Over the last 15 years, our old ways of arranging vacations and buying almost anything were radically changed by websites like Expedia, Amazon, and eBay and the technological advances that powered them. When these sites were new, they disrupted their industries by connecting consumers directly with producers, bypassing the middlemen and causing turmoil. But as we got used to this new way of doing things, our habits permanently shifted away from old paradigms to new ones. This type of paradigm-shifting, disruptive technology continues to be developed, and it has its eyes on the financial sector next. Financial technology (fintech) has already begun to change the way consumers manage finances, and as the technology develops, banks find themselves competing with smaller, more nimble competitors who can offer services and speed that banks cannot. For example, fintech is streamlining and simplifying the borrowing process. When you apply for a loan, you need to supply your bank statement data so lenders can do an affordability check. In the past, this was a manual process – you either downloaded a statement from your bank and uploaded it into the system – or you asked your bank to email or fax the statement to your potential lenders. Fintech companies are streamlining this process, offering banks seamless, simple, and secure access to users’ data. Ultimately, such technology can make banking and lending services slicker, faster, and more efficient. But even as traditional banks make slow transitions to new technologies, those same technologies are disrupting the financial industry. Using this technology, marketplace lenders are causing waves in the industry in the same way Amazon and Expedia did, by connecting the producers (in this case, lenders) with consumers directly and eliminating the middleman. Smaller lending companies can be more nimble, offering consumers and businesses access to mobile technologies and personalized services that banks cannot. For example, lending companies such as Moula leverage Yodlee® Interactive Aggregation API to access a prospective borrower’s business cash flow data. Without this integration, the application based on cash flow analysis would involve manual intervention. By leveraging Yodlee Interactive Aggregation REST API, they can verify bank transaction data more quickly and make more efficient lending decisions. So while traditional banks, slowed by regulation and the tenets of an aging model, begin the long process of integrating new financial technologies and addressing consumers’ digital-age expectations, the financial market is open to more agile players with fewer constraints that can offer consumer services and speed that their banks cannot. What are your thoughts on the disruption of financial services, especially marketplace lending? To learn more about how Yodlee Interactive APIs power innovative financial apps, visit our developer portal.
