How Fintech Is Steadily Taking Over The Offline Channels

It is an undisputed fact that India is undergoing a massive fintech revolution at present, emerging as the world’s second-biggest fintech hub after the US. The sector has witnessed a three-fold growth in the number of startups between 2015 and 2018, rising from a count of 737 in 2014 to over 2035 startups now, according to India Fintech Report 2019. Amidst this segment, spaces like payments, lending, insurance, and personal finance management hold the maximum share in terms of the number of startups that have emerged.

It has been observed that around 70% of the fintech ecosystem in India is being dominated by financial lending firms, and rightfully so. Till a decade ago, securing a loan was a tedious and next to impossible task for a significant number of individuals as well as businesses.

Not only were the processes extensive and time-consuming, but the parameters for creditworthiness set by formal institutions like banks would also often render a substantial fraction of these segments ineligible for a loan. In such a scenario, they would have no one to turn to except for informal resources like family, acquaintances, moneylenders, and loan sharks who would often charge ridiculously high-interest rates and inconvenient repayment timelines. This is where digital lending firms have emerged as a boon.

Digital lending platforms are steadily becoming the most preferred channel for individuals as well as businesses across the country for securing loans. According to a survey by Boston Consulting Group (BCG), the size of the digital lending market in India is estimated to have grown from $46 Bn in 2016 to approximately $75 Bn in 2018.

The survey has also projected how digital lending will become a $1 Tn opportunity in India in the next five years. With a rise in the ownership of smartphones and increased internet penetration, digital lending platforms have emerged as a game-changer in the credit space for a wider segment of consumers.

Amidst such a landscape, here is how these fintech platforms are redefining the lending space by surpassing the offline channels.

Minimal Documentation

While traditional financial institutions require one’s physical presence for a ton of documentation before even initiating the loan application process, digital lending platforms have brought the entire procedure online. By simply uploading the soft copies of all the necessary documents online, the loan application process can now be completed in a few steps.

Moreover, such platforms enable one to track their application status in real-time through a simple login. Therefore, these digital lending platforms have taken away the cumbersome practice of physical and extensive documentation.

Instant Approvals

By incorporating modern-day technological interventions like AI, ML, and Data Analytics algorithms etc. in their mechanism, digital lending platforms are able to facilitate almost-instant loan approvals. While a bank employee would take weeks to process and analyze documentation to check for eligibility, these platforms’ tech and data-driven processes ensure that there are no delays made.

This has especially emerged as a huge solution in today’s day and age when the monetary requirements of individuals or businesses need immediate addressal.

Faster Disbursal Of Funds

Through automated credit underwriting processes, digital lending platforms are able to assess and analyze the risks associated with a borrower’s profile, consequently verifying and disbursing the loan at a much faster pace than traditional financial institutions.

Moreover, unlike loans disbursed by banks in the form of cheques and demand drafts that take another couple of days to finally get cleared, digital lending platforms release the loan funds directly into the borrowers’ account. Such quick disbursal helps save time and efforts on both the ends.

Transparent Processes

It has been observed that traditional institutions like banks and NBFCs usually have an array of hidden charges that they tend to deduct from the principal amount. Moreover, the terms and conditions for their repayment processes are often stringent and include higher interest rates, early repayment penalties, and other such cost deductions.

In such a scenario, a borrower is usually left with lesser credit than what they expected. However, digital lending platforms do not have such provisions. No extra charges are levied on a borrower, and the processing fees are as low as 2%, thereby ensuring a fair and transparent loan process.

Efficient And Data-Driven

By leveraging advanced technologies to gather, analyse, and act upon a large number of traditional and non-traditional data points, digital lending platforms have succeeded in achieving greater operational efficiency. These platforms have created alternate credit scoring models to gather important insights, determine the risks associated, and form a credit score all in a matter of few seconds.

Moreover, such data-driven processes enable these platforms to offer an enhanced experience as well as a holistic view of their finances. Therefore, digital lending platforms are not just able to address the credit requirements of their borrowers but also provide them with personalized forward-looking financial advice and decisions.

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