The fintech industry has stolen a march over the traditional banking system in the digital lending space by leveraging new-age tech to speed up the whole process of ascertaining the credit worthiness of potential borrowers with quick disbursal of credit and a host of other services.
The fintech industry in India is growing rapidly. They have captured a good space with advanced technologies like smart usage of Data Science, Artificial Intelligence and Machine Learning. Even large banks and financial institutions have now started to value the importance of fintech.
The rapid growth of India’s fintech space can be attributed to the success of mobile payments and digital lending. Hence, it is not very surprising that traditional banks are also keen on embracing new technologies and partnering with fintech players to improve their service standards.
Many large banks have even set up fintech subsidiaries to internalise fintech competitiveness and export technology capacity to smaller banks. Fintechs are also stepping in to help financial institutions handle the large number of loan applications by enabling digital applications, facilitating data collection or assisting with the underwriting and approval process.
How fintechs are helping keep consumer liquidity flowing?
Mobile payments
Fintech has significantly pervaded the mobile payments landscape. Many fintech players are taking advantage of the rise in the use of smartphones, improvements in digital infrastructure, and a growing interest in online shopping.
The advent of UPI has further eased the process of making payments online. The biggest advantage offered by UPI is its interoperability among multiple banking platforms. This enables customers to enjoy a fast, seamless and reliable payment experience, and pay utility bills. In addition to this, they can send money to their family and friends almost instantaneously.
Digital lending
The process of availing loans from traditional banks is not only time-consuming but also paper heavy. It sometimes takes weeks to just get approvals for the loan. The COVID crisis has further worsened the situation as most of the banks are reluctant to lend in this uncertain scenario. Against this background, digital lending NBFCs have emerged as a saviour for customers.
Fintech companies operating in the digital lending space uses new-age approaches to disburse credit. Instead of relying on traditional financial data, they are now using alternative data to make more accurate and informed credit decisions.
Alternative data for credit scoring can cover employment history, academic background, rental payments, utility bill payments, insurance payments and even social media activities.
Since there is a shortage of credit data on MSME borrowers, fintech lenders leverage alternative data to assess their creditworthiness. This method improves access to credit for MSMEs, who are often declined credit from the formal banking sector.
Not just MSMEs but alternative data also helps salaried professionals and freshers who do not have any credit score. This explains why despite being a fraction of the banking system in size, the digital lending space is growing at a rapid pace owing to the faster and hassle-free process of loan disbursal.
Another main advantage of digital lending is that it allows for digital customer onboarding and credit disbursements, thereby eliminating the need for the customer to be physically present at the lender.
The digital lending space apart from being hassle-free is also helping the new to credit customers and those who have lower income to avail short term personal loan with a few clicks. The fintech companies, through technological means, can promptly evaluate credit risks by using the database containing loan applicants’ background and approve the loan.
https://yourstory.com/2020/09/fintech-firms-digital-lending-consumer-liquidity/amp
