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Fintech companies specializing in credit have experienced fast expansion and could speed up various sectors of the financial industry.
Global FinTech investments increased from $87 billion in the latter part of 2020 to $98 billion in the initial half of 2021, as stated in the “Pulso da Fintech H1 2021 – Global” report by KPMG.
Fintech credit companies have expanded quickly globally in the past few years, with significant variations in size among different economies. These differences are influenced by economic development and the structure of financial markets, as countries with higher income levels and less competitive banking systems tend to see more fintech credit activity.
Credit fintechs provide a different funding option for individuals and businesses, enhancing credit accessibility for those in need of quick investments and improving financial intermediation efficiency.
This article provides a detailed exploration of how Real Estate Credit Fintechs have influenced developers’ approach to real estate projects, serving as a substitute or addition to traditional banking options like the Green and Yellow House. Investors are also leveraging this trend to diversify their investment portfolios through collective real estate financing.
What are credit fintechs?
Fintechs specializing in credit are expanding in the financial market by providing fast online loans with competitive rates, enabling companies to grow their businesses.
How does financial technology credit operate?
Credit fintechs are startups or companies that specialize in creating fully digital financial services and products, simplifying access to credit compared to traditional banks.
These new companies provide customized credit services promptly with extensive customer engagement, utilizing innovative methods to analyze data and assess borrowers’ needs and repayment capacity.
This definition of fintech credit refers to any credit transactions arranged by platforms that connect borrowers with lenders.
These platforms, known as “peer-to-peer loans (P2P),” involve using their own financial resources to connect borrowers and lenders, and may also encompass technology companies providing platform credit services.
What motivates credit fintechs?
Credit fintechs have expanded quickly on a global scale, yet the level of activity per person varies significantly among economies, mirroring factors influencing conventional credit forms.
The activity of credit fintechs increases with higher income levels in a country and is influenced by competition with other credit sources, with fintech credit volume being higher in countries with less competitive banking systems.
Fintech credit volumes are currently more significant in savings compared to other types of credit, with less strict banking regulations.
Financial advancements enabled by digital technology, known as “fintech,” have become increasingly significant in delivering a wide range of financial services. While financial technology is not a new concept, its progress has notably sped up in the digital era, with consumers in both advanced and emerging economies embracing the convenience of digital financial services.
Various elements influence different types of credit, such as a nation’s economic growth, financial development, institutional quality, and competition in credit markets.
A more cooperative banking industry could lead to increased access to banking credit, which could in turn support alternative credit providers like credit fintechs.
Credit fintechs may expand in regions with limited credit access if they can assess borrower data more effectively or efficiently than traditional credit institutions.
The future of the real estate industry: Financial Technology Real Estate Loans
Understanding the expansion of real estate credit fintechs is crucial for several reasons.
FinTechs’ presence is expanding, with Brazil solidifying its position as a leading fintech hub globally, ranking first in Latin America according to the “2021 Global Fintech Rankings” report.
Builders and developers often encounter difficulties securing loans from the Federal Economic Box. Typically, banks provide 80% of the funding for projects once they commence, releasing the funds incrementally.
Builders and developers must initially use their own funds to initiate real estate projects. Real estate credit fintechs provide the opportunity to quickly secure a significant amount of capital, facilitating project development.
Real estate credit fintech provides a different funding option for developers and investors looking to diversify their portfolios and secure profitable investments in the real estate market.
This loan type removes a middleman by linking investors and builders directly via an online crowdfunding platform.
Understand how real estate credit fintechs operate more effectively.
Real estate credit fintechs use a straightforward peer-to-peer business model to offer a streamlined, cost-effective loan application process and enable direct communication and transactions between borrowers and investors via an online platform.
Potential borrowers submit details about their financial situation and the project they need funding for, which fintech investors then evaluate on the platform. If the borrower and investor agree on the terms, the loan agreement is directly made between them.
After the loan is issued, the real estate credit platform acts on behalf of investors, managing the loan and receiving fees in return. The platform handles documentation, payment collection from borrowers, distribution of earnings to investors, and ensures profitability.
Advantages of real estate credit fintech companies
Real estate credit FinTechs boost competition in financial markets, offering services more efficiently than traditional financial institutions and reaching a broader user base.
Real estate credit fintechs offer similar services to banks, but in a distinct and fragmented manner. For instance, similar to banks, crowdfunding platforms convert deposited funds into loans and investments.
The variation in returns depends on the level of profitability. When the basic interest rate is at or below 8.5% annually, savings yield 70% of the Selic rate plus the variation of the TR. However, if Selic surpasses 8.5%, the returns revert to the previous rule of 0.5% plus TR per month.
Investors have the opportunity to make up to an 18% annual return when evaluating real estate investment platforms.
How are construction professionals profiting from real estate credit fintech companies? Where should they begin?
Employers or constructors can take advantage of collaborating with real estate credit fintech companies in various ways.
Companies can decide on their investments, the usefulness of startup services, and their funding needs. Builders can use online services to make important decisions for their business.
They can collaborate with fintech companies in real estate credit to assist in fulfilling your financial and investment requirements.
Many engineering firms utilize real estate credit fintechs like INCO to secure quick credit with favorable interest rates and payment terms that align with their project needs without jeopardizing their financial position.
Raising funds easily is possible because of the straightforward investment process in real estate crowdfunding with individual investors.
Summary
Credit fintech companies aim to transform the financial industry by offering platforms that broaden and diversify the credit market, enabling more individuals and institutions to profit from investments in sectors like real estate.
Data democratization and technological advancements have given credit fintechs a competitive edge over traditional banks, which is particularly beneficial for businesses experiencing delays in loan disbursements from their conventional lenders.
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