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Digital Currency and Lending

The Money Flower_072722A
[The Money Flower, International Settlements]


- Digital Currency

Digital currency (digital currency, electronic currency or electronic currency) is any currency, currency or currency-like asset managed, stored or exchanged primarily on a digital computer system (especially the Internet). Types of digital currencies include cryptocurrencies, virtual currencies and central bank digital currencies. Digital currency can be recorded on distributed databases on the Internet, on centralized electronic computer databases owned by companies or banks, on digital files and even on stored-value cards. 

Digital currencies exhibit similar properties to traditional currencies, but often have no physical form, unlike currencies that print paper money or mint coins. This lack of physical form allows for near-instant transactions over the internet and eliminates the costs associated with distributing notes and coins. Typically not issued by government agencies, virtual currencies are not considered legal tender, and they enable transfer of ownership across government borders. 

This type of currency can be used to purchase physical goods and services, but may also be limited to certain communities, such as in online gaming. 

Digital currencies can be either centralized, with a central point of control over the money supply (such as a bank), or decentralized, where control over the money supply is predetermined or democratically agreed.


- Digital Lending Technology

Digital lending is a technology that allows financial institutions to increase productivity and loan profits while providing faster service at the point of sale (POS). It enables potential borrowers to apply for loan products, such as BNPL, from any internet-enabled device anywhere in the world. Digital lending involves lending via web platforms or mobile apps, leveraging technology for identity verification and credit assessment. 

Digital lending is neither new nor unfamiliar, and financial institutions are well aware of the basic concept. However, as technology has advanced and consumer needs have evolved, the concept has become more complex. Customers expect banks to process applications and make decisions extremely quickly. Ordinary paperless services are now commonplace, and financial institutions must provide customers with digital lending practices that go beyond the norm to keep pace. 

Historically, lending has been a transaction in which a lender provides funds to a borrower in exchange for a return on the funds (interest). While there are a variety of sophisticated lending and financing instruments, lending has always revolved around one thing: the ability to get your money back. 

Traditionally, this sector has been highly chaotic. Over time, it has evolved from borrowing money from pawnbrokers in exchange for collateral to a more structured procedure involving banks and/or financial institutions. Rapid advances in cloud computing, artificial intelligence and blockchain, along with faster and more affordable internet connections, have fueled the rise of fintech start-ups, and lending has transformed and become “digital”. 

Lending is always for a strategic advantage. How to detect fraud more easily, make more accurate decisions about underwriting, , or the universe of targets grow more quickly than competitors? 



[More to come ...]

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