Why lending players are so crucial, especially during current times?
As the COVID-19 pandemic wreaked havoc on global economies and caused widespread disruption, lending players have emerged as beacons of stability. As the current events unfold, unprecedented changes are being brought into our daily routines, the localized infrastructure and national economies.
Though several industries proved to be highly vulnerable to the resulting economic downturn, financial lenders have come to play a crucial role in helping communities tide over the current turmoil and prepare for a stronger comeback.
Financial lenders, both private and public, can help in stabilizing the economy, ensure continuous commerce, keep start-ups and small businesses afloat and provide the much-needed financial support for people struggling to make ends meet.
Role of Lenders During Financial Crises
Lending players serve as leaders in dynamic and uncertain times such as the ongoing one, creating a strong future not just for themselves but for communities as a whole.
Here are the important functions that lenders are playing in current times of distress:
1. Increase Effectiveness Under New Work Environment
Financial institutions, such as banks, are helping companies invest more in collaboration and tech tools to supplement the work-from-home mode of working for their employees. With the Covid-19 pandemic disrupting the way we work and live, private and public lenders are also considering upgrading their collaboration tools. As technology streamlines processes, lenders can better serve borrowers. For instance, introducing digital tools account holders can help with scheduling appointments with a loan officer of a financial institution, along with a platform that the loan officer could use for hosting virtual meetings, thus making the entire process run seamlessly.
2. Enable Strong Communication to Build Trust
Communication is key, and lenders are reaching out to customers or members with important updates about their accounts, digital banking and payment options, and safety and security measures will help build trust. In the case of financial institutions, when rapid developments lead them to cut down on branch hours, move to drive-through options and temporarily close down branches, these updates need to be timely communicated to the public.
By sending real-time alerts, critical updates can be sent out through emails, text messages, or even mobile push notifications. By using multiple methods for communicating about digital options, lending institutions are enabling people to manage their financial tasks at home itself.
3. Empower Presence-less Lending
In the past few years, banks and fintech have been largely focusing on digital and this will grow further, enabling presence-less lending with people owning a digital identity that they will be able to use for borrowing loans. As in-person visits are minimized, a lender’s digital presence would truly be the face of their organization.
With digital capabilities, the lives of account holders have become easier, especially during the current crisis. Person-to-person payments, for instance, are helping account holders make payments to their friends and family without having to visit them in person. New features that drive more digital engagement are being added which are creating lasting effects in use and leading to the adoption of low-cost digital channels.
4. Being Available for the Public
Lenders, both private and public, are helping offset the anticipated economic repercussions of the global pandemic through continuous lending to businesses and individual consumers, which in turn helps to spur significant economic activity and extends support to those who need it.
For example, several financial institutions have deferred payments and interest rates on credit cards and loans, waived off late fees, extended credit limits and the payment deadlines, as well as lowered minimum payments. Some private lenders have pledged not to report missed payments to the credit bureaus and suspended home foreclosures and suspended auto repossessions. Simultaneously, a lot is being done to accommodate the rising volume of online banking activity without compromising on frictionless self-service.
5. Protect Against Fraud
When data is shared between banking channels and across financial bodies, fraudulent activities can easily be tracked. With real-time alerts, account holders can monitor attempts at phishing and other fraudulent activities online. FinTech institutions have set up safeguards in place which help to protect assets from cybercriminals looking to make profits by stealing sensitive data or the probability of public lending institutions shutting down.
Multiple-layered cybersecurity with 24×7 monitoring, detection, management and response is vital for protecting the whole IT infrastructure.
6. Overcoming Impact of Regulatory Requirements
In the aftermath of the economic crisis, banks and fintech institutions have been resorting to asset sales, downsizing of less essential businesses, rationalization of product portfolios, and various other such measures to overcome the effects of the tight regulatory framework. This way the public lenders, especially, have improved their operational efficiency and reduced their bad assets, so that they can lend loans to those in need. Banks have gone a step ahead and closed unprofitable branches as well.
While there are hardships along the way, this crisis has become a turning point for the lending industry. With the adoption of digital processes, lenders have come to play the role of rescuers in times of economic desolation such as the current one. Today’s economic scenario has elements that are reminiscent of the global financial meltdown of 2008, including fears of negative interest rates and lack of economic stimulus packages.
However, during that recession, lenders were criticised for contributing to the crisis. But now they have an opportunity to bring about financial stability and security for the times to come.
The author, Amit Narula, is Co-Founder and Director at Money In Minutes. The views expressed are personal