Digital Tech

Know about Authentication and Authorization in the Digital Lending Platform

Authorization in the Digital Lending Platform

It will be a decade since we entered the modern digital era. While we were keeping up with the technological advancements properly, the sudden onslaught of COVID-19 fast-tracked the whole process across all industrial ecosystems and verticals.

The world was forced to function remotely through online platforms. Similar to other verticals, the financial sector also saw a massive shift in the lending and borrowing behavior of the consumer.

During and post-COVID, the most significant change seen in banking and financial industries was the redundancy of a physical anchor point representing and driving customer loyalty. Consumers now decide on their banking and shopping choices based on the highest-rated app available in the store.

The same change is reflected in the lending process as well. Financial institutions are now trying to offer consumers a smooth experience by digitizing the lending platform. AI digital lending platforms have become the center of lending ecosystems as these APIs deliver instant solutions to customers without drowning them in red tape or paperwork.

Apart from delivering better solutions to the customer, these lending platforms also provide them with customized financial solutions while collecting user data to analyze consumer behavior patterns.

The Role of AI Digital Platforms Post Covid-29 Pandemic

Due to Covid-19, like all other industries, the lenders also had to undergo digital transformation to retain old consumers and bring in new ones. To achieve this goal, financial institutions are working with private companies to create APIs for contactless and seamless borrowing and lending experiences for their patrons.

AI digital lending platforms play a significant role in this rapid era of digitalization to help financial institutions stay connected to their clients without needing physical communication.

Authentication and Authorization in Digital Lending Platforms

With lenders and financial institutions rapidly moving toward digital platforms, there is a need to undertake strict online security measures, including authentication and authorization of new users and apps.

While these terms – authentication and authorization – are often used interchangeably, they are two completely different security measures. This article covers the definition and difference of these two terms and how they are essential for digital lending platforms.

What is Authentication?

This falls under Customer Identity and Access Management (CIAM). Authentication confirms and corroborates the identity of the user. The process verifies if the customer is who they claim to be. 

The password is one of the most commonly used ways of authenticating user identity. If the user name and password match, the system validates the identity and grants the user app access.

Apart from authenticating passwords, many establishments have gone one step ahead and introduced technologies like single sign-on (SSO), one-time passcodes via SMS, biometrics, and multifactor authentication. With these authentication methods, users no longer need to remember passwords to gain access to the platform.

What is Authorization?

The authorization process starts after user authentication on the platform. The user is granted full or partial privileges and rights to use the platform resources in this process. For example, once the user is granted access to an AI digital lending platform, the authorization process would establish what resources the user can and cannot use.

Authentication and Authorization in Digital Lending Platform – An In-depth Understanding 

Digital lending platforms use both technologies to secure user information and financial transaction via the app. Implementing authentication and authorization using the right technologies will make the process more productive and secure. Here are some standard authentication techniques used by digital lending platforms:

  • Password-based authentication
  • OTP via SMS or registered email ID.
  • Multifactor authentication or two-factor authentication
  • Social authentication using credentials of social media platforms
  • Single Sign-on allows access to multiple apps through one set of credentials

Here are some authorization techniques often used by online lending apps:

  • Role-Based Access Controls (RBAC)
  • Single Sign-On format
  • JSON web token
  • OAuth
  • OpenID authorization

Technologies like OpenID authorization, OAuth, Single Sign-On format, and JWT are simultaneously used for authorization and authentication.

How is the Mortgage Industry Adopting Automation Techniques for a Smooth Lending Process?

While the world is progressing toward digitalization, the mortgage sector still depends on a lot of paperwork, manual process, and task lists to get a job done. It is sufficient to say that this segment of the financial industry could do with some user-friendly digital tools to process loans quickly and easily to the client.

To get on the bandwagon of digital transformation, researchers have found that 92 percent of mortgage agencies have doubled their efforts to adopt automation into their lending process in the last year. While this is good news, some firms still rely on manual lending processes requiring much paperwork from the client’s end.

The prolonged mortgage and loan approval process frustrates the customer and negatively affects the agency. Long-drawn mortgage and loan approval process may lead the customer to switch to other agencies offering a streamlined digital lending experience.

Adopting automation is the only way lender can stay ahead in the competitive market and retain old and new clients. Using AI digital lending platforms will not only streamline the whole mortgage and lending process but will also reinvent the traditional process and workflows.

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