The digital lending industry is amorphous, shifting whenever confronted with technology and innovation. To stay ahead of the competition, companies must embrace these continuous changes. Sonar is at the forefront of digital lending technology. We understand emerging trends and implementing them in our platform. Below is a list of trends we believe will soon affect lenders in this space.
What Is Digital Lending?
Digital lending is the process of acquiring and providing loans through digital channels. The borrower can apply, get approved, and make payments entirely online. Unlike traditional lending, digital lending is paperless and highly streamlined. It opens doors for borrowers who don't meet banks' strict criteria because alternative credit measures such as rent payments can be considered.
Current Digital Lending Market Overview
The digital lending market is snowballing, with estimates placing its value at more than $700 billion before 2030. That represents a significant jump from 2023 when the market size was valued at $405.11 billion. Key players in the digital lending market include Funding Circle Limited, On Deck Capital Inc., and Sonar. Sonar is a trusted partner for mortgage brokers and lenders looking to enter this growing market. Our platform offers comprehensive digital lending solutions, from lead generation and automated milestone emails to workflow management.
2024 Digital Lending Trends
Here are 2024's digital lending trends:
Enhanced Automation and AI-Powered Underwriting
The rise of AI and automation ties into the need to reduce operational costs. Powerful AI tools can eliminate tedious work from your day and significantly speed up your processes. For instance, utilizing AI-powered underwriting algorithms leads to faster, error-free approvals and more satisfied customers.
Blockchain for Secure Transactions
Blockchain technology has the potential to transform how lenders operate. It enhances transparency by offering a simple and reliable way to verify transactions and identities. Smart contracts executed on the blockchain can handle tasks usually assigned to team members. These contracts are self-executing and tamper-proof, reducing the risk of fraud or errors.
Personalized Mortgage Products
What do your borrowers want? You don't have to rely on intuition. Data analytics lets you create personalized borrower profiles. You can then build custom loan packages based on the data. Some borrowers want low-interest rates; others care more about a low down payment. Properly segmenting your market gets customers what they need and drives conversions.
Mobile Mortgage Applications
In 2024, expect more lenders to offer mobile mortgage applications. Many borrowers find it far more convenient to submit mortgage applications and financial documents through their phones. They also want to be able to check their loan status no matter where they are.
Regulatory Compliance Technology
Regulatory compliance technology is mandatory if you want to guarantee ongoing compliance. Lenders realize they need more time to keep up with an ever-evolving swath of regulations. Compliance tools automate reporting and conduct regular audits for you, limiting the risk and penalties and giving you peace of mind.
Enhanced Borrower Experience with Virtual Reality (VR)
It's not always possible for homebuyers to visit the property as many times as needed. Some lenders utilize virtual reality (VR) to let borrowers "walk" through their potential homes when they're many miles away. This technology can help minimize buyer's remorse by giving them a more realistic view of the property they want.
Integration of E-Signatures and Digital Closing
No one has time for heavy paperwork anymore. E-signatures and digital closing solutions are quickly becoming standard. The advantages are obvious and numerous - no misplaced documents, faster mortgage closings, reduced paperwork, and fewer delays. By the end of 2024, lenders who still need a digital closing option will be at a severe disadvantage.
Lenders can now make more informed decisions with the wealth of data available through digital lending platforms. They can analyze trends and patterns to identify potential risks or opportunities. Decisions that were formally made using experience alone can now be assessed with the help of data analytics.
Green Mortgage Products
The sustainability movement isn't going anywhere and may start affecting the mortgage industry. Some lenders might offer incentives that make "green" properties more enticing. Lenders may also receive incentives for promoting these eco-friendly initiatives.
Enhanced Security Measures
Enhanced security measures go hand-in-hand with increased digitization. With the rise in cyber threats, lenders must prioritize advanced cybersecurity measures. Otherwise, they're leaving sensitive borrower data vulnerable. The necessary measures include multi-factor authentication, encryption, and regular security audits. As technology advances, so will the need for more robust security measures.
Emergence of Alternative Mortgage Lending Tools
As the digital mortgage lending market expands, a noticeable shift toward alternative tools has occurred. These tools address the needs of borrowers immersed in a digital landscape and highlight those whom traditional lenders would ignore. One of the key reasons for this shift is the increasing need for alternative credit measures, such as rental and utility payment history. This shift allows lenders to assess the creditworthiness of individuals who may not have a traditional credit score. Sonar is at the forefront of this trend with our innovative solutions. Our platform offers AI to evaluate borrower risk through various digital indicators. We also let lenders meet borrowers where they are, providing mobile-ready POS and CRM systems.
Key Digital Lending Takeaways
The growth in digital lending means lenders have more time to focus on improving relationships. With a purely digital loan framework, you don't have to worry about mountains of paperwork or trying to reconcile handwritten data. Processes that used to take hours can now be fully automated.
At Sonar, we see the value of cutting-edge technology. Let us be your partner in navigating the ever-changing landscape of digital lending. Those who don't adapt to new trends stop being competitive. Stay updated instead and embrace digital lending with Sonar. Ready to adopt the shift? Schedule a Sonar Demo Today!