Innovation – Use of technology to create secure and seamless lending

 

Technological innovations in digital space are slowly replacing the traditional banking setup in a big way. A few years ago, one had to spend considerable time to manage banking tasks like passbook updating, money deposits or withdrawal, cheque encashment, and getting a loan. What was more challenging back then was to wait in long queues at the counter and finally initiating the formalities, starting with long forms etc. 

Fast-forward to present time, all you need to do is install an app or log on to internet  and start transacting on your laptop or smartphone, be it a fund transfer, bill payment, shopping, or opting for a loan; everything can be done at your fingertips without having to enter a bank. With time, these technologies have evolved and the interacting system was made more and more secure including two level of authentications, SMS confirmation, Notifying customer in real time and what not. However, in the space of corporate lending, it  still continues to be a complex and involve fair amount of paper work.

Over the years, technological interventions have been powered by a rapid digitalization wave across various banking verticals. This has given birth to an all-new domain called financial technology, also known as fintech. Players in this space intended to transform the traditional lending processes, which for ages has remained extensive, time-consuming and complicated. 

Thanks to tech innovators and experts who have been significantly simplifying the banking process, by making it paperless and much faster than what it was a few years ago. For instance, digital lending has emerged as one of the best ways for consumers to get access to small- to mid-sized loans and meet their day-to-day aspirations as well as any emergency expenses that might crop up. Let’s see how.

Seamless access

Today, a consumer can simply register on an online lending platform using a smartphone or laptop, fill the loan application and upload all the relevant documents, within a few minutes. Whereas traditional banks take a minimum of four to eight business days for the same. Depending on the type of loan, the amount they are borrowing, especially if it’s a large size loan, the chances are that the wait times can be longer. 

Moreover, digital lending platforms incur lower operating costs compared to conventional financial players, mainly because their operations are largely driven by automated technologies, remote teams and digital processes. These advancements also help digital lenders expand their reach to wider geography like smaller tier II and tier III cities as well, and driving financial inclusion across India in a more seamless manner. 
 

Digital paperwork 

Traditional players take a lot of time to assess the creditworthiness of a borrower. This is primarily because a printed file has to be transferred from one table to another. However, digital lenders perform this function in a few minutes, using predictive algorithms. These tools help them obtain useful insights about the borrower and identify whether or not he is fit to reap the benefits and contribute in the healthy lending space.

What has added more efficiency to the system is the introduction of the e-KYC, which has dramatically reduced the turnaround time for processing loan applications by digitalizing the entire verification process. Today, if you seek a collateral-free loan, all you need to do is submit your Aadhaar, PAN information, and income proof to the lender, instead of making a friend or family member your guarantor for loan approval. 

Flexibility like never before 

Digital lending platforms send reminder notifications to help ensure timely payments and prevent late fee charges or penalties. Additionally, borrowers can also choose to pay through multiple payment routes according to their convenience, be it UPI, net banking, or any other method to choose from the endless paying options. Traditional banks, on the other hand, have limited repayment options. 

Technology has enabled easier repayment models to be set up. The only mechanism earlier was when the person had to go to the branches to pay or pay to the branch agents when the bank sent agents to collect. Collection agents today can send you links on messages instead of coming to your house to get you to pay with the click of a button.  Now they can pay on the app, or on bill-paying utility payment platforms associated with Bharat Pay. Earlier customers had to set up a mandate by filling in a NACH form which the bank would process to set up an automatic flow of cash. Now e-mandates do the job – with two clicks, customers can set up the mechanism directly where the auto-debit happens from their bank account instantly. 

Robust security 

Privacy is quickly becoming an important issue for the middle-income Indian consumers. Even a year ago, the notion of privacy was an esoteric preoccupation for a few people who were techno savvy, and who were already very comfortable in using apps for all their needs, but there are a lot of people out there, who are still getting used to this wave of digital and have a lot to lose if their data was compromised. Leading digital lenders invest in advanced technologies to ensure strong security to customers. They make sure that a borrower undergoes a lot of bureau checks before the loan is approved. This helps the lender make quick decisions on whether to approve the loan or not and prevent fraud in the process. Digital lenders store customer records using cloud technology and leverage these insights with customers’ permission only. They strictly follow government guidelines and keep customer safety and privacy at the forefront of their operations.

Conclusion

As we move towards greater digitalization, digital lenders will continue to experiment with new technologies to make lending easier and seamless for consumers and keep rolling out more innovative solutions to transform the lending ecosystem. Although the adoption of these solutions will take a while, the future is going to be digital, slowly but surely.

 

Disclaimer: The Author of this blog is Technology Head at Northern Lights Ventures Pvt. Ltd. (NLVPL) a company owns and operated digital platform “Finworks360”. Views expressed in this blog are in his professional capacity. Readers are requested to exercise necessary due diligence and Finworks360 or NLVPL does not assume any responsibility or liability for the same.