Why are Digital Lending Companies Successful in India?
The Coronavirus has changed the norms of finances globally, including everything else. Indian banks were doing well and progressing before the Covid-19 hit us. And it was despite the increasing competition from NBFCs and financial setbacks. Technology played a significant role in the growth of the banking sector. Earlier the digital lending market in India was giving competition to the traditional banking sector. But the pandemic escalated the digital lending growth.
In this article, we will highlight the role of the Indian government and infrastructure in the growth of digital lending in India. We will also go over the future scope of digital lending.
The Indian government is boosting the digital lending growth in India in the following ways:-
- Policies & Norms
- Video KYC (know Your Customer) by RBI
- Initiatives of The National Payment Corporation of India (NPCI)
- Accessibility to Technology & Internet
The vital interventions of GOI like federated consent architecture and the newly created payment ecosystem are proving to be the catalysts of digital lending in India. There are some wonderful measures taken recently about interest rates and liquidity regulations. These measures are enabling Fintech and NBFCs to serve their customers more efficiently.
We all are trying to avoid any social contact during Covid-19. But the lack of field visits could affect the speed of KYC. The RBI has provided a solution to this issue in the form of Aadhar card-based KYC of customers over a video call. Video KYC will ensure cost-effective and reliable customer onboarding with efficiency. This route of KYC is a boon for banks and NBFCs. It can help them to combat the slowdown in the financial market due to the pandemic.
On 8th November 2016, India walked into sudden demonetisation. Many major currencies were of no use for people. These circumstances revived the dormant digital payment culture in India. NPCI recognised the need of the hour and came up with innovative apps for digital payments. For instance, toll collection via FASTags, IMPS, UPI, and Bharat Bill Pay. The popularity of digital payments is a reason for the emergence of digital lending in India.
Indian fintech companies took advantage of the change bought by the demonetisation. They levelled up their game in terms of new technology. They used technology to provide a smooth experience to their customers. The decreasing cost of the internet in India also went in favour of fintech business models.
The following factors should be credited for the bright future of the digital lending market in India:-
- Efficient Processing
- High-end Metrics
- Strong Integration
- Customer-centric Approach
The decision-making in NBFCs, Fintech, and digital lending companies are more efficient. They have the technology to excess the credibility of the buyer at one click. They can immediately decide to give a loan or not and for how much amount.
The growth of digital lending in India is running on advanced and sophisticated metrics. The data is processed at speed. The lending companies get a better understanding of the profile of the customer. At the same time, credit alarms and portfolio insights allow digital lending platforms to make a secured decision.
The companies with a business model of digital lending lean on strong integration for their seamless working. They have cloud-based connections with data sourcing agencies and credit bureaus. They also have a system for internal data sharing amongst branches and employees. In this way, they gather comprehensive information from both internal and external resources
The main ambition of the digital lending market of India is to provide ease of documentation and processing. Millennials who are salaried or owning a small business love this time-consuming and convenient experience of getting a loan. And the best part is the efforts are ongoing for making the digital lending procedures more user-friendly and systematic.
It is now essential for the traditional banking system of India to get on with innovations such as human-computer interface, Artificial intelligence, cloud-based connectivity, etc. Already banking system is a lot more digital than it ever was. The data entry and record keeping of banks in present days are more technology-driven than human efforts. But still, there is a lot of scope for building hi-tech digital lending systems through conventional banks in India.