lending loans

Over the last decade, every industry in India has remained untouched by rapid technological developments, including 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, and real-time processing, have created a positive impact in subsectors, including payments, investments, and lending. New-age lenders have implemented these technologies to bring much-needed efficiency and speed to the sector, revolutionizing the way it 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 filling out the paperwork required for the loan and documentation and arranging 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 once defined the industry are being revolutionized by new-age lenders, who are infusing the industry with innovative technological solutions. These tools are being leveraged to fast-track the approval process and provide accessible lending solutions to the masses.

Some of these innovations include cloud-based technology and automation, which are allowing lenders to deploy software tools quickly. These integrations also provide lenders with information on 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 evaluate and define each loan's criteria, from interest rate, repayment tenure, and disbursal.

Technology's most significant advantage in India is providing credit to the underserved masses. The implementation of GST in mid-2017 was followed by a spike in digital adoption by businesses for bookkeeping and transactions, which 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 socialborrower's, on a real-time basis. This allows lenders to gauge a borrower’s credit, even without conventional data points such as credit scores. Tools such as personal loan calculators 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 by visiting a lender’s website or app. 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 procedure's heavy paperwork and slow nature to ensure that risk assessment was maintained.
As new-age lenders have leveraged various technological tools to assess a borrower’s credibility, the approval and disbborrower'sess have become tremendously quicker. One can get funds in their account within 48 hours of submitting their application form.
  • Underwriting: With the conventional loan application process, borrowers were required to provide much more documentation than needed. Online lending platforms, compared to banks, only require a few basic KYC documents for the application process.
  • Unsecured loans: The most significant 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 can provide access to credit to a wider audience segment than traditional institutions. With lower-income eligibility requirements, lenders can cater to a once-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, t"the tech revolution has transformed how borrowers can avail of lending services, from application to disbursal. New-age lenders have tremendously benefited from implementing cutting-edge technologies that enable them to cater to the underserved masses, thus significantly contributing to the country’s socio-economic development.