Regardless of status, access to credit is a crucial part of financial growth and inclusion. Sadly, however, it's those who need such facilities most that lack access to them.
If you’re struggling to get credit or the terms you receive are unfavorable, you’re not alone. According to a World Bank report, approximately 1.7 billion adults across the globe are unbanked. Closer home, over one-third of American adults are underbanked or unbanked.
In fairness, one of the primary reasons the level of financial inclusion is still wanting is the traditional banking system's limitations. But now, with the rise of Fintech and crypto banking solutions, things are changing.
Projections indicate that mobile transactions will grow by 121% in 2022. As a result, they'll now comprise 88% of all banking transactions. With such solutions to traditional banks gaining momentum, banks are increasingly worried about losing a significant chunk of their business to standalone Fintech solutions in the coming years.
Why Are Users Turning to Fintech?
For centuries, banks have been the sole custodian of financial services. However, technological advancements facilitating the development of technology-based financial services have changed this. Now, banks are facing arguably the biggest disruption that threatens the nature of traditional banking.
The first layer to this disruption is simplifying access to credit and increasing financial inclusion. With traditional banks, accessing credit is a complex process with many hoops that lockout most people. These include:
- High credit score requirements
- The need for security
- The need for guarantors
On the other hand, Fintech solutions are different. With access to a mobile device, users can borrow. So long as you do not have a history of defaulting on loans, you can access credit. Such loans are often short-term, and the amount accessible increases with a good repayment record.
But, it's not just the unbanked and underbanked that are embracing Fintech. Another element that's making Fintech lending popular is the simplicity and disbursement speed. Instead of waiting for approval which takes days with banks, one can apply and receive funds within minutes with Fintech.
Moreover, Fintech solutions make it possible to borrow small amounts that are otherwise not available with traditional banking.
As such, Fintech is challenging banks by addressing consumer needs. These include:
- Easy access to credit
- Fast approval and disbursement
- Approving small amounts
- Providing short duration loans
Top Trends in Fintech and Crypto Business Solutions.
Along with Fintech, another trend that’s been growing is crypto banking. By offering an alternative to fiat currencies, crypto lending also aids in increasing financial inclusion. Some of the trends in these sectors include:
1. Rise of Blockchain in Lending
Blockchain technology is a key enabler of Fintech services as it facilitates fast and secure financial transactions. Due to its decentralized approach to finance, blockchain helps reduce risks and increases data security.
This is why it’s believed to be the technology with the largest disruptive effect on banking. As its adoption rate suggests, this is not a far-fetched assertion. Projections indicate that blockchain revenues will rise to $20 billion by 2024, up from $315 million in 2015.
In the same vein, expect the continued uptick in crypto lending to continue. This is propelled by the increasing number of crypto traders and lending platforms such as Connect Financial.
2. Open Banking
Traditionally, banks have been very secretive with their financial data. However, the open banking initiative, which aims to see banks share data with Fintech, is gaining popularity. To achieve this, an application programming interface (API) is used to connect the banks' database with a website or app.
But why would banks agree to share data with rivals?
Well, the answer is simple; to remain competitive. This is because consumers' have an increased desire for convenience and flexibility. As a result, the number of open banking users is expected to grow at an average yearly rate of 50% till 2024. With a changing landscape, banks are now exploring ideas outside the traditional centralized model.
3. Rise of Digital-Only Banks
With the traditional banking structure, serving consumers and increasing market share involves opening branches near them. However, digital banking solutions reduce the need for this. This is because one can now open an account and transact using an app or website.
Also, the convenience that digital banking offers is appealing to consumers. Data shows that 80% of people now prefer banking online than visiting physical branches. With this, there’s also a notable rise of institutions that now solely rely on digital platforms to offer banking services.
Take Control of Your Credit.
As mentioned, access to credit is essential in any economy. It’s what allows people to set up businesses and grow them. In addition, access to credit can help you during emergencies. As such, it’s vital to take control of your credit.
The first thing you should know about this is that it’s much easier to do this today. Digital solutions are redefining financing solutions and services. By offering easily accessible, flexible, and fast financing, Fintech solutions have become the ideal solution for most.
With this, banks are now playing catch up in a market where they've enjoyed near-monopolistic control for centuries. Therefore, if you want to have more control of your credit, take the following steps:
1. Maximize Your Credit Ability
Even if you do not use it, access to credit is vital. If you can't access bank loans, Fintech solutions are a great alternative.
You can use them to finance projects and increase your credit score by making consistent timely payments and keeping a low balance. As your credit score improves, you’ll also find that you’ll be in a better position to access credit from banks.
2. Consider Alternative Assets Such as Crypto
Understandably, when it comes to accessing credit, you'll likely only think about fiat currency. However, with the rise of digital currencies, it's not just about dollars and pounds anymore.
As with stocks, you can buy and hold cryptocurrencies to capitalize on their increase in value. But beyond this, you can use crypto holdings as security to access loans.
Capitalize on Digital Solutions to Access Credit.
Applying for credit has traditionally been a cumbersome process. This is primarily because relationships between banks and consumers have been one-sided; the banks dictate the terms, and you do your best to meet them. Failure to do so leaves you without access to credit.
But that’s not the case anymore. Digital lending solutions make it significantly easier to access credit. Moreover, they offer flexible terms making the process more convenient for you. Do you want to access credit while still investing? Connect Financial is a platform that offers cryptocurrency-backed loans. As your cryptos gain value, you can take out a credit card for reliable financing. They are gearing up to launch their credit cards in the next few weeks, sign up today to access credit using your crypto investments.