Digital lending: changing the financial inclusion landscape in India

The rise of digitization in the aftermath of the COVID-19 crisis has complemented the growth of industries such as e-commerce, financial services, and consumer credit. As a result, the fintech ecosystem has experienced a meteoric rise, especially when it comes to digital lending, obtaining loans and disbursement systems – thanks to the growing penetration of smartphones, the flexibility of the lending range. and transparent online transactions.
According to a report by PWC, the Indian digital lending market will register a CAGR of 36% by 2023. Digital lending is emerging as an effective force in reaching those who do not have or have limited access to financial services.
With the internet reaching the most remote parts of India, there is an opportunity for people of all geographies and demographics to access financial services digitally. The innovative products offered by startups are now able to overcome geographic limitations, reduce transaction costs and improve the customer experience. There is an upsurge in the contactless process from various clients, which has resulted in a wide variety of digital lending models, each dealing with financial inclusion in unique ways.

The rise of digital transactions

Digitization allows consumers to register with an online platform from their smartphone, making transactions easier. You can get faster credit, unlike traditional banks which tend to take a minimum of six to seven business days to approve loans. With technological advancements, digital financial services are now able to approve loans even within minutes.
There has been an increase in demand for seamless access to credit and customers who fall into the new customer category such as millennials, Gen Z professionals, and the underserved population. These salaried people in level 2, 3 and 4 cities are increasingly looking for easier access to credit from verified sources. Although they can apply for loans from formal institutions such as banks or non-bank finance companies, they are often denied access due to a lack of credit history and a preference for creditors. top notch customers.

Fostering financial inclusion in India

Fintech lenders focus on smart product development and catering to low-income, semi-urban and rural clients in unorganized sectors. In cities of levels 2 and 3, poor infrastructure is also one of the reasons for insufficient access to credit. As demand increases and the credit landscape evolves, the emergence of new-age digital lenders has been a much-needed respite for borrowers. Fintech lenders adopt such business and operating models running on cutting edge technologies that can seamlessly facilitate the launch, design, implementation and execution of personalized products and services.

Artificial intelligence / machine learning (AI / ML)

Fintech lenders use technology capabilities such as data analytics, AI, ML, and open application programming interfaces to gain insight into consumer buying and spending habits to build models alternative credit. As the government takes steps to promote the Digital India initiative, it is also approving regulatory interventions for the growth of the sector, proposing a separate division for FinTech companies.
All AI / ML based systems analyze data to predict customer creditworthiness and assess the risk involved in the loan. These self-learning systems continually update their algorithms to become stronger and safer over time.
With this capability, AI offers an unprecedented opportunity to extend to the credit market the same benefits that have already been introduced in consumer markets. Gradually, most financial organizations are moving towards such AI or ML systems for improved and risk free loans.

The digital lenders of the new era

Digital lending applications have only gained ground in recent years with the emergence of tech-driven startups and the digital revolution. Today, there are more Internet users in small towns and rural areas than in subways that adapt to these technologies.
Additionally, digital lenders have a higher risk appetite than banks, which allows them to lend to lower income segments. By offering unique products, such as microloans and short-term loans, they help low-income people build a credit history with small loan amounts without falling into the debt trap or facing debt. a huge burden. They make financial inclusion easier for the underbanked, allowing them to get loans from the comfort of their own homes with less paperwork and quick processing.
The digital lending landscape will continue to advance and reform by delivering innovative technology-based solutions. New age startups are driving this revolution, ensuring India has hassle-free access to credit. They are fast becoming a reliable source of credit for millions of people.

The views of the author are personal and do not necessarily represent those of the website.

Shruti AgarwalShruti Aggarwal is co-founder of StashFin. She has over 15 years of experience in financial services and entrepreneurship. She runs StashFin by making it easier for employees to obtain credit in several cities in India. She has experience in banking and as a chartered accountant, legal and accounting functions.
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