An increasing number of small business owners are teaming up with online lenders—companies that allow them to conduct the entire loan process, from applying for the loan to receiving the funds, online. Traditional financial institutions are also embracing tech start-ups, leveraging their innovative technology to improve the digital user experience for their customers.
Here’s why this trend has gained such momentum.
Convenience key to online lending’s growth
Small business owners have become increasingly comfortable banking online, in part because of the convenience, speed, and flexibility afforded by online channels. “Online lenders reduce hurdles in terms of applying for and receiving a loan. It is generally a faster, more streamlined process,” says Sean McDermott, senior analyst, Corporate Insight, a competitive intelligence research firm focused on financial services and technology. “You also have a new wave of younger small business owners, the millennial generation, who are more apt with technology and more used to and comfortable having a digital relationship with a firm,” he notes.
Why banks are embracing online lending collaborations
A growing number of banks are working with online lenders so they can better service their customers in the online channel. For example, Regions Bank recently announced a collaboration with Fundation Group, which allows the bank to leverage Fundation’s digital platform and makes it possible for Regions Bank small business customers and prospects to apply for a loan quickly and easily online.
Collaborating with a third party can be preferable to building new technology in-house. While banks have spent the last 100 years building their infrastructure and processes, a new technology company can create something from the ground up, without having to worry about integrating those advancements with legacy systems or educating their current customers. “In the financial industry, we have entered an era of collaborations, where incumbent firms are more comfortable working with third parties to address gaps in their services,” observes McDermott. “They recognize that with how fast technology is changing and how nimble some of these fintech startups are, it sometimes makes sense to look outside the box and enter a working relationship, rather than build something in-house.”
As banks continue to forge these relationships with tech experts to improve their online offerings, customers will reap the benefits—secure online products in a convenient and flexible environment, provided by financial institutions they know and trust.
