In the last 10 years, the lending industry has evolved and transformed tremendously. New types of businesses have come up and marketplace lenders like online loan lender has entered the lending market which has created tough competition in a field earlier dominated by traditional lenders like banks and credit unions.
The reason behind this change is rapidly growing technology and digitization. Also, the consequence which the world witnessed after the 2008 financial crisis brought a massive change in the lending industry. The credit crunch that came up after the financial crisis gave opportunities to new lending avenues that could provide new credit choices to borrowers who were forced to look for a different source of credit at that time.
In the last decades, the expectation of customers has grown in line with the development in technology and, while customers cherish the multiple choices of financial help available for them which were not available before, they also expect fast service and better customer service experience. The abundance of mobile technology has put more focus on speediness, with customers expecting lesser and easier credit journeys that can be finished within minutes from their Smartphone and other electronic devices like laptops, computers, tablets, etc.
Despite this, the ability of lenders to release funds quickly remains a major hurdle. For example, in the case of POS lending, lenders might be able to release the fund but the borrowers’ journey is often time taking and complicated. Borrowers may need to fill multiple forms that require processing before the credit is sanctioned and released. It can take days for the amount to appear in the customer’s bank account before they can use it.
How Virtual Card Works?
With the introduction of a virtual card which can be accessed via mobile or any other device, lenders can attract new customers very fast than before. The omnipresence of mobile phones is enabling lenders to offer a virtual card with the sanctioned amount which can be added to a virtual wallet quickly. Overall it means that the consumers can visit a retailer, choose the goods which they want, and apply for the loan which can be approved instantly that will allow them to purchase the goods in a minute rather than days. In this case, the retailer would have no idea from where the customer has obtained financing and the customer would not be issued any physical card which they may need or want.
This entire process contributes to the fast and easy access of funds to a customer and the important thing here is that it can take place within a minute. This type of lending enhances the end-user experience many folds, it also has many advantages for lenders themselves.
Benefits of Virtual Card for Lenders
One of the most significant advantages is access to data. Earlier the process of lending was such that the amount was getting credited directly into borrower’s bank account and lenders have no idea where their money is getting used. Without this information, lenders were unable to gather correct information regarding their customers. Also, lenders were unaware of the spending habit of borrowers. But with the help of a virtual card, lenders can get all these details easily.
By offering borrowers with a virtual card, lenders can have access to all valuable information about the spending habit of their customers; including how and where the customer is spending money.
With this information, lenders can get a complete insight into customer’s behavior and create more accurate risk profiles which will enable them to make a wise decision about providing loans again to the same borrower and giving additional credit and loans in the future.
In conclusion, we can say that when a virtual card is beneficial for both lenders and borrowers. It can help in improving the credit journey for the customers for any type of loans such as business loans, short term loans, etc and retain business for lenders in a market that is very competitive. A virtual card has the potential to make the credit market better and helps lenders to adjust according to the market’s needs and grow to stay in the lending market.