India has a very high demand for credit because of the population and the number of industries that rely on nature for revenue. Due to the increased medical expenses and other financial difficulties, the pandemic significantly raised the need for borrowing. The procedures used by traditional lending institutions grew onerous when the pandemic struck the nation. Thus, people have resorted to digital lending, where they can access instant credit from lenders.
The approximate time banks and financial institutes take to make traditional lending decisions is between a month or a little more, with the time-to-cash extending a couple of months. However, digital lending is quite the contrary, where things are much faster. Here the time-to-lend and time-to-cash can be slashed to a lightning-fast 24 hours. For the banking industry, such transformations are a great way to attract and retain customers, enhance revenue growth, minimise the incidences of application fraud and achieve significant cost savings, especially when lending loans to SMEs and corporate. It is even more important for banks to consider going digital because the current pandemic has sparked the “less touch time trend.”
To ensure that credit and loan facilities are genuinely available on a pan-India basis, digitising loans is a crucial step undertaken by new-age tech and fintech companies.
Advantages of Digital Lending
Digital lenders use a very borrowers-friendly strategy. On the other hand, traditional banks follow very rigid lending policies, and many small loan borrowers need help to get credit as they do not fit the expectations of the banks or lenders.
Minimum to no paperwork is one of the most significant advantages of this platform. The e-KYC has also brought a drastic reform in the credit industry as the borrowers must refrain from repeatedly uploading documents for evaluation. It has also lessened the burden of lenders in the industry.
Analyse user data more conveniently
While onboarding consumers and registering their information, document filling is one of the most time-consuming and difficult procedures. It also is an area that is most likely to have manual errors, such as incorrect spelling or misplacements, considering the nature of hand-written documents. Physical proximities add to the time too. As a result, digital platforms offer a greatly improved user experience.
Enabler of Quick & Calculated decisions
Instant loan approvals mandate a more immediate evaluation of borrowers. Long loan evaluation and approval delays can mean losing a customer to a competitor. Automated Decision engines use complex algorithms based on measurable user-derived data, which includes past spending patterns, credit history, credit information reports, credit score, and buying behaviour. A human analysing this data would require significant time and skills to make a reliable decision about the customer’s creditworthiness.
Demonstrates enhanced fraud detection vigilance
Anti Fraud solutions software falls under the umbrella of digitisation. It also identifies the legitimacy of the customer and can smell suspicion and raise the alarm beforehand, saving lenders from potential (huge) losses. Advanced behavioural analytics using AI and multilayered cloud-based security systems make accounts hard to breach and ensure they are continuously monitored for any abnormal activities.
Drives efficiency in organisational silos
The introduction of a cross-functional team that works with business, risk, IT, and operations is required by digitisation. Multi-departmental collaboration helps balance customer journey and business objectives with robust credit decision-making and risk control. The customer journey is sped up, and touchpoints are reduced by centralising the teams.
Facilitates financial inclusion
The decision-making process for traditional lending mainly relies on factors like credit scores obtained from credit information companies. But what about those without a score, credit history, or borrowing for the first time? Using advanced analytics and AI, it is now possible to predict a customer’s behavior using unconventional information such as social media posts, utility bill payments, and other alternative data.
Digitisation drives an agile approach
Innovation in digital lending is what has changed the Indian lending market. As a result of automation, the experience of borrowing money online has been made seamless. The instantaneous availability of financing and minimal to no paperwork requirements are made possible by digital lending.
Digitisation plays a critical role in the lending process. When lenders digitise all of their loans, they not only create operational (and economic) efficiency, but they can also significantly enhance the customer experience. Thanks to digitisation, financial institutions can foster growth by offering a cutting-edge omnichannel experience.
The effects of disruption caused by digital lending across customer engagement, origination, credit assessment, underwriting, risk monitoring, compliance, governance and collection are still unfolding. Digital lending is anticipated to unlock new doors in the financial sector.
