Ever since automation was introduced in the BFSI segment, digital innovations and technological disruptions have been a regular feature. During the past decade particularly, there have been varied technological breakthroughs and disruptions. Not surprisingly, besides impacting the existing business models, these have led to the advent of new ones.
Digital payments, automated underwriting, mobile banking, open banking, peer-to-peer lending and digital authentication are some of the models that have emerged in the last decade. The major driving force behind these transformations – enhancing customer satisfaction, lowering operational costs and creating alternative product options curated as per customer preferences and needs.
Innovations And Transformation
The digital lending industry is witnessing a similar transformation and has come a long way in the past ten years. The digitalisation of lending began with the need to overcome the traditional pain points in the lending process, which were extensive, time-consuming, manual and complicated. Thanks to digitalisation, the lending process has become paperless and comparatively faster.
Consequently, digital lending is rising speedily in India. As a significant number of new users are using digital platforms, there has been a concomitant rise in enterprises that support lending money online. All of this has been transforming the country’s lending landscape.
In recent years, apart from numerous new fintech entrants venturing into the digital lending space, traditional banks have also begun offering such products, acknowledging the role of digital in staying competitive. Meanwhile, new-age lenders are deploying technology more than ever and harnessing partnership ecosystems across the entire value chain of lead generation, customer onboarding, underwriting, credit/loan disbursement and collection.
The fintech digital lending startups are doing what no other traditional financer does, bringing credit facilities right where the user is – on his/her mobile or smartphone. The fintech industry has accepted new technology trends such as blockchain with distributed ledgers and is also introducing novel products working on the digital identification of customers. This makes operations more secure and easier to audit while overriding geographic limitations in making the transactions truly international.
The bedrock of most fintech platforms is the unique combination of advancements in technology and the emergence of innovative business models. Indeed, technological advancements have been pivotal in driving a significant evolution in the fintech sector.
For instance, automation is expediting all operations. Previously, procedures dependent on manual human interventions were slow, tedious and error-prone. ML-enabled tech tools have automated most tasks, making these fast, safe and accurate while eliminating the high degree of human errors. Additionally, some technologies are reducing the distinction between the old and new-age lending processes, easing the lending and borrowing protocols, evaluating risks more precisely and enhancing the user experience.
Benefitting The Unbanked
Furthermore, the creation of new lending products provides a plethora of combinations concerning the tenure, interest rates, loan amounts and EMI flexibility. These are helping customers choose products as per their requirements without worrying unduly about prepayment penalties or the fear of being locked in long tenures that don’t benefit them.
Novel lending products in spaces such as health emergencies or education, travel and auto loans, and purchases on e-commerce stores are all available. Moreover, unbanked segments such as freelancing millennials, subprime customers and those seeking microloans – who may not possess the elaborate documentation that traditional lenders seek – are also eligible for loans.
These customers are serviced based on the unconventional data harvesting techniques that digital lenders use, including social media and other auxiliary records. Social media, AI, machine learning and big data technologies have emerged as the enablers in disrupting the consumer lending sector worldwide and changing the way credit risk is assessed along with other novel technologies. AI/ML-based systems are designed to consume data and predict consumer creditworthiness and the underwriting risks involved in such lending. These self-learning systems keep updating their algorithms, ensuring more robust results and lower risks for lenders.
Digital innovation & technologies have made the emergence of an instant digital lending system, that consumers can access on their smartphones, possible, without even entering a bank. India is estimated to have almost 700 million Internet users throughout the nation in 2020. Backed by this vast user base, digital lending provides affordable credit opportunities to a large section of India’s population.
While the burgeoning number of digital users and transactions leads to an exponential surge in data usage, the use of cloud technology has become popular for storage of records. Undoubtedly, fintech entities have benefitted from the agility, flexibility, modularity, scalability, security and cost-optimisation provided by cloud technology.
Finally, even where customers are concerned, they benefit equally from the speedy, safe and secure offerings of digital lending platforms.
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Andy Sen is the Chief Technology Officer of mPokket, one of India’s leading digital lending platforms for college students and young professionals. As the CTO, Andy is responsible for overseeing the end-to-end management of the technology function at mPokket, which involves product development and delivery, continuous product innovation and ensuring its high scalability. Furthermore, he is tasked with business growth and building a robust technology team, from the ground up. An IIT Kharagpur-alumnus, with a Bachelors in Computer Science and Engineering (CSE), Andy has achieved several milestones in his career spanning 18 years.