This article was created in partnership with Sortter, a Finnish loan comparison service. It is based on an interview with Rolands Mesters, the CEO and Co-Founder of Nordigen, discussing lending and the future of the financial industry. The original interview can be found in Finnish on the Sortter blog.
Coronavirus divided the loan application process into two periods
The lending process can be divided into two time periods: before and after the coronavirus. It is clear that the Covid-19 pandemic rocked the foundations of all industries – including the financial sector.
“Digitalization started to increase even before the pandemic, but a lot of manual work was still needed. However, Covid-19 forced us to change the systems to quickly become more digital, all in a matter of weeks”, Mesters explains.
According to Mesters, it is very common for people to apply for a loan online. Consequently, banks must rely on automated processes and not only on manual procedures: the infrastructure follows trends and the way consumers want to use financial services. A good example of this is how the coronavirus forced lenders to digitise.
So what are the current trends in this field?
Mesters believes the demand has grown, mostly in the availability and speed of information: in other words, consumers want quick and easy access to information. Presented with plenty of loan provider options, consumers will very likely choose the most convenient one. Our guest mentions Buy Now, Pay Later operators, i.e. service providers that make it possible for the consumer to buy products in interest-free instalments yet gain access to their purchase instantly.
“Buy Now, Pay Later providers define themselves as a payment method option, and not so much as an institution offering credit. Such operators are aware of trends and what consumers are interested in”, Mesters summarises.
We live in a world where information can be accessed quickly – instantly, even. Consumers desire more convenient solutions, which partly forces operators to offer increasingly faster options.
As for the future, according to Mesters, it depends on two things: consumer trends and infrastructure. The approach is very market-led: if consumers want something and companies have the resources to offer it, they will do anything to be able to offer what’s best for consumers.
“We will no longer return to a less digitalised world”, says Mesters.
Companies keep up with innovative thinking
The future of the financial industry looks clear: in the next few years, we will be moving more in the direction where financial services are offered according to sales and need. In other words, we identify the need and offer a solution for the problem. In addition, Mesters is looking forward to what will happen in the area of so-called Embedded Banking:
“The term is overused, but it simply means that the service is available whenever it is needed”, says Mesters.
Today, there are already plenty of different applications available for budgeting, financial management, and cash flow or financing planning for companies. Different applications are convenient because they are available precisely whenever they are needed.
In addition, today's consumers want speed and dexterity from their services. Therefore, process automation has become more common. So why do banks want to automate their processes? The answer is simple: manual data entry is really expensive.
“The amount of data is not decreasing – it is constantly increasing, and people's resources are limited. However, we have the opportunity to create useful algorithms, and it makes more sense for things to be automated when the number of people is not enough”, summarises Mesters.
Even though the average consumer today is looking for automated processes and turns to FinTech, banks still have something that new players do not necessarily have: trust. According to Mesters, customer satisfaction is of the utmost importance, because it allows us to know we are going in the right direction.
However, it is clear that the “good old days” no longer apply in today's business world. So what is required of banks to keep up with developments?
The most important thing is to internalise the so-called innovator's mindset: you have to be able to follow trends and have the courage to renew operating methods. In addition, he also mentions the concept of innovator's dilemma:
“Your company may have good, committed customers that you want to serve. However, these customers do not need digital services at the moment, and by serving them, you miss an ongoing trend, which in turn is a threat to the company. Five years from now, these customers will need the digital services that you don't have, and will then go elsewhere”, Mesters warns.
Mesters believes that the game is over if the company does not invest in digital channels. If you can't serve a small but fast-growing industry, you’re losing future growth opportunities. That is why he urges those who want to thrive in the long run to invest above all in innovation and look to the future:
“Try to understand who you want to serve in the future and start serving them today.”