Digitalization and adoption of advanced technologies in microfinance organizations are on the rise. Credible research shows that micro-finance institutions (MFIs) entering the FinTech terrain tend to offer low-cost financing for their clients, reduce operating costs, reach more unbanked populations, and make their services more socially oriented. Transitioning to digital solutions is not a whim but a necessity to remain competitive in this market and meet increasing customer demands.
According to my research, payday advance software is one of the most recent and groundbreaking solutions in the booming microfinance market. It is also one of the hottest lending trends that makes online lending more efficient. The payday loans market was valued at approximately $33.5 billion in 2022 and is projected to reach USD 42.6 billion by 2030, so solutions like advanced loan software are becoming an increasingly popular way of winning a significant market share.
In this article, I guide you through the intricacies of payday loan software that revolutionizes the relationships between borrowers and lenders. First, I explain how the payday loan software works and what advantages it brings to businesses. Then, I jot down the steps of implementing this solution in your company. Finally, I provide my expert opinion on how the ABLE Platform™ can be used in microfinance. So, if you are wondering how to start a lending business, find more information below.
Table of Contents
How Does Payday Loan Software Work?
The term refers to an application that automates classic loan-related tasks (see Figure below). These may include the following:
- Calculation of loan amount;
- Calculation of interest rate;
- Online loan application;
- Credit risk assessment;
- Verification and automated approval;
- Automated repayment.
In other words, this software helps automate the entire lifecycle of the loan process, making it more organized and comprehensive. Unlike cash advance software that helps fund businesses, payday loan software targets individual clients. Some apps allow automating specific components, depending on the company’s needs and unique operation characteristics.
All online payday lending software works similarly, with minor variations. These are the specific steps that customers go through as they use microfinance loan management software:
- Register and upload documents (e.g., passport, bank details, etc.)
- Calculate the loan limit based on the specific customer characteristics
- Link the bank account to the app for further lending and repayment
- Apply for a loan, specifying the sum and the deadline for repayment
Repayment is performed automatically on the next payday, so the customers don’t have to worry about keeping the deadline dates in mind.
Payday lending apps also have an automated interest rate calculator, which calculates the amount the client will need to repay at a specified date. This function increases the transparency of the lending process. As a result, clients perceive it as more reliable and credible.
Many useful admin features simplify the work of the MFIs’ employees. These include but are not limited to the following:
- Access control – allows regulating access to the network based on the employee’s position.
- Transaction history – allows collecting, organizing, and securely storing data for audit.
- Document storage – helps keep all clients’ data in one place, which facilitates document management and prevents security breaches.
Payday loan businesses developing their apps from scratch can add customizable features to meet their specific needs. They may help create their own rules of the game and make sure operations are compliant with regulations for a specific location.
Advantages of Payday Loan Software for Businesses
Authoritative reports and industry-leading specialists confirm the utility of user-friendly payday loan solutions. They possess numerous advantages you should not miss out on if you are building a lending business.
Convenience for Customers
Self-service functions allow users to access loan information anytime and anywhere. They don’t have to wait in the office to understand whether they are eligible for a loan or get information on the interest rates. By helping build a positive and personalized relationship between borrowers and lenders, the apps increase the customer trust and popularity of payday loans, especially in contrast to credit cards.
According to the study published in 2021, perceived convenience of use and perceived quality of services are directly linked to customer satisfaction. Simply speaking, payday loan software makes customers happier, and happy customers will likely return for more.
Scalability
Running a financial services business is not a piece of cake. Many tedious, bureaucratic, management-related tasks drive attention away from strategic planning. Payday loan apps help decrease this burden by automating many tasks. As a result, human resources can be allocated to projects helping the business grow. Besides, automation allows serving more customers, which is a sure path to development.
Efficiency
Data collection is the most time-consuming part of lending for both clients and service providers. A lot of paperwork must be completed before the loan application is approved. Therefore, paperless processes enabled by advanced software are always welcomed in this sphere.
Moreover, payday advance software offers advanced algorithms and assessment tools that enable instant decisions on loan applications. These solutions are driven by the idea that lending cannot be based on a one-size-fits-all approach. They allow treating each loan independently without spending too much time on each client. By decreasing the processing and waiting time, these apps make operations more efficient, allowing companies to provide services to many applicants simultaneously.
Security
Based on my experience in the FinTech field and personal interaction with financial organizations, I can confidently claim that security can make or break it. No matter how appealing the interest rates are, or how user-friendly the website is, they mean nothing without strong security and data protection. Research confirms that security plays an important role in reducing the problems/deficiencies of electronic banking services. Payday loan software is a good example of how enhanced security can become a game-changer.
Payday advanced apps protect clients’ sensitive information from unauthorized access and cyber-attacks. They are also designed in line with existing regulations, which increases customer trust. For organizations themselves, this security decreases the risk of legal complications and penalties.
Debt Collection
The key to success for a payday loan business is to collect all debts timely and fully. With state-of-the-art software, employees don’t have to track all debts manually. The system automatically collects debts at a specified payday, saving the company a lot of trouble.
Analytics and Reporting
Transition to digital lending also opens up new opportunities for business analytics. Payday loan software can collect vital data on loan performance and customer behavior, informing evidence-based business decisions. Up-to-date and comprehensive reporting helps monitor employee performance, assess portfolio quality, and track the lending operations’ overall progress.
Cost-Effectiveness
Loan software introduction requires an initial investment but is cost-effective in the long run. By automating processes and reducing the burden on human resources, the software can decrease operational costs and ensure a significant return on investment. Given the competitive financial industry, these advantages cannot be ignored.
As you can see, payday lending software is a win-win for MFIs and customers. Don’t let the complexity of these technological solutions fool you. They can be easily integrated into your business regardless of the size of the company, the lending model, or the available IT infrastructure.
How to Implement Payday Loan Software Step-by-Step
Since you may be unable to obtain reliable, first-hand information on how to implement loan software, I’ve tapped experts in this industry to help you make an informed decision. So, here are the steps for digital loan migration you need to take to make the most of this FinTech innovation.
Step 1. Comprehensive Market Analysis
Market analysis is an inseparable part of any business undertaking, whether a new company launch or a new product development. Efficient loan software implementation also rests on learning the market and finding a niche. So, it is important to analyze the following aspects:
- Customer demand;
- Existing technical/management problems;
- Competitors’ services.
Moreover, it is crucial to examine the local digital culture to understand whether the customers are ready and willing to use the software. Make sure that the existing laws and regulations allow for using the payday loan software and learn what restrictions (if any) they may impose on financial organizations using this software.
Step 2. Choosing the Right Payday Loan Software
This stage is by far the most important one because the quality of the software will have a tremendous effect on all business operations. Study the available options carefully, comparing their pros and cons. Then, contact software developers for more details to check their customer services, which are a good indicator of quality and reliability. No haste is needed at this stage, so take your time and make a weighted decision. Look for the following characteristics:
- Suitability to specific business needs;
- Functionality;
- Price;
- Positive reviews;
- Agility of the solution (how flexible and customizable it is);
- Expertise and experience of the vendor (e.g., check the portfolio).
Step 3. Discovery Phase
During this stage, the client shares all necessary information about the company to help the software vendor come up with a relevant solution. Clients are also invited to clearly state their requirements and expectations. Together, they establish a clear plan/roadmap of the project and set deadlines.
Step 4. Implementation
Solutions for digital lending are often customizable. It means you can choose what features and functions to implement based on your business needs and customer demand. Customization is also a great way of standing out, especially if you incorporate unusual, innovative features that others don’t have.
During the implementation stage, the payday loan software is also seamlessly integrated with industry-leading third-party services (e.g., AML screening systems, KYC providers, local credit bureaus, etc.).
Step 5. Testing and Quality Assurance
When most of the work is done, it’s time to test how well the system operates. This stage is needed to ensure that the product corresponds to the requirements before it is launched. It also helps detect and eliminate software errors and flaws.
Step 6. Software Deployment
During this stage, the software development company prepares the product for use. The following steps are usually made:
- Setting up network access;
- Preparing the infrastructure;
- Setting up user accounts;
- Deploying the latest tested version to production.
Now, the software is ready to be used in practice. Although it’s tempting to believe that all errors were addressed in the previous stage, there will likely be much work on this stage as well. Prepare for honest customer feedback and make sure to use it for continual service improvement.
Step 7: Warranty Maintenance and Support
The software development company also makes sure that the product runs smoothly during the first weeks/months after deployment, providing the client with expert advice and technical support if needed. The goal is to help the client master the use of the software and eliminate workflow disruptions and errors.
What Else to Consider When Implementing Payday Loan Management Systems
To make your implementation as easy as can be, I did my research, tested a range of software products, and spoke to the experts. So, here are the factors to consider when incorporating this advanced solution.
- Security measures to prevent cyber threats and security breaches;
- Regularly reviewing user feedback and suggestions for enhancements;
- Performance metrics to assess software effectiveness;
- Offering self-service options and 24/7 accessibility;
- Streamlining application processes and reducing approval times.
Best practices from other companies may also be useful. Consult reliable sources and use the proven methods of payday loan software implementation from leading companies. Prioritize independently verified information and avoid relying on promotional materials because they tend to diminish the challenges commonly associated with new technology adoption.
Key Feature of Payday Loan Software to Look Into
As with any FinTech solution, you want to look for a high-quality one. A good rule of thumb is that the more features it has, the easier it will be to adjust it to your business needs. So, I recommend paying attention to the following features:
- Customization without code – allows adjusting the software’s features without requiring much work or advanced IT services.
- Integrated customer relationship management system – helps maintain contact with clients and increases client satisfaction through optimization of services.
- User-friendly interface in both website and mobile versions– helps customers make sense of the services and utilize them more effectively.
- Possibility of process automation – reduces the workload and speeds up the process.
- Centralized access – allows the company to get access to client data (e.g., through cloud-based solutions) and facilitates database management.
- Scalability – enables further growth as the company enters new markets, targets new customers, or introduces new services.
How Can ABLE Help?
Choosing payday loan software can be overwhelming, given the number of seemingly similar products available on the market. If you’ve looked through dozens of software vendors and still have doubts about what product meets your needs, please check the ABLE Platform™. Below is a list of features that may encourage you to consider this solution:
- Ready to launch in a few months (less than four weeks for the out-of-the-box solution);
- Contains a data protection system;
- Boasts customizable features adjustable to any business’s needs;
- Simplifies integration with third parties (e.g., credit bureaus).
Moreover, this payday loan automation software can propel your business growth by:
- Improving customer onboarding;
- Streamlining back-office operations;
- Increasing transparency;
- Growing your portfolio.
The software increases productivity by 700% compared to manual work and spends two seconds on each loan application. The best thing is that this remarkable operational speed does not come at a cost because the software allows for thorough application tracking and carefully evaluates each potential client to remove risks.
If you want to treat your clients, they will definitely enjoy the following appealing features provided by the ABLE Platform™:
- User-friendly design;
- Speed;
- Multichannel communication through chat-bots, emails, and IVR calls.
ABLE Platform Success Story – x10 Faster Loan Approval
User testimonials and success stories further illustrate the immense potential of this microfinance loan solution. For example, the ABLE Platform™ updated the lending process for a European microfinance lender, making borrower evaluation ten times faster and facilitating decision-making. With the help of the software, the company was able to increase the conversion rate by 30%. Currently, it approves loans within less than a minute, delivering high-quality and efficient services.
This proven track record leaves no doubt whether you need the ABLE Platform™. It highlights the importance of automation in microfinance, vividly demonstrating how easily businesses can grow with the proper technology at hand. With software like the ABLE Platform™, companies working in this sphere can gain a competitive advantage while saving vital resources.
Conclusion
Today’s loan companies need efficient automation to provide fast and high-quality services. They are competing for clients and seeking ways to improve customer satisfaction, so payday loan software is a must-have for supporting their operations.
AI-powered and cloud-based software currently available on the market helps microfinance companies pursue continual improvement while minimizing the burden of bureaucracy on human resources. Products like ABLE Platform™ are designed to make the microfinance business more transparent and efficient. So, it’s time to discover how they can revolutionize your business.
FAQ
What are the benefits of using payday loan software for my lending business?
Payday loan software automates loan-related tasks and enables instant decisions on loan applications. This sophisticated solution decreases the time spent on every client without sacrificing the security and reliability of services. By simplifying and speeding up the loan application process, it helps increase customer satisfaction and make loan services more transparent.
What are the key steps involved in implementing payday loan software?
Payday loan software implementation consists of seven key steps:
- Conducting market analysis
- Choosing the right payday loan software
- Ensuring data security and privacy
- Customizing the software to business needs
- Introducing the software
- Testing
- Deploying software
How can I choose the right payday loan software for my business?
Look for software with high scalability that allows for flexible customization without code. Top-notch solutions also offer an integrated customer relationship management system, a user-friendly interface, and centralized access for enhanced data management. Features like AI integration are also important and may be harnessed to optimize the services even more.
How long does it typically take to implement payday loan software?
It typically takes two months to deploy payday loan software. However, there’s always a faster and more efficient alternative. Some solutions, such as ABLE, can be implemented in less than four weeks.
Why choose ABLE as your payday loan software provider?
ABLE is a highly scalable software ready to launch in less than four weeks. It boasts customizable features adjustable to any business’s needs and simplifies integration with third parties for seamless business growth. It can help increase the conversion rate by 30% and make borrower evaluation ten times faster, making it a win-win for your business and customers.
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