The banking industry has witnessed rapid changes in the last few years; the traditional banking practices have been seamlessly integrated into digital banking structures. Fintech companies are transforming the banking sector, all thanks to digital tools and emerging technologies.

The Aadhaar Card and video know-your-customer (KYC), cardless cash withdrawals, paperless client onboarding, and mobile ‘tap and pay’ are technology-first tools that highlight India’s rapid financial digitalization. 

As internet prevalence and smartphone use rise, conventional and new-age borrowers are being drawn towards digital lending options. 

According to a survey, roughly 40% of borrowers, headed by millennials, are willing to secure loans online rather than traditional channels.

Technology is a crucial facilitator of the digital lending business. The rapid use of digital technologies has helped troubleshoot real-time issues and meet the market demand. Consequently, the necessary foundation has been laid to bridge the credit divide in the country, and supply credit assets and value-added services through digital pipelines.

The 3 D’s – Digital Infrastructure, Device Penetration, and Digital Loan Journey Experience – dictate the ubiquity of personal loans across client categories in this digital world.

  • Digital Infrastructure: In terms of fundamental infrastructure (such as broadband) and enabling ecosystems (such as Payments / UPI), India has made a commendable effort to eliminate digital barriers. 
  • Device Penetration: Accessibility or the extent of digital penetration through mobile phones, digital literacy, adoption have reached new heights. Availability of various digital channels, devices, and platforms, such as mobile phones, the web, or even omni-channels or physical models, are playing different roles in promoting digital literacy among commoners. Borrowers now have access to credit 24X7.
  • Digital Loan: Borrowers’ capacity to experience and act on the whole loan journey from origination to repayment has also been a game-changer due to rapid rise in technological innovations.

Here is how technology has changed the entire borrowing experience.

  • Loan application is quick and easy.

Personal loan applications used to take a long time to process, and many people who made a consistent amount of money were frequently declared ineligible under the rules of the top loan providers. The game is rapidly changing today. 

Some organizations use AI and ML  to fetch your bank statements; phone and power bill payment records; and shopping histories to measure safety and trustworthiness when lending money to people, adding inclusion to the personal loan scenario. 

  • Comprehensive tools in the consideration stage

You can now receive comprehensive loan quotes from various lenders in minutes. EMI calculator is another perk of the digital system that many lenders offer.  It helps you to calculate personal loan EMI and how much you can expect to pay over time. It also allows you to calculate penalties and other aspects of EMIs. Applying for a personal loan is now a matter of a click.

  • Fast document verification 

Document verification with traditional banking methods was a fairly lengthy process. It would take two weeks to verify your documents and transfer the loan amount into your account. However, the game has changed entirely with digital banking; document verification is no longer a one to two-week-long wait. 

  • Quick approval of a loan

Traditionally, it was mandatory to visit the lender’s branch office, and experience long waiting hours and multiple rounds of evaluation before the final approval of the loan would come by. 

Now, applying for a Personal loan, i.e., checking eligibility criteria, documents verification, and loan sanction, is instantaneous. You can get approval for your online personal loan without leaving your livingroom. 

The digital lending market is data-driven, in addition to technology. Digital loan processes cover data from start to finish, from underwriting to disbursement. Digital lenders must use new technological improvements that can help speed up specific procedures and turnaround times. Loan procedures have grown more streamlined due to technology integration, allowing digital lenders and personal loan aggregators to comply with ever-changing rules, operate in less time, and maintain robust systems for consumer security.

The distributed ledger technology, also known as Blockchain or Cryptographic originations, offers opportunities in the areas of fraud detection, and with the introduction of digital currency as a legitimate legal tender, there is potential to speed things up and cut down the cost of lending while also increasing transparency by a factor of ten. 

The growth of the financial services ecosystem, such as Account Aggregation, will make the onboarding and verification process more seamless and, in the end, less expensive. With more open banking architecture being used by major banks and traditional NBFC lenders, the overall cost of financing and integration should be trending lower.

Personal loans on digital apps also break down barriers such as lack of digital workflow affinity, languages, and technical and financial literacy competency levels through experiences with vernacular voice, data, and cognitive chatbot solutions, lead by advancement and proliferation of Natural Language Processing (NLP). 

Customers are expected to be presented with a plethora of options and products on Personal Loans from direct digital lenders, peer-to-peer lenders, platform lenders, and directionally progressing the business forces to make it a borrowers’ market.

Bidding Note

Though digitization has taken decades, it has accelerated exponentially as mobile data plans have become more affordable and the world has confronted the Covid-19 pandemic.

In other words, 2022 will allow enterprises to use technical capabilities and drive digital transformation across the financial value chain. The high adoption rate may fundamentally alter a financial institution’s cost structure and provide an entirely new set of services to customers that have never been seen before.

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