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Why do lenders operate online?

It wasn’t that long ago that an application for credit or even for a standard current account had to be made in person at a branch. While this may seem time consuming now, most people wouldn’t have thought twice about going to the bank for their usual banking services and transactions. In fact, it was quite common to have at least one bank in every village and small town across the UK, with several branches in bigger towns and cities. These days, you’re considered lucky if you have a local branch within a ten minute drive.

So much has changed with the development of technology, it might be difficult to appreciate just how much easier digitalisation has made everyday tasks. For the older generations, it hasn’t come without its difficulties and accessibility limitations. But for many young people, applying for a credit card in a branch now seems ludicrous.

How does online lending benefit consumers and lenders?

Technology advances very quickly with almost every nation in the world striving towards the digital age with the belief it will make things smoother, faster and cheaper. While it’s easy to think that complex technology is reserved for rocket engineers and computer scientists, the reality is that we benefit from the growth of technology in our everyday lives. From electric vehicles to sophisticated doorbells, improvements in tech and tech-assisted products are everywhere. It’s no surprise therefore that the banking and financial services industry is also making use of the consistent advancements to enable a smoother journey for customers from the first point of contact.

Using an online platform has several benefits for consumers and lenders, including:

Ease of Access

By operating online, credit products are no longer restricted by location or opening hours, meaning a customer can apply for credit anywhere, at any time. Even if the lender’s office is based in London, someone from Glasgow could submit an application. Most people are therefore able to find instant cash loans or credit products that suit them, rather than having to choose from a limited range based on where they live. If lenders only accepted applications through a branch, this wouldn’t be convenient for consumers and would reduce the market available to the lender. It also means that people who find travel difficult or who work long shifts, which means missing branch opening hours, have the same opportunities as everyone else.

Speed of application

Another benefit to using digital services is how quickly applications can be processed – even on weekends or overnight. Most lenders use automated algorithms to assess affordability and creditworthiness so that they can review an application any time of the day. This means customers receive their loan or credit decision almost instantly and funds can be transferred the same day if the application is approved. In a society that thrives on instant gratification, having quick application processes and decisions is virtually vital, especially if you need money fast. The quick turnaround benefits consumers and is a competitive advantage for lenders.

Account Management

By providing a service online, consumers can easily access their account and any information related to their credit card, overdraft, payday loan, etc. Instead of having to visit a branch or call the lender directly, simple queries like “what is the balance” and “when is the next payment due” can be answered quickly online. Many lenders also enable several account management options online so minimal contact with your creditor is required. This results in reduced correspondence for the consumer, but also means response times for more in-depth queries are much quicker.

For example, at Polar Credit, you can withdraw from your credit line, make payments, access your statements, update your personal information, and view your transactional history online without getting in touch with our customer service team. If you do need to contact us however, you will usually receive a response with a couple of hours, with a maximum wait time of 24 hours for most queries.

Environmental Benefits

Online lending isn’t something that you might immediately associate with being an environmentally conscious effort but with less travel, paperwork, and waste in general, it is better for the environment. Although you still use energy to power a computer or charge a mobile, this is much less energy than you would use driving to a store, and it produces far fewer carbon emissions. Although paper is a recyclable material, deforestation is still happening at an alarming rate so the less paper we use the better for the trees. Sustainable borrowing is something we should all be conscious of, even if banking and financial services are not the biggest contributors to global warming.

Obviously, there are additional benefits for lenders operating solely online or having a branch-online split. Lenders can save costs by reducing the number of properties they need to provide their service and by (usually) having fewer staff because store assistants aren’t required, and many small queries can be resolved online without staff-to-customer interaction. However, the online service lenders provide is still driven by consumer preference and lenders work hard to ensure a good service is delivered at all times.

For banking, it’s not always possible to have an online only presence because many people still prefer to conduct their banking admin in person. But many lenders, from credit card companies to payday loan lenders to credit line providers, are able to offer a comprehensive online service which is accessible, intuitive and simple for consumers. Lenders wouldn’t operate online if it didn’t benefit their customers.

More Information

What is sustainable credit?

Credit Card Alternatives

Polar Credit: A new way to borrow

For more helpful information about how to manage your money, different financial products or what we do at Polar Credit, take a look at our Info Hub.