lending loans

Over the last decade, there hasn’t been any industry in India that has remained untouched by rapid technological developments, and that includes the financial services industry. Non-banking financial companies (NBFCs) and banks are upgrading their lending systems to take advantage of the fintech market’s rapid growth.

Numerous tools such as digital connectivity, automation, real-time processing have created a positive impact in sub sectors including payments, investments, and lending. New-age lenders have implemented these technologies to bring much-needed efficiency and speed to the sector, which has been revolutionizing the way the sector has usually functioned.

Compared to a decade back and earlier, the loan application process was a slow, lengthy and tedious affair- usually with no definite outcome with the approval. Applicants would need to spend time to fill out the paperwork required for the loan and documentation, as well as arrange collateral if it was unsecured. Additionally, the chances for approval usually took many weeks, only to have a better rejection chance.

Undeniably, institutional lending has been slow and exclusive to a certain income demographic. The strict regulation and process that has once defined the industry is being revolutionized by new-age lenders, infusing the industry with innovative technological solutions. These tools are being leveraged to fast-track the approval process and providing accessible lending solutions to the masses.

Some of these innovations include cloud-based technology and automation, which are allowing lenders to deploy software tools with speed. These integrations also provide lenders with information to relevant data points of a borrower, such as their identity, income, credit history, etc., without needing to go through the expensive and lengthy manual verification process.

This allows faster processing, better risk assessment, and lowered overhead expenses, all while still providing loans to creditworthy borrowers at attractive interest rates. The automation process also enhances efficiency with the approval and disbursal process. It also helps lenders to evaluate and define the criteria for each loan, from interest rate, repayment tenure, and disbursal.

In India, the largest advantage that technology can offer is providing credit to the underserved masses. The implementation of GST in mid-2017 has been followed by a spike in digital adoption with businesses for book keeping and transactions. This has created a massive amount of financial data.

NBFCs and fintech companies incorporate technology to factor in this data, along with alternative assessment parameters, including a borrower’s social data, on a real-time basis. This allows lenders to accurately gauge a borrower’s creditworthiness, even in the absence of conventional data points such as credit scores. Tools such as personal loan calculator can help borrowers discover how much their monthly loan EMI will amount to.

Benefits of New-Age Lending Platforms

  • Fully digital process: Gone are the days of waiting in lengthy queues and filling out tedious paperwork at the bank. Loans can be taken from the comfort of one’s home, simply by visiting a lender’s website or app. Additionally, the digital process allows for more transactional transparency.
  • Quick approval and disbursal: Earlier, it would take several weeks for an applicant to get an update on their loan status. The high turnaround time for loan approvals was due to the heavy paperwork and slow nature of the procedure, so as to ensure that risk assessment does not get compromised.
As new-age lenders have leveraged a variety of technological tools to assess a borrower’s credibility, the approval and disbursal process have become tremendously quicker. One can get funds in their account within just 48 hours of submitting their application form.
  • Underwriting: With the conventional loan application process, borrowers were required to provide a lot more documentation than actually required. Online lending platforms only require a few basic KYC documents for the application process, as compared to banks.
  • Unsecured loans: The biggest advantage of new-age lenders is their collateral-free loans. Unsecured loans eliminate the hassle for borrowers, who would otherwise have to arrange for sufficient collateral to pledge against a loan they avail from traditional lending institutions.
  • Accessibility: Online lending platforms are able to provide access to credit to a wider audience segment than traditional institutions. With lower-income eligibility requirements, lenders can cater to a once previously ignored audience, while maintaining a low default risk.

Conclusion

As stated by Bill Gates, “Banking is necessary, banks are not.” While banks have been offering cookie-cutter loan products for decades, the tech revolution has transformed the way borrowers can avail lending services, from application to disbursal. New-age lenders have tremendously benefited by implementing cutting-edge technologies that enable them to cater to the underserved masses, and thus create a significant contribution to the country’s socio-economic development.