The Digital Transformation and Benefits of Online Lending


Traditional lending is generally a long and drawn-out process, as most borrowers can relate to. Completing all required documentation and going through approval processes within a financial institution could take weeks or even months. The stringent requirements often leave out small borrowers who don’t have collateral, a good credit score, or the income stream required by these large institutions. As a result, they often ended up going to loan sharks who are not licensed or registered, putting them at risk of predatory interest rates and even harassment.


From Traditional to Digital Lending

Digitalization, or the use of digital technologies to change a business model, has spawned a whole new wave of lending options in recent times. With the exponential growth of financial activities in the digital space, many financial transactions that used to require a visit to a financial institution and submission of pages of documentation are now being conducted over the internet. 

Potential borrowers were able to browse the websites of different financial institutions, compare their rates, and fill in an application form from the comfort of their homes. As the popularity of apps arose, Silicon Valley, and online technology companies in other countries, began developing lending apps that further added to the convenience of a loan application.



Online lending brings several benefits for an individual needing emergency funding or an entrepreneur seeking finance for business expansion.

Increased financial inclusion

While there are still many underbanked and unbanked individuals, the growth of mobile use has allowed these people to go online, download lending apps, and apply for credit. 

Faster processing time

A Federal Reserve Bank survey conducted in 2019 found that 46% of respondents found the waiting period for their credit application too long while only 12% of those who used online lending platforms complained. 

It is not only the application process that is sped up, but also the payment of loan proceeds. In traditional lending, a loan check could go through several signatories before it can be released to the bank account of the borrower. Then the check has to be cleared before the borrower could get the money. With online lending, the loan can be approved as soon as 24 hours and the borrower’s bank account is immediately credited.

Easier comparison across lending companies

With many lending companies accessible through their websites and/or apps, it is so much easier for borrowers to compare interest rates and other information such as fees, penalties, and documentation required. Quick loans that do not require collateral have much higher interest rates than secured loans so comparing across different companies can get one the best terms.

Greater chance of loan approval

There are now licensed and registered online lending companies that cater to the borrowing sector that often has no collateral and poor credit scores. Traditional lending would likely reject these people. However, they have a greater chance of getting a personal loan when applying with an online lending company. It’s important to check that the lending company is duly registered, but there is now an opportunity for this sector to readily borrow online.

As new technologies expand what can be done online, it is also expected that online lending platforms will likewise grow. If we are to go by the current trends and as we see a digital transformation happening in many companies, there is more to look forward to with online lending platforms.



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