There has been massive growth in the world of digital banking over the past few years. Today, you can use your computer to do just about any task that required you to physically visit the bank a decade or so ago. Planning to open an account with a financial institution of your choice? Just visit their web portal or download their official mobile app, and you’re good to go. All these benefits can be attributed to the emergence of the financial technology (fintech) ecosystem.
Fintech has made it easier for people to access mainstream financial services without leaving the comfort of their homes or offices. This innovative feature has contributed to the growing popularity of the payday lending concept, even in markets where traditional banks are willing to provide loans.
Payday loans aren’t new in the corporate world, but they’ve been associated with high-interest rates for a long time. As such, it’s always been a nightmare for low-income consumers to access these lending facilities. However, fintech is now gradually revolutionizing this sector. But how exactly has it impacted payday lending in general? Read on to learn more.
- Access to instant cash loans
Gone are the days when you had to fill out stacks of paperwork and wait in long lines when applying for payday loans. With financial technology, things have changed drastically, and you can now access payday lending services from the comfort of your couch.
Lenders like MyCanadaPayday allow you to borrow and access loans within 15 minutes. The fact that all application procedures are done online makes these financial facilities more convenient than physical payday stores.
- Low interest fees
As mentioned earlier, accessing payday loans has always been an issue for low-income earners because of the high-interest rates. Some lenders take advantage of the borrower’s financial situation to make a fortune. As such, the interest can go as high as 400% per year. This is one thing that fintech has gradually rectified over the past few years.
The main purpose of payday loans is to help you solve your financial issues and then allow you to repay the money once your salary arrives. Fintech is doing pretty much the same thing as the payday lending industry but at a fair deal. With the help of these organizations, you can access part of your future earnings at no cost or a small dollar fee.
For instance, most fintech companies will charge you not more than CAD$5 to access 50% of your upcoming wages. Some mobile apps in the fintech ecosystem generate revenue through tips. As a borrower, in your application, you may choose how much to tip the lender, and that will be included in your total repayment.
- New model of accessing funds
The payday industry works by loaning you some money that you’re required to repay on your payday. This can be helpful when you’re in urgent need of financial help. But as stated earlier, some payday lenders take advantage of their borrowers by charging high-interest rates. Fintech companies are slowly making changes in this industry by introducing a new model of accessing funds.
Rather than borrowing a loan and repaying it in two weeks or so, this new financial technology model allows you to access part of your earnings early. In most cases, you can withdraw up to 50% of your wages, which will be automatically deducted from your monthly salary. So, if your monthly salary is at least CAD$1,000, you can use up to CAD$500 of your future earnings for a small fee. It’s worth noting that companies may have different policies regarding this, and some may allow you to access your paycheck in full before payday.
If your employer has already partnered with a fintech company, you might enjoy these benefits at no cost. In fact, some models have been designed to allow employees to access their earnings as soon as they earn them. For instance, if you’re paid on an hourly basis, whatever you earn today can be transferred to your bank within a few days upon your request.
Conclusion
Despite their benefits, traditional payday lending facilities have their fair share of drawbacks. Among the main disadvantages of using these loan options is the fact that most of them charge high-interest rates.
Fintech is slowly taking center stage in the payday lending industry, and it has already proven to be helpful to many people. Today, one can access payday loans at a relatively low cost, thanks to financial technology. You can also access a portion or all of your future earnings through a new innovative feature. With fintech, you no longer have to deal with high-interest payday loans.
