Sep 8, 2021 ●12 min read
How is Fintech transforming the lending process in India?
Financial technology, also known as fintech, is an economic industry that uses technology to make financial services more efficient. It brings innovation, agility, technology expertise, and accountability into complex practice.
The word “Fintech” is defined as a series of computer programs that are used to enable banking and financial services. It is based on using software to provide financial services. Fintech companies are generally startups that exist to disrupt age-old financial systems and corporations relying more on manual work and less on digital spaces.
One of the spaces where Fintech is setting its foothold strong is the credit landscape of India. The fintech startups are doing something that no other corporation ever thought of, bringing the credit facilities and creditors in the comfort zone of their buyers, through their laptops and smartphones.
Digital lending is in a full-throttle mode in India. It has witnessed an unprecedented rise in new users’ onboarding platforms. On a predictable note, there has also been a rise in enterprises and startups supporting lending processes and it all is changing the very landscape of lending in India.
The lending landscape and processes in India has undergone a dramatic shift over the years. The systems and practices which were considered prominent in this space are disappearing. They are now getting replaced with swift processes channeled by data and technology.
This transformation which was already in motion over the past few years has been further accelerated by COVID-19 and the social distancing norms to counter it.
The Digital Lending Ecosystem can be broadly classified into 6 segments viz. Banks and Financial Institutions, Data Providers, Core Platforms, SME/MSME, B2B segment for investors, and the B2C segment, informally regarded as the consumer segment.
There has also been a surge of platforms, and services supporting these core 6 segments, but these are the ones that fetch the primary engagement. Read more to find out the processes disrupting the lending ecosystem of India.
The first and most groundbreaking transition that has come to the credit ecosystem of the country is through Digital payments or as we call it, online payment. Digitalization in the ecosystem has allowed users to sign-up for an online lending platform, fill their loan applications, and upload the documents with just a few clicks. Their counterpart’s traditional offline setup takes a minimum of 14 working days to process and approve loans.
The digital lending apps, on the other hand, approve loans securely in a matter of minutes. Since the processes involving the lending apps are driven by technologies, the platforms have substantially lower operating costs, and room for errors when compared to banks and NBFCs.
The successes of fintech platforms are built on the foundations of technology and innovative business models. These help the businesses grow and serve their consumers in the most effective way possible. The financial industry itself has significantly evolved due to infrastructural developments in technological advancements.
Cloud technology has allowed lenders to operate at a significantly lower cost while serving a higher volume of the consumer base. The tech provides cost-effective scalability to startups/ organizations by freeing themselves from the hassles of infrastructure, assets, maintenance, upgrades, repairs, and disaster recovery. This also helps them to fixate on consumer experience and their business goals, be more agile, flexible, modular, scalable, secure, all while optimizing its cost.
Artificial Intelligence is one step towards revolutionizing the financial ecosystem. The AI/ML-based systems are designed to consume data and predict creditworthiness and risk involved in lending to consumers. These are the best self-learning systems that keep updating their algorithms to become sturdy and risk-free over time.
Machine Learning and Artificial Intelligence include technologies and sophisticated programming tools that analyze massive volumes of unstructured and unorganized data, make sense of them, create an unprecedented and incredible opportunity avenue. Thus, delivering the benefits to the market, its creditors, and consumers in processing swift credit loans.
AI technologies have immense potential to release debt to creditworthy SMEs that get jacked just because of the high cost, people, and time involved in underwriting such personal loans. Steadily, most financial organizations are making the smart move towards AI/ML systems for risk-free lending.
The Indian payments landscape is evolving rapidly over the past few years and it has only accelerated in 2020. This evolution is driven by rising in the number of digitally abled consumers, expenditure on personal consumption, usage of digital payments, urbanization, and improvement in technology and mobile infrastructure.
All of this comes together to build up a solid case for the adoption and growth of credits and loans via Fintech. The digital credit landscape in India is growing at an insurmountably fast pace, and yet the demand forecasts are expected to be a big challenge for lenders. However, with a great challenge, comes great opportunity.
4g has already penetrated its depth in India. With the Introduction of 5G in the Indian lending market, the services and consumers relying on them are going to skyrocket generating huge numbers every second. This could be a challenge to a few but it certainly will be an opportunity for the fintech startups that have bootstrapped themselves well.
The lending ecosystem is adding new players every day. Yet, the borrowers seem confused about which lender to avail credit from. There are tons of Loan marketplaces and aggregator apps for users to choose creditors from.
Fintech has transformed the lending and economic landscape of India, for the best. The road ahead looks clear and promising for innovative techs such as Artificial intelligence and Machine Learning. Not only will they cut costs but also reduce the time and effort put in by the middlemen/ brokers/ bank staff to get the loans sanctioned.