Across the world, due to the outbreak of COVID-19 gave rise to the digitalisation of companies and the financial sector is not an exception.
With a global economic crisis and a historic economic slump, 2020 has caused unprecedented disruptions and the digital lending sector has not been spared either.
Techsaga, offers digital marketing services, helping fin-tech start-ups to combat major challenges leveraging the potential of technology to fill the gaps where banks make the lending process inaccessible for customers.
Covid-19 :Stepping up the game
COVID-19 crisis has created a digital ecosystem that has complemented the growth of industries such as e‑commerce, financial services and consumer credit. Consequently, meteoric rise has been reported in digital lending, loan procurement and disbursal systems because of increased smartphone users, facilitating flexible seamless online transactions.
Impact on India:
PWC report stated that India’s digital lending market will witness a growth of 36% by 2023. Digital lending is an emerging way for those who have limited access to financial services.
India’s remotest areas have easy access to the Internet, so can lend financial services digitally in an easy way. New digital money can be lent to people across remote areas overcoming geographical limitations, reducing transaction costs and enhancing the customer experience. Huge variety of lending models has resulted in an upsurge of contactless processes of digital lending models, each dealing with financial inclusion in unique ways.
Digital lending is transforming the financial health of India.Digital lending is a process of getting a loan digitally with no or minimum paperwork, executed with the help of the Internet. With technological advancement, the traditional banking system in India has been revolutionized, with the facilitation of Digital lending.
What is the need for Digital lending/Digital loan?
Digital lender platforms can comprehend the paradigm shift in consumer behaviour amidst pandemic, and need of getting instant funds reported. New age tech platforms which are data-driven came into the picture providing loans according to the convenience of consumers.
There are also methods developed to check the creditworthiness of an individual while sanctioning loans. Digital mode of lending requires a tech-infused platform to facilitate lending of loans of any size in an easy manner. Digital loan facility also eliminates the cumbersome procedures of traditional banks involves less paperwork and minimal to no documentation;
Customers enjoy the digital lending in just a click away.
Since 2015, the Indian market has seen an emergence of new players rolling out on tech-enabled services like digital payments, P2P lending, insurance. India’s financial services landscape underwent a lot of transformation with new regulatory reforms enabling hassle-free customer onboarding, quick and easy Aadhaar-based e-KYC processes, credit risk assessment processes.
Reasons for the growth of Digital Lending Model
Online consumers prefer easy procedures involving less documentation and hassle-free onboarding
Online creditworthiness can be checked also, making it easier to approve or disapprove the loan.
Advanced Data Security;
Short disbursal time;
Smooth process;
Introduction of e-KYC.
Benefits of Digital Lending
The lending model in India has undergone a huge transformation due to the rise in digitization and automation. The digital lending model provides numerous benefits include-
Easy Loan Access:
Geographical barrier is no more a barrier when it comes to digital loan and any individual can easily initiate a loan application from anywhere at any time, with the help of Internet access.
No Paperwork
Digitization helps the entire procedure to be paperless which means no need to physically attend a bank for a loan requires endless paperwork.
Quick Disbursal
Don’t need to stand in a long queue to get your loan approved and processed, Digital loan is processed in just a matter of time. However, all the required documents should be ready beforehand before initiating online application.
Transparency
Transparency is one of the most significant benefits digitized lending process offers. Loan application provided must contain a good repayment history.
Useful in Emergencies
One can lend an emergency loan on an urgent basis, through quick swift processing and get disbursal.
Access to multiple lenders
Due to digitization, borrowers can access multiple lenders and help you in choosing the best-suited loan, whereas in the traditional banking system borrowers need to visit multiple times to get such information.
Easier access to loans for first-time borrowers
Traditional banking system does not disburse loans easily to first-time borrowers because of no credit payment history. However, this is not true in the case of digital lending, and borrowers can access the loan facility for the first time.
Innovative Digital lending models
Over the last few years, a plethora of start-ups are investing in the lending landscape through innovative business models.
Some of these digital models are mentioned below.
Point of Sale (PoS) based lending
Bank fintech partnership model
Bank-led digital models
Invoice discounting exchanges
Peer to peer lending
Challenges of Digital lending
Digital lending involves complex algorithms in the decision-making process while granting loan therefore should be designed in a user-friendly manner and any change must be tested before launch.
Additionally, digitization means more automated processes and less human intervention. And people who are not that comfortable with the new features and socially backward people are a major segment who may face serious challenges, but time has arrived now to understand and accept this form of transition.
Techsaga, a digital marketing company, can handle a substantial amount of customer interactions with the help of AI-based chatbots, helping in optimizing the lending process by allowing lenders to focus on customer engagement and retention.
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