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Fintechs are currently on the rise, with over 100 fintechs launching within the lending space from 2019 to 2020. According to FinTech Australia, there are currently over 800 fintechs operating in Australia. This significant increase demonstrates the high demand from consumers for new and innovative ways to access credit.

Let’s break down how traditional bank loans differ from fintech loans and which option might be best suited to you.

What is a traditional bank loan?

A traditional loan is a personal loan provided by a bank. These loans are considered to be traditional because they were once the only option for people to access credit. Before the existence of the Internet, a person had to physically go into a bank to apply for financing.

Most traditional lenders are brick-and-mortar banks, meaning that they have physical branches in which you can speak with people face-to-face. While you can still apply for a loan in person, most banks also allow you to apply online.

How is this different from a fintech loan?

Fintech cash loans, otherwise referred to as online loans, are personal loans offered by fintech companies. Most fintech companies, such as Jacaranda Finance, operate 100% online. Fintech, standing for financial technology, aims to compete with traditional financial services through the integration of advanced technology. In Australia, the fintech industry was valued at over $1.1 billion U.S. dollars, equal to approximately $1.4 billion Australian dollars.

In terms of consumer finance, fintechs allow customers to utilise innovative products tailored to their specific needs. Fintech companies can utilise AI and machine learning to eliminate the need for an underwriter to complete manual tasks.

Bank loan vs. fintech loan

To help you compare, here are some key differences between traditional lenders and fintech lenders;

Loan Feature Traditional Lenders Fintech Lenders
Typical APR (annual percentage rate) Lower Higher
Typical loan processing Slower Faster
Application criteria Stricter Less strict
Online loan application In most cases Always
Term loans Yes Yes
Loan approval and payout Slower Faster

Typically, banks and fintechs differ in a few key ways: customer engagement, bank statement analysis, underwriting, credit bureau importance, loan contracts, and loan disbursements. We give a rundown of each below:

Customer engagement

With fintechs typically being much smaller enterprises than banks, they often utilise tools like customer relationship management (CRM) to advertise their products to a wider audience. Some fintechs use technologies like Chatbots to supply customers with information without the need for human interaction. Despite fintechs being online, they often still have human customer service teams that are contactable (by email or phone).

Bank statement analysis

Traditional lenders will typically analyse an applicant’s bank statements from recent months manually. Many fintech companies use AI and machine learning to conduct risk analysis by utilising bank statements. Jacaranda Finance, for example, uses machine learning and AI to access copies of bank statements, categorise the information, and give the application a score based on this information. This limits the possibility of human error and reduces the time needed for the underwriter to analyse this information.


Bank underwriters must manually execute every aspect of the underwriting process. The implication of this means that parts of the application processing are left up to the individual assessor and their judgement. Whereas, fintechs implement underwriting algorithms for parts of the application using AI, which collates bank statements and personal information as a part of the application process. Using AI technology enables fintechs to deliver faster loan outcomes than banks.

Credit bureau importance

Traditional lenders, such as banks and credit unions, offer the best interest rates to the best applicants. This means that they are much stricter on their lending requirements and place more importance on an applicant’s credit score and history than a fintech lender. Fintechs integrate credit reports and bank statements to decide the applicant’s eligibility for a loan and can provide loans to people with bad credit.

Loan contracts

Some traditional lenders may require a manual signature on a loan contract. Fintech companies, on the other hand, automatically create the loan contract which is sent to be electronically signed by the borrower. This allows the person to sign the contract anywhere, anytime, saving time on waiting for a signed contract.

Loan disbursement

Upon loan approval, bank loans sometimes take from one to seven days to hit your bank account. Fintech lenders often provide instant transfers on approval, such as Jacaranda Finance, so you might have your cash in your bank account in just 60-seconds. Keep in mind that who you bank with can influence the time it takes for your loan to be deposited into your account.

A final comparison

Bank loans and fintech loans both come with benefits and drawbacks. Bank loans are typically reserved for the ideal loan candidate with perfect credit history and are able to wait a longer period for a loan payment. Fintech lenders provide fast, efficient, and effective financial support through the utilisation of AI and machine learning. With 800 fintechs to choose from, there are many options available that may be suited to your needs.

Jacaranda Finance is an award-winning fintech lender that specialises in fast and inclusive lending. We were the first lender in Australia to deliver a 60-second loan payout, operating six days a week to provide everyday people with financial support when they need it most. We offer quick cash loans from $1,000 to $15,000 that are often processed within the hour. Once the loan is approved, you could have your cash in 60-seconds* (if you have an NPP-enabled bank account).

*Most approved applicants have their money in their bank account and ready to use within 60 seconds once they have accepted their digital contract.

Written by: Jacaranda team