PYMNTS Intelligence: Partnering to Power Growth With Instant Loan Disbursements

Instant disbursements adoption set records in 2022 and is anticipated to continue increasing in the near term.

The only disbursements that consumers were significantly less likely to receive instantly last year were those in the borrowing category, including personal loan payouts and debt consolidation loans. Nearly half of all consumers wish to receive disbursements instantly, and two-thirds of customers who tap FinTechs as their financial institutions (FIs) would be very or extremely willing to pay extra specifically for instant loan disbursements. For consumers, there is a clear demand for faster lending options and not enough supply.

Even more compelling is the case for instant loan disbursements for small- to medium-sized businesses (SMBs). Small businesses have high expectations for a fast and seamless lending experience, and a growing majority are voting with their feet to bank with FinTechs when legacy banks cannot meet their needs. Evidently, the lending space is ripe for an instant disbursements transformation.

Lending’s Digital Transformation Slow to Take Off

Lending poses unique challenges for instant disbursements due to long-time perceptions about security. While consumers prefer to open most new financial accounts digitally — including personal banking, savings and credit card accounts — they still prefer to initiate personal loans, auto loans and mortgage accounts at branch offices or by phone.

In part, this is because consumers continue to see physical branches as the most secure FI channels for such high-value transactions, with 68% of customers rating branch offices first in providing security, while only 35% view web portals as secure. The lack of wide availability of digital tools to support loan applications, however, may itself reinforce this perception. With demand increasing for faster loans, the opportunity is strong for digital innovation to build more trust in the lending space and drive greater customer satisfaction and loyalty.

Modern Systems Allow Fast Onboarding

Against the backdrop of traditional lending, FinTech lenders have made significant strides toward more streamlined digital lending processes that allow consumers to apply for loans simply and securely from their mobile devices. Consumers want faster loan applications and disbursements, but they prioritize security above customer experience. In an era rife with cybersecurity threats, applying for loans and transmitting personal documents through email and unencrypted web forms will not meet their expectations. A state-of-the-art loan origination system integrates features that streamline the process, enabling a frictionless and secure experience for both borrowers and lenders.

Partnering With FinTechs Can Enable Innovation

Increasingly, top banks are partnering with FinTechs to bring this innovative approach to their lending to better win and retain customers. Automation with enhanced data and analytics not only improves speed and accuracy in credit scoring and lending decisions but also provides banks with rich, real-time data for personalizing offerings to fit individual customers’ needs.

Banks must ultimately generate new revenue, and lending is an essential core of banks’ profitability. Bringing the lending space fully into the digital revolution with instant disbursements could prove an important — and overdue — driver of banks’ growth in both the near and the long term.