Technology is currently transforming the U.S. lending industry, according to two of America’s leading business research firms. Thanks to these advancements, borrowers are now getting the best experience when they are applying for loans.

More Efficient Service

According to a McKinsey report, digital technology is making substantial improvements in borrowers credit journey. Technology cuts down the credit process to less than a day. On average, traditional banks and financial companies need three to five weeks to decide on a loan application. Also, the same borrower needs to wait for nearly three months to receive the money.

Now, with the help of sophisticated tools, digital lenders can accurately determine a person’s creditworthiness in just minutes. Also, it will take borrowers less than a day to receive the money. What’s more, borrowers do not even have to leave their homes as the transaction is entirely done on the internet using their laptops or smartphones.

Banks Should Embrace Digitalization

In another report by Gartner, traditional banks’ refusal to embrace digital lending may lead them to extinction. The business research firm predicted that by 2030, only a fraction (20%) of traditional financial firms would survive the disruption.

Banks know that they should adapt to the developments in the lending industry. In a 2018 survey, large banks are open to change their practices. Currently, only half of the giant banks (more than $1 billion in assets) and 38% of the small banks (less than $1 billion in assets use digital tools for loans. Many of the respondents say they want to partner with other companies for receiving and processing digital loans.

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Fintech Powers the Disruption

Meanwhile, a new set of companies, such as peer-to-peer lenders is currently challenging the credit dominance of big banks and traditional lenders. Fintech companies like PayPal and Square have just reported a significant rise in their small business lending business. Amazon also offers the same service to merchants through Amazon Lending. These tech companies have some edge over traditional banks and lenders. For one, they use data for quick and accurate transactions. And since they only operate online, they have fewer business costs, giving them the power to reduce loan interests.

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