The financial world today is more dynamic than ever before and many analog banking structures are unable to meet the dictates of the rapid pace that the markets are now experiencing. The following is an area that is experiencing a major revolution: the issuance of instant loans.
Blockchain, already proven as a decentralised, secure and transparent technology, is well capable of reforming this process. Consumers could gain better accessibility to the credit instrument: additionally, through the cutting of intermediaries, minimizing paperwork, and offering faster transactions, blockchain might offer a smooth solution to the problem.
The decentralized approach
Blockchain is otherwise a distributed system; meaning that there is no intermediary like the bank in the management of the loans.
This has a disadvantage of minimizing the involvement of third parties which in one way may hasten the loan approvals/ disbursals.
Quicker Transactions
The main differences between the established methods for issuing loans and its perspectives include several phases like verification, credit checks, and manual procedures that might take days if not weeks.
Blockchain has enabled speedy transfers since the performance of most tasks is automated (for example, smart contracts) and paperwork is non-existent.
Openness and Safety
Such loans are secured and transparent since every transaction on the blockchain is captured on a public ledger and is accessible to both borrowers and lenders.
This is important in loan disbursals since fraud is easily eliminated with the help of the security features exclusive to the blockchain technology such as encryption and nature of data that cannot be altered.
Intelligent Contracts
It means smart contracts can be used in order to set predefined conditions for loan approval and its disbursal.
Where such requirements are developed (for instance, credit score check), the loan can be disbursed without any intervention by the processor or any other personnel, thus reducing the duration taken to process the loan.
Lower Expenses
This is the case whereby, since the use of the chain eliminates the need for go-betweens such as the banks or other financial institutions, a number of costs associated with the transactions will be cut out completely.
It also makes loans cheaper to consumers after cutting out intermediaries in the lending business.
Enhanced Credit Rating
It may also create opportunities for more diverse credit scoring systems, where one could tell how creditworthy a specific individual is based upon a range of factors.
This may help give loans to those people who might not have the formal score but are in any case good clients.
Worldwide Accessibility
Blockchain also provides an opportunity to instantly give loans to people without a bank account and even without a physical presence.
This could be very useful for people from developing nations that often do not have access to most basic bank services.
The technology is expected to go a long way in transforming the disbursement of instant loans in the current society. If implemented, because it is digital, decentralized, transparent, and secure, it could revolutionize how organizations provide loans, currently the process is tedious, expensive, and time-consuming.
However, there are definitely regulatory limitations to be discussed and the need to understand how to get blockchain into people’s lifestyles, yet it is apparent that it has the power to revolutionize the lending business.
SOLOMON CAPITAL PRIVATE LIMITED is a Non Banking Finance Company (NBFC) registered with the Reserve Bank of India (RBI). RUPEE112 is the brand name under which the company conducts its lending operations and specialize in meeting customer's instant financial needs.
