Benefits of Using Financial Technology for Building Credit
by Arnab Dey Finance Published on: 10 November 2023 Last Updated on: 24 September 2024
Financial technology solutions are changing how we manage our financial transactions and investments. From online banking to personal finance management tools, these applications are streamlining processes and making the process simpler.
In addition, they’re reducing operational costs and opening up new avenues for accessing credit. Read on to learn more about the benefits of FinTech for consumers and businesses alike:
Streamlined Financial Processes
FinTechs like Current use technology to simplify and streamline finance processes. They can help businesses automate key finance workflows to make them more productive.
Some examples of financial technology include payment processing apps, crowdfunding platforms, e-wallets, and more. Many of these applications are based on blockchain, which allows for digital transactions that are secure and transparent.
FinTechs also can make it easier to access loans by streamlining the loan process for borrowers. They can verify a borrower’s identity and authenticate account balances in real-time. These tools are helping borrowers find more consumer-friendly loan options and avoid predatory lending. They also give consumers access to investment tools like robo-advising and stock trading.
Reduced Operational Costs
Financial technology platforms can provide customers with a full suite of financial services at a fraction of the cost. The platforms can automate many processes and reduce manual labor costs. This allows them to pass the savings on to their customers.
E-payments also help to reduce operational costs by eliminating the need for paper transactions. This also helps to increase security as there is less risk of physical theft and hacking. Additionally, real-time money tracking improves transparency.
Robo and non-contact human advisors are seeing growing patronage as millennials seek to invest their finances while cutting out intermediaries. This fintech innovation is even affecting employee benefits, as it makes it easier for employees to unlock paychecks early, pay for their healthcare expenses through buy-now-pay-later solutions, and refinance their student loans through programs.
Access to Loans
Using FinTech tools is one of the best ways to build credit. Rather than filling your wallet with plastic, consider alternatives like secured credit cards or becoming an authorized user on someone else’s account. These options help establish your credit and can make it easier to secure a mortgage or auto loan in the future.
Fintech platforms are transforming the lending component of financial services firms by offering fast and automated underwriting programs that can make credit decisions in seconds. These digital companies also allow you to borrow from a wider pool of lenders without needing an in-person bank visit.
For people with no or limited credit histories, credit-builder loans may be a way to accomplish two goals simultaneously: Boosting their credit scores and building savings buffers. These loans typically report to one or more major credit bureaus, allowing your on-time payments to build your score over time.
Convenience
Financial services can be complicated, and keeping up with your finances often requires much time and effort. FinTech platforms simplify these processes by integrating them into the technology you already use.
For example, companies allow you to access snapshots of your banking activity and credit ratings through mobile apps without requiring you to log into your bank’s website. This makes it easy for you to keep track of your spending, monthly payments, and expenses.
Fintech platforms also allow lenders to offer loans to more consumers than before. This includes freelancers, students, and low-income households needing a better credit history. Personalized finance solutions like pay-over-time options are also available for these consumers.
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