Are you prepared for a loan revolution?

Every economy's lifeblood is credit, and it's an important part of everyone's financial journey through life. Technology is rapidly changing our lives, and credit is only at the start of its transformation. While credit has traditionally been assessed based on our spending history, technological advances are allowing credit to be reengineered and assessed to match the digital age, where our actions might present a more accurate picture of our future behavior than our past actions.

The Fair Isaac Corporation Score, which established the bar for American borrowers and helped create the groundwork for credit analysis abroad, was the final big advance in credit scoring in the late 1980s. Credit history, credit composition (types of loans you may have, such as mortgages, store accounts, cards, and so on), payback history, and new applications are the four aspects that make up this credit rating system. The focus has been on leveraging previous credit to predict future behavior.

But what if you don't have any previous credit or data? What if a person's credit history contains blips that were beyond their control, such as the many uncontrollable events during the pandemic?

New Technology for a New Age

Fintech solutions take center stage. They're about to change the way credit is scored and loans are distributed. These companies have a competitive edge in the credit arena over traditional players like banks and credit bureaus since they were born digitally native. Rather than continuing to rely on historical collateral, we are now seeing data being quickly analyzed. Anyone can get a credit score and construct a credit history using new tech-enabled ways. Fintech's capacity to build our personal data footprints for our own gain will shift.

One size does not fit all in this case. Contextualizing a borrower's creditworthiness is crucial, as is understanding about their life in order to predict their behavior patterns.

There are already companies that calculate the credit score of a customer by analyzing psychological tests in the form of quizzes that aim to gauge character, as well as education modules that help the consumer become credit literate and lead to credit behavior. This serves as the foundation for their first loan. Transaction history may then be used to assist character validation over time.

If correct scoring can be demonstrated, credit availability might increase enormously by addressing the first step of the ladder: the essential initial loan.

The Scope

In the developing world, where many people stay outside of the official banking system, this option to secure the important initial loan through fair methods represents a great potential.

By making this information available to both credit providers and consumers, a transparent relationship can be formed to develop credit in a practical and ethical manner. Banks may now profit from diversification into a new asset class that first-time borrowers have developed. Banks that invest in this asset class will likely be rewarded with loyal consumers who will increase their spending year after year.

The Change

The way we analyze and offer credit solutions is being transformed by digitalisation in ways that have never been seen before. Fintech companies will stimulate innovation in banking channels, products, and models as a result of these systems. Customers will flock to those that perceive this as an opportunity rather than a threat.

This banking sector makes the ideal ground for technology to make a difference in the financial services sector as well as for citizens.?