LOS are transmitted and made available in the LMS
- Money Movement – This involves funding of the loan amount to the customer account via a Bank. The setting up of repayment schedule and generation of he Automated Clearing House (ACH) instructions. Alternate channels of payments and handling of exceptional conditions are performed
- Accounting and Amortization – The amortization of the loan, interest and fees is done in this module and also, relevant G/L entries are created for posting in the accounting software using GL Connectors
- Collection – This is the process for handling of loans with overdue payments including offering Short or Long Term Considerations
- Termination – The completion of loan under various scenarios
- Renewal – A loan may be renewed based on certain conditions