Rogneda Kniazhina

Technical Writer

Technical writer with a natural ability to craft content that’s real and relatable. Rogneda has a passion for translating complex ideas into simple language and a keen eye for detail.

Business

5 min

Lending as a Service as the Future of Fintech

As you know, one of the key directions of fintech today is to make traditional banking products and services more client-oriented and end-user-friendly. Where a lot of bureaucratic actions are usually required, digital finance should offer an innovative, convenient and simple solution. One of these can be a LaaS solution or lending as a service. As an experienced fintech software development company, we decided to explore this concept to find out the main benefits and influence of LaaS on the further growth of the fintech industry. What is Lending as a Service? To answer what is lending as a service, we will have to ask another question. Have you ever used buy now pay later services? If so, then you already know the basic principle of LaaS, which is actually the extension of any credit or loan that takes place outside the traditional banking system. The idea of such lending is not new and was actively used in auto loans as part of indirect lending services connecting buyers and dealers through software. Traditional financial institutions usually require lots of different papers and proofs to loan money for something even small, which became a true curse when they shifted to digital banking. However, lending as a service became a timely solution to many problems that arose on their way to success, as it allows to offer lending products and services to customers through Application Programming Interfaces (APIs) and cloud-based platforms. So, LaaS is now part of a fast-growing trend of embedded finance, which also includes BaaS (banking as a service) and CaaS (cards as a service). It is mostly used for small business lending or e-commerce because it provides a plug-and-play approach to lending. Now, companies can focus on their core business, getting access to the benefits of a full-featured lending system without the need to develop it. Top Benefits of LaaS It's no secret that the financial services sector undergoes changes very slowly, despite the rapid development of technologies and their already-understood advantages, finance is very slow to adapt to new ways and methods of providing services. Nevertheless, LaaS has already managed to prove its efficiency and benefits for financial institutions, which was reflected in the rapid growth of LaaS market. Cost-efficiency As mentioned earlier, LaaS eliminates the need for building lending infrastructure, which can be costly and resource-intensive, hence enabling institutions to substantially reduce operational expenses. So you can have all the benefits of a large structured lending system without building one from scratch. Speed and Scalability LaaS allows financial services providers to speed up the lending process itself. They can quickly offer loan or credit product to a customer without wasting time and resources. Moreover, they get the flexibility necessary to respond to market demands or seasonal fluctuations in credit activity. Risk Management LaaS offers advanced risk assessment tools and data analytics necessary to make data-driven decisions on many key lending issues. Thanks to this, financial service providers will be able to reduce the risk of default and improve the overall quality of their loan portfolios, hence, take higher positions in the lending sector. Market Expansion LaaS allows financial institutions to expand their market. Partnering with robust LaaS providers, they can reach new customer segments and geographies without the need for physical branches, creating lending options all over the globe. Innovation What could be better than to get a competitive advantage and not spend the annual budget on it? LaaS promotes innovation in the lending sector since financial institutions can benefit from the latest technologies and lending practices, bypassing long years of research and months of development of unique services or custom vs off-the-shelf software, betting on the convenience, speed and simplicity of LaaS lending solutions. However, If you’d like to know more about custom development and how it usually works, read our article ‘What is the project discovery phase.’