API: Significance to the Lending Ecosystem
On the demand and supply side, the lending ecosystem has been altered by technological advancements and the evolution of consumer requirements. The entire demand side of the lending ecosystem has shifted towards a sea change in the way consumers borrow money to buy large household appliances versus instant credit to buy day-to-day stuff. The whole thought process about acquiring finance is transforming. Now, access to finance or credit is not only limited to the bank’s branch but also at their fingertips using their smartphones. Processes need to constantly be sped up and enriched with more data so that ever-increasing customer expectations for instant, highly personalized services may be met.
Compounding the issue is the COVID-19 pandemic, where legacy and silo systems must urgently be digitally transformed. Customers now expect the financial service provider to offer contactless and seamless borrowing experiences. Ensuring that customers get a smooth and enhanced user experience is an area that the banks and financial institutions struggled to manage as they could not catch up with the fast pace of digitization happening in all areas of life. The lenders and financial service providers need to create a strong, robust, and seamless digital capability to give an improved customer experience at each stage of the transaction journey.
The dependency on manual processing and underwriting is the barrier to this digital transformation; the time used in paperwork can be quite well spent by the bank’s officer on business strategy and relationship building. With the increasing integration of ecosystems, APIs, or Application Programming Interfaces, play a highly significant role. By aggregating information from multiple sources, lenders will be able to get a holistic view of a customer’s financial status and further enrich their profile for making better and more accurate decisions. In addition, through the application of APIs, financial institutions will be in a position to provide innovative banking products and services, hence enabling a future full of innovation.
Different kinds of lending APIs?
Onboarding API
Onboarding API enables lenders and financial service providers to provide a smooth, quick, and omnichannel onboarding experience to customers. Traditionally, the entire process has been taking a long time, which was wrong and also of a large size. Lenders can now find information and time, the expected loan duration range, the amount of time, etc., in just a few minutes. Thus, this whole process is completed in a minute compared to old methods.
Credit Underwriting API
The underwriting APIs will provide the lender with relevant, accurate, and timely information for preparing ideal loans for the borrowers. It collects customer credit data from CIBIL and other major alternative sources and shares the same with the lender in an automated manner. Algorithms in the API program collect data from various sources and send it across the lender’s internal system to enable lenders to make the decisions they want.
Loan Fulfillment API
Use the loan processing API to issue loans to customers and store the credit account information for billing and processing purposes on the platform. Once the credit is approved, the credit agreement will be digitally created, published, and forwarded to the borrower and lender. The loan would be disbursed through debiting the lender’s account and crediting the borrower’s account.
Loan Collection API
Loan collection API is the service through which collection agencies can retrieve the latest details regarding borrowers for tracing and collecting EMI for a loan. These APIs have significantly supported financial institutions in utilizing their available resources to their full potential so that the debt recovery process may take place at all levels without leaving any sort of ambiguity regarding it. Integration with mobile and web platforms makes possible fast, paperless transaction processing and reduces risks.
What advantages do APIs bring to a lending company?
APIs allow banks and other financial institutions to be responsive in their operations based on changing customer needs and allow them to innovate with their efforts in digital banking. The features of an API explain why digital banking features such as mobile check deposits, bill pay, and transfers from one account to another occur. Some advantages of APIs for lenders include:
- The lender uses APIs to enable instant decisions regarding a loan application, retrieving data points from any third party, be it a government or a non-government agency.
- APIs don’t store data within them; hence, it is 100% secure and safe.
- The lenders and the financial institutions using APIs have the capability of having third-party vendors that fit their business vis-à-vis the options provided by the digital banking vendor.
- An open API allows financial institutions to connect with services that will improve the digital lending experience. The integrations may allow applications to pre-populate information from the borrower’s driver’s license or mobile phone and save considerable time.
- The advantage of using APIs is the workflow automation they provide. More automation brings benefits, such as reduced errors, lower staff hours and monetary costs, and smoother operations.
- APIs can be utilized to run applications efficiently and to send or gather other needed information, as appropriate for your reporting needs.
Jaguar Software India is fulfilling the digital needs of different financial institutions that are lending institutions to their customers. Jaguar Software India is providing a SaaS-based, cloud-first lending technology—Jaguar Software India—which leverages the power of cloud computing to streamline and digitize lending operations. Jaguar Software India is an API-driven technology solution that integrates and streamlines disparate systems, enabling lenders to source data from multiple sources. Jaguar Software India can integrate with origination systems, collection systems, data verification systems, etc., to form an intelligent digital lending solution.
