How Lending as a Service (LaaS) is Revolutionizing the Fintech

With the never-ending evolution of digital technologies we can see in the last years, businesses can discover more opportunities and options to make a profit, reduce the cost of their operations, and attract/retain customers than ever before. Specifically, this thesis can be applied to the financial industry, one of the leading areas of which is lending.

For example, the independent source Global Data claims that the global digital lending services market will grow at a CAGR of 22.1% until 2030. At the same time, one of the most effective ways of providing such services is by using the Lending as a Service format. Below, we will explain what it is, how such solutions work, what their advantages are, and what impact they can have on the financial sector in the future.

What Is Lending as a Service (LaaS)?

In a nutshell, Lending as a Service is the delegation of all operations related to providing loans to its customers to a third-party provider.

The convenience of SaaS lending technology is obvious even at first glance: instead of independently learning how to manage risks and generally studying how the financial sector and related legislation work, businesses get the opportunity to remain focused on their key operations while expanding their range of services and making them more convenient and accessible to consumers. This approach also reduces the costs associated with the implementation of financial lending services without reducing their effectiveness.

How Lending as a Service Works

From a practical point of view, LaaS is usually presented in the form of cloud solutions that can be adapted to the individual needs of a particular business. Their functionality is available in real time, which means that businesses that have chosen this format of cooperation do not experience any inconveniences associated with delays and downtime.

At the same time, such solutions take on much more than just issuing loans according to the rules and restrictions pre-established by a particular company – they allow these companies to fully automate credit lending services and even speed them up compared to how it could be if they did it personally. 

Benefits of Lending as a Service

So, let's formalize the advantages of fintech lending solutions for businesses.

• Less time and overhead expenses. Companies that do not have the opportunity to pay attention to the implementation of lending can significantly benefit from outsourcing loan management. They will also not be forced to deal with tasks related to maintaining their credit platforms since all this will be the responsibility of their suppliers.
• More information about customers. Any average Lending as a Service platform provides businesses with analytical data about their consumers, which can give them valuable insights into their income level, preferences, and other characteristics important for attracting and retaining them. In this way, businesses can significantly boost their efficiency.
• Fewer risks associated with unreliable customers. Typically, the implementation of a lending service is accompanied by the development and deployment of internal Know-Your-Customer (KYC) policies, which may require businesses to become more familiar with how the lending industry works in general and what laws and rules govern it. Conversely, by entrusting all this to a third-party provider, businesses can gain time to solve more pressing problems.
• Wider coverage of the target audience. The rapid implementation of lending services, which LaaS platforms can provide, allows companies to enter new markets and do this much earlier than their competitors. Thus, they gain an increased competitive advantage without the need for a radical modernization of their internal digital infrastructures.
• Accelerated access to advanced IT achievements in the financial sector. Sometimes such a fintech innovation becomes a starting point for more serious updates in the IT infrastructure of a particular business. Indeed, by regularly interacting with LaaS solutions, companies learn more about new digital technologies and the possibilities of their application in a specific business niche, which, in the long term, can give them new ideas for automation and increase the efficiency of their other business operations.

Impact of LaaS on the Financial Industry

It is worth noting that LaaS has an impact not only on individual businesses that have decided to implement such solutions but also on the financial industry as a whole.

Since they actually connect financial institutions (banks), fintech companies, businesses engaged in sale of services/products, and consumers themselves, this interaction chain opens up colossal potential for benefit for each of its links. Indeed: banks get even more clients, companies involved in the development of fintech startups get useful knowledge that allows them to implement standard-compliant solutions, businesses get increased efficiency and adaptability, and consumers themselves get the opportunity to purchase previously unavailable goods and services.

In the long term, all this can lead to the obsolescence of traditional lending models and the opening of new opportunities for cooperation between all the above-described participants in the lending procedure.

Conclusion

If you are considering the digitalization of financial operations in your business and are looking for a reliable service provider providing fintech development services, feel free to contact us. We will create a custom digital banking solution adapted to the standards and generally accepted regulations of your business niche to ensure your company’s sustainability for many years to come.