The total value of loans in India increased by 11.5% in December ’24 compared to the same period in the previous year. Additionally, the loan growth rate in India remained steady at around 11.8% between 2012 and 2024, highlighting the increasing demand for credit within the Indian economy.
Despite these positive trends, around 30-35% of microfinance loan applications and many home loans are rejected due to factors including tighter RBI guidelines, poor credit scores, outdated loan approval processes, etc.
While loan rejections can impact a borrower’s financial plans, slow and inaccurate loan approvals reflect poorly on lenders, affecting their reputation and credibility and eventually resulting in poor customer experiences and lost opportunities.
This article examines how bank statement analysers backed by cutting-edge technology and data analytics can help lenders streamline their loan approval processes and minimise rejection rates.
What is a Bank Statement Analyser?
A bank statement analyser is a software that evaluates relevant data from bank statements to empower lenders to identify trends, evaluate the borrower’s creditworthiness, and make informed and accurate decisions.
These tools are powered by advanced technologies, including artificial intelligence (AI) and data analytics, allowing lenders to analyse vast amounts of data within seconds. Bank statement analysers also highlight key cash flow patterns and flag discrepancies, such as irregular or suspicious transactions and lack of funds.
Lenders can automate mundane and time-consuming loan approval processes to expedite loan approvals and eliminate human errors.
How Bank Statement Analysers Streamline Loan Approvals
The financial landscape has evolved rapidly over the past decade, driven by technological advancements and the entry of a host of non-banking financial companies (NBFCs) and Fintech firms. Hence, bank statement analysers are a necessity for lenders to stay ahead of the curve and improve customer experiences.
Let’s look at some convincing points on how bank statement analysers can improve a lender’s approval rates.
1. Faster Underwriting
Lenders, including financial institutions and NBFCs, conduct thorough background checks to assess a borrower’s creditworthiness via underwriting. Underwriting is a standard process adopted by lenders to offer loans at a calculated risk in exchange for a premium.
A bank statement analyser enables lenders to understand the source of income, borrower’s assets, and whether they can repay the loan according to the defined timeline.
In short, these tools aid in swift and accurate risk assessment, paving the way for efficient, accurate, and scalable underwriting.
2. Early Detection of Red Flags and Anomalies
It is an uphill task for humans to go through large volumes of data in a limited time and detect red flags accurately. Bank statement analysers help lenders overcome this problem by identifying potential red flags, including negative account balances, high and inconsistent account withdrawals and deposits, and bounced checks.
They eliminate the need for manual verification by automating the entire process, keeping tabs on the borrower’s income-expense patterns and offering personalised output. This includes insights into a borrower’s financial health, such as account balances, expenses, and recurring income.
3. Fraud Detection
Bank statement analysers are powered by cutting-edge technology, such as AI and machine learning algorithms, that can seamlessly detect suspicious and fraudulent activities, such as unusual spending and income patterns and forged or tampered bank statements.
This allows underwriters and every stakeholder in the loan approval process to prevent financial losses caused by manipulated financial data. Bank statement analysis tools are also equipped to verify a borrower’s identity, ensuring unauthorised access and accurate identity identification.
4. Faster Documentation
Loan approvals can take a couple of weeks or even a few months, depending on the type of loan, loan amount, and documentation. For instance, a reputed and credible lender will process a housing loan within 1-2 weeks in India.
However, in reality, loan approvals can take longer. These delays can be attributed to the documentation verification process wherein the borrower must submit several documents, including income statements, property papers, identification, etc.
Bank statement analysers are equipped to scan digital bank statements swiftly thanks to the Optical Character Recognition (OCR) technology that automates this process. These tools extract key data such as transaction dates, descriptions, and amounts using OCR and other technologies.
Key Technologies That Feature in Bank Statement Analysers
Optical Character Recognition
OCR automates the process of scanning and extracting key data from digital bank statements, including images, physical documents, PDFs and physical documents, accelerating documentation verification.
Artificial Intelligence (AI)
AI-powered algorithms detect patterns and anomalies to get insights into the borrower’s financial behaviour, improving decision-making during the lending process.
Machine Learning (ML)
Machine learning enables bank statement analysis tools to leverage past data to detect trends and discrepancies. Additionally, it also empowers lenders to tackle unconventional challenges and adapt to evolving regulatory changes and markets.
Natural Language Processing (NLP)
Natural language processing (NLP) segregates transactions based on their descriptions in bank statements, uncovering precious insights from unstructured data.
Data Analytics
As the name suggests, data analytics analyses vast amounts of financial data, such as income, expenditures, and cash flow, to aid lenders in evaluating borrowers’ creditworthiness.
Final Words
Bank statement analysers are a must-have tool for lenders in today’s fast-paced and dynamic financial ecosystem. Apart from streamlining the different aspects of the lending process, these bank statement analysers save significant overhead costs and pave the way for better borrower experiences.
Lenders must prioritise improving their loan approval processes by simplifying the different steps and outlining the dos and don’ts borrowers must keep in mind while applying for credit.
Precisa’s bank statement analyser empowers lenders to minimise their processing time and improve productivity by analysing bank statements in seconds. It supports documents in over 1000 formats and classifies each transaction based on its type, amount, and description.
Sign up for a free demo today!
Mumbai