By the end of 2021, the size of the global payday loan market was estimated at $33.5 billion. What’s more, it’s projected to reach $42.6 billion by 2028, growing at a CAGR of 4.1% over the forecast period. The projected increase in payday loan applications, as well as their current booming popularity, is driven by the growth of online banking in particular and the fintech industry in general, which makes it easier for borrowers to apply for loans and get the best deals from anywhere.
While there are multiple payday loan apps on the market, they fail to meet the growing user demand for accessible and convenient credit options. So there’s still room for new solutions. Consider launching a payday loan app? Read on to learn how such solutions work, where to start loan app development, what core features you should implement first, and how specialized software helps minimize risk and maximize profits by automating manual processes at all stages.
Benefits for Businesses
The traditional approach to managing short-term loans is time-consuming and tedious, not to mention the possibility of human error, which can come at a high price in financial services. This is where payday loans software comes in, offering numerous advantages over legacy systems. Let’s take a closer look at them.
✔️ Complete automation
The main function of loan management apps is to automate the entire process – from online application and loan origination to the last payment. Automation makes it possible to avoid human errors, speed up processes, increase efficiency, reduce operational costs, and much more. From this point, all the other benefits of loan management apps emerge.
✔️ Better customer experience
Payday loan management apps provide a seamless experience for borrowers by allowing them to apply for a loan from the comfort of their homes via their devices, rather than visiting a branch. A smooth borrower journey and excellent experience lead to a higher customer satisfaction rate, which in turn is critical to the well-being and growth of your business, as well as customer retention.
✔️ Smarter resources allocation
Specialized software enables financial service providers to save resources in many ways. It eliminates repetitive manual tasks and reduces personnel costs, enables companies to go paperless and save on stationery, and so on. Payday loans software solutions also free up space and time for activities aimed at growing your business by taking over tedious and time-consuming tasks.
How Does a Payday Loan App Function?
Payday loans are a type of short-term borrowing with higher interest rates based on the borrower’s income. The loan amount is a part of the borrower’s next paycheck and is automatically debited when the borrower receives the paycheck that serves as collateral for the loan. Generally, the amount of a payday loan is limited to $1000. Below, we describe step by step how to take out a loan with a special app.
First, a user needs to register in the application, enter their personal data (name, income, photo, etc.) and upload the documents required for the KYC check.
2. Loan limit & interest calculator
Based on the data provided by the user, the app calculates the maximum possible loan amount. The interest rate also varies and depends on the user’s income.
3. Linking with a bank account
To take out a loan, users must link their bank accounts to the app. These accounts will be used for both lending and repayment.
4. Online loan application
Users apply for a loan online, specifying how much money they want to borrow and for how long. If the loan is approved, the money is transferred to the linked bank account.
5. Automatic repayment
On the next payday, when the user’s salary is received in the linked bank account, the credited amount is automatically withdrawn.
Payday Loan App Core Features
To avoid confusion, we divided key functions of a payday loan app into two groups – user app features and admin panel features.
User app features
Users can register in the app with their credentials (e.g., phone number or email), which are then used for login.
• Profile creation
Users can create their profile in the app and fill it with personal data such as name, contact details, photo, etc.
• Linking a bank account
Users can link their bank account to their profile in the app to obtain or repay loans.
• Documents upload & management
Users should be able to upload the documents needed for KYC and other verification processes.
Users can pass the Know Your Customer procedure by uploading their documents and providing the required information.
• Loan limit calculator
The credit limit is automatically calculated based on the user’s salary information provided during profile creation.
• Interest rate calculator
The interest rate is automatically calculated based on the amount a user wants to borrow.
• Loan application
Users can view the available loan types, select one and apply for it by submitting the required documents and other related details.
• Loan status
Users are informed about the status of their loans on a regular and timely basis.
• Automatic debit
The loan amount, along with the interest amount, is automatically debited from the user’s linked account as soon as they receive their paycheck.
• Push notifications
Users are informed in a timely manner via SMS, email or push notifications about the status of their loans, upcoming payments, new offers, etc.
Admin panel & general features
• Role-based access control
Role-based access control (RBAC) restricts network access based on an employee’s role. It’s one of the main methods of advanced access control.
• Transaction log generation and storage
All transaction data is collected, organized, and securely stored for future audit purposes.
• Document storage
Integrated document storage with classification and access control enables efficient document management, improves regulatory compliance, and prevents data breaches.
• Customization options
Your app’s loan management capabilities should be versatile enough to enable you to provide a personalized experience for your borrowers. It’s advisable to equip your app with customization options – you should be able to configure custom rules for loan products, payment plans, fees, underwriting needs, etc.
To run your daily operations efficiently, you need to integrate your software with multiple third-party tools and services. Therefore, it’s important that all the tools required to effectively manage payday loans are seamlessly integrated and work smoothly.
As cyberattacks get more sophisticated, regulatory requirements for fintechs are becoming more stringent. Violations of these can result in heavy fines for your company. Thus, ensuring compliance with legal and regulatory requirements relevant to your type of business is a matter of survival.
Let’s explore the best practices for payday loan software automation that will allow you to maximize your profits and reduce operating costs and employee workloads along with increasing efficiency.
There are several stages in the lifecycle of a loan that can be streamlined and automated with AI technology – from credit scoring to risk management and data analytics. To this end, we implement intelligent AI systems that help you make data-driven decisions and grow your business.
Reporting & analytics
We implement advanced reporting and analytics systems that allow you to keep track of your cash flow by providing an overall view of all processes across the company. An efficient reporting and analysis engine enables well-informed decisions and ensures that not a single detail is lost.
Fraud detection & prevention
Our seasoned specialists utilize best practices such as real-time data monitoring and suspicious activity detection, predictive scoring for alerts, prioritization of high-risk alerts, and others to ensure a sophisticated defense system for your solution. This way, you can focus on what’s important for growing your business, instead of dealing with the consequences of fraud losses that can jeopardize your revenue and reputation.
How to start Pay Day Loan Software Development with Itexus
As a trusted fintech software development partner, we have brought our expertise and capabilities to the table to help our customers around the world achieve their business goals with tailor-made and robust fintech solutions. And we’d love to do the same for you. Here’s how we’ll do it.
1. Project assessment
To create impactful digital products, we need to understand your goals, as well as the needs of your target audience. Once we outline the desired outcome, we’ll document the project requirements and estimate the resources needed to implement your solution.
2. UI/UX Design
Our designers will wireframe your future app to identify the best ways to meet users’ needs and ensure flawless and intuitive navigation. Then they’ll create a design concept – the core idea determining the design of your solution. After that, our UI/UX specialists will design the app’s interface and perfect it based on your feedback.
3. Development phase
Our seasoned fintech engineers will develop your app, integrate it with industry-leading third-party service providers, and ensure a high level of security utilizing industry best practices.
4. QA, delivery, and post-launch maintenance & support
Once the loan app development is completed, your app will be thoroughly tested by our QA team to make sure all bugs are identified and fixed and everything works as it’s expected. Now, your brand-new app is ready for deployment. If needed, we’ll maintain and support your app after the launch updating it regularly to ensure its uninterrupted work and high performance.
Payday loan app development is a great way for existing financial companies to expand their offerings and attract new customers. It’s also a good opportunity for new businesses to enter the fintech market. At Itexus, we have helped both the oldest market players and newcomers drive growth and win users’ love with secure, robust, and powerful fintech software. If you can imagine it, we can code it – just share your idea and we’ll do our best to help you achieve your goals.