Then, flash forward to the present and all you have to do is download an app and begin doing business on your mobile for any purpose, whether it’s a money transfer or bill payment, shopping, or requesting the option of a personal loan; everything can be accomplished on your smartphone without the need to visit the bank.
Through the years technological advances are fueled by a rapid digitization wave across various sectors of banking. This has created a brand-new field called financial technology, also referred to as fintech. In this area, players are seeking to revolutionize traditional lending processes that have been for centuries, lengthy, long-winded, and complex.
Thanks to the tech-savvy professionals and innovators who have drastically made banking easier by making it paper-free and quicker than it was just a couple of years before. Digital lending, for instance, has become one of the most effective methods for customers to gain access to small to mid-sized loans to fulfill their daily needs and any unexpected costs that may arise. Let’s find out what we can do about it.
Today, a customer is able to sign-up with the online platform for lending with an iPhone, fill out the loan application, and upload all of the required documents within a couple of minutes. While traditional banks require between four and eight business days to process the same. Based on the kind of loan and the amount of money they’re borrowing, especially when it’s a substantial loan, there is a chance that waits times could be more lengthy. For instance, home loans fall in this category.
Additionally, the digital lending platforms have lower operating expenses than traditional financial players, in part due to their operations being powered by automated technology remote teams, as well as digital processes. These advances also allow digital lenders to expand their reach to more areas as they cater to customers who are from smaller tier II or tier III cities facilitating financial participation across India in a more efficient way.
Traditional players spend a lot of time assessing the creditworthiness of a lender. This is because printing files have to be moved across tables from one to the next. However, digital lenders complete this job in only a couple of minutes, employing predictive algorithms. The tools they use help them gain important information regarding the borrower and help them determine whether or not they’ll be able to pay back the loan.
The key to bringing an additional level of effectiveness to the program is electronic KYC. It has significantly decreased the time required for processing loan applications through the digitalization of the whole verification process. If you’re aware, prior to this, bank personnel needed to visit your place of business to complete all KYC requirements. In today’s world, if you want an unsecure loan all you have to do is provide the required Aadhaar, PAN information, and proof of income to the lender rather than making a relative as a guarantor or household member the loan’s approval.
Flexible like you’ve never seen before
Digital lenders today offer the possibility of a credit line up to INR 5 lakh. The loan is repaid over an incredibly flexible period that can last up to 36 months. The most appealing aspect of this credit solution is that you can obtain the loan in advance and utilize it in the future as per requirements, in contrast to traditional loans, which have to be repaid and consumed after approval. Additionally, you don’t need to utilize the whole loan amount once taken and pay only interest on the amount you used. If, for instance, you get a loan for a small amount of INR 50,000, and only use INR 30,000, then you will are required to pay the interest on INR 30000, not the whole INR 50,000, as opposed to traditional lenders that are charged interest for the entire amount.
If we talk about repayment, online lending platforms provide reminders to make sure that payments are timely and avoid penalties or charges for late payments. In addition, borrowers may opt to pay using various payment methods based on their preferences, whether it’s UPI or net banking, or any other option. Traditional banks however offer a limited selection of payment options.
Technology has made it easier for payment models to be created. The only method before was that the customer had gone to branches to pay or pay the branching agent in the event that the bank had agents collecting. Today, collection agents are able to send you links via messages, instead of visiting your home to pay at the touch of a button. You can now pay through the app or bill-paying utility payment platforms that are associated to Bharat Pay. Prior to this, customers had to establish an account by filling out the NACH form, which the bank processed to establish an automatic payment of money. Today, e-mandates take care of the task by requiring just two clicks. customers can set up the system directly, where the automatic debit is credited to their bank account immediately.
Secure and robust
Privacy is fast becoming a significant issue for people who earn middle-income Indian consumers. In the past privacy was a topic of discussion for those who were tech-savvy and who were confident in using apps to meet every need, but there are many individuals who are still adjusting to the digital revolution and could lose should their personal information be stolen. The top digital lenders only partner with reputable banks and NBFCs and invest in the latest technologies to provide security that is strong to clients. They ensure that a borrower is subject to a number of bureau inspections before approval of the loan. This allows the lender to make rapid decisions as to whether to accept the loan or not and also prevents fraud during the process. Digital lenders keep customer data by using cloud technology and use the information they collect with only the permission of the customers. They strictly follow the regulations of the government and ensure that customer safety and security are at the top of their business.
The final word
As we progress toward more digitalization, lenders from digital will continue to test innovative technologies that help make lending more convenient and easy for customers. They will continue to roll out new and innovative ways that will transform the lending system. Buy-now pay-later (BNPL) is an excellent example of the kinds of innovations that have been developed by fintech players which allow customers to shop with no concern about the amount of cash in their pockets, as well as rapidly convert their purchases into easy-to-play EMIs to help them keep their debts at bay. While the acceptance of these options will take time, however, the future is set to be digital, gradually but surely.