The Indian digital lending industry grew at an impressive CAGR of around 132% driven by emerging and convenient digital models, government initiatives, and evolving customer behaviours.
With the number of smartphone users expected to surpass 1.55 billion by the end of 2040 in India, the volume of digital lending is also tipped to witness exponential growth in the upcoming years, emphasising the need for accurate and timely bank statement analysis.
The Indian lending market is increasingly competitive, with traditional lenders facing competition from NBFCs and Fintechs. To maintain an edge, lenders must leverage advanced tools like bank statement analysers to improve decision-making and streamline operations.
This article explores how bank statement analysis can enhance loan application processes and mitigate risk.
What is a Bank Statement Analysis?
Bank statement analysis is a process that helps lenders make informed lending decisions by extracting useful data from a borrower’s bank statements including cash inflow and outflow, credit card payments, withdrawals, and overdraft payments in a stipulated time frame.
This data enables banks to validate the financial transactions and approve loans provided the borrower has a stable income, satisfactory financial behaviour, and the ability to repay the loan on time.
Vital Features of a Bank Statement Analyser
Bank statement analysers leverage cutting-edge technologies including artificial intelligence (AI) and machine learning to automate data extraction and offer key insights into a borrower’s financial health.
Let’s look at some of the main features of a bank statement analyser:
Financial Health Analysis
Credible and top-rated bank statement analysers are loaded with advanced analytical tools that provide detailed insights into a borrower’s financial status by evaluating and integrating numerous data points.
This feature allows lenders to extract crucial data including transaction patterns, payment histories, and account balances to gain an overview of the borrower’s financial status. Additionally, the advanced algorithms also categorise financial transactions and expenses, uncovering key trends and financial behaviour.
Gathering and Integrating Key Data
Bank statement analysers allow lenders to collect important borrower data from several sources, ensuring data accessibility and integrity. These tools, thanks to their robust integration protocols allow lenders to integrate vital data into their existing solutions, ensuring seamless operations and minimum disruptions.
Lenders can install or integrate advanced APIs to accurately collect information from bank statements in different formats including scanned documents, PDFs, Excel sheets, etc.
Swift and Accurate Verification
Bank analysers are equipped with anomaly detection tools to verify the borrower’s financial and identification documents, minimising the risk of fraudulent activities. Machine learning algorithms detect and evaluate anomalies in financial data and play a key role in detecting irregular patterns and risks accurately.
Reporting
One of the most important features of bank statement analysers is their ability to aggregate and analyse financial data and convert them into visually appealing reports.
Further, many bank statement analysers allow lenders to consolidate borrower data across different banks into a unified single-page report. These reports include bar graphs, pie charts, and other data visualisation techniques that represent important insights including financial obligations, spending patterns, and income.
4 Key Benefits of Bank Statement Analysis for Loan Applications
Now, let’s explore the benefits of bank statement analysis and how it aids lenders assess the borrower’s financial discipline.
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Timely and Accurate Creditworthiness Evaluation
Bank statement analysis provides a holistic view of a borrower’s financial information including income, spending behaviour, and other expenses.
This allows lenders to evaluate their creditworthiness accurately compared to traditional methods.
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Swift Loan Processing
Thanks to their exceptional automation and analytical abilities, bank statement analysers eliminate mundane and time-consuming tasks including manual report generation, data entry, and borrower verification during the lending process.
This ensures minimal processing time, allowing lenders to approve a high volume of loan applications and enhance borrower experiences.
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Customised Loan Solutions
While loans can be classified into personal, home, educational, and business depending on the borrower’s requirements, lenders can improve the overall borrower experience by offering them tailored loan products with desirable repayment terms.
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Better Operational Efficiency
Bank statement analysis encloses all the key parameters required to evaluate and approve loan applications in different formats including XML files, Excel spreadsheets, digital statements, and PDFs.
The numerous reports coupled with visually-appealing dashboards improve decision-making and also play an instrumental role in cutting down the lender’s operational costs.
Final Words
Lenders can no longer rely on traditional loan approval and disbursal processes to compete in the increasingly dynamic and competitive. Tech-driven bank statement analysis tackles the shortcomings of manual underwriting processes including lack of uniformity across bank statements in different formats, time-consuming loan approvals, and high error-risks.
Bank statement analysis performed by top and reliable bank statement analysers must adapt to different formats, evaluate, and organise all the key parameters of bank statements to accelerate loan disbursal and other aspects of the lending cycle.
Precisa’s bank statement analysis ensures timely and accurate loan approvals, helping lenders reduce processing time by 5x.
The tool is equipped to handle data in more than 1,000 formats, categorise transactions, and detect potential red flags, allowing lenders to assess a borrower’s creditworthiness accurately.
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