• Sat. Feb 4th, 2023

Tech-enabled Financing Solutions are bridging the gaps in India’s lending system

Jan 9, 2023
"Tech-enabled Financing Solutions are bridging the gaps in India's lending system" along with an image
Mr. Priyank Kothari, Director of Arvog.

India is one of the world’s fastest-rising Fintech markets. The industry’s market size in 2021 was valued at $50 billion and is forecasted to grow to nearly $150 billion by 2025. The ecosystem includes a wide range of sub-segments, such as lending, payments, personal financial management, wealth technology, insurance technology, regulation technology, agriculture technology (agri-fintech), and more. Technology has further sped up the process by addressing bankers’ typical problems, such as data, digitization, and demand.

While new ways of lending and borrowing have become prevalent, even traditional lenders are leaning on technology to help decipher the plethora of data available today and help make business decisions.

Innovation can help the underprivileged in ways that support economic growth and well-being in the fintech sector. Below is an outline of how technology and its uses are changing the financial landscape.

Value Chain Financing is critical:-

Value chain finance describes the movement of money to and among the many links in a value chain. Technological advancements have significantly influenced the expanding use of value-chain finance. These include utilizing information and communication technology for mobile banking, electronic networks, technical help on the go, and enhancing management information systems to support specialized financial services.

Blockchain Technology is reliable:-

Blockchain is a shared ledger of all transactions and accounts recorded and kept by all participants. The cost of gathering this data is prohibitive otherwise. More innovative lending is made possible by blockchain technology, a reliable method of data storage. Additionally, the system works with smart contracts to coordinate timely payments between parties.

Technology and digitisation are the enablers:-

Lenders currently have access to alternative client data from social media profiles and communications to conduct profile checks, instantaneously obtain the borrowers’ credit reports, run intricate algorithms, and determine a customer lending score in real time.

Customers can upload documents directly to their platforms, including proofs of address, identity, and bank statements. Customers can also apply online, digitally submit their information and supporting documentation, and follow the progress of their loan application at all times. Customers are now more receptive to online financial transactions, thanks to our regulators, the government’s demonetization program, and other steps to promote digitization.

The upsurge of Tech driven FinTech lending:-

A new and improved lending system with faster processing times and little to no documentation has emerged due to the growth of fintech. The loan industry has been digitalized even before the COVID-19 outbreak, and demand will continue to rise. Although the digitally and technologically sophisticated generation continues to be the target market, it is expanding outside the traditional evaluation systems and norms.

The quicker credit approval time is one significant benefit of digital financing. Credit reviews and loan disbursals on digital platforms happen more swiftly than traditional loans. The operating cost-effectiveness of digital alternative financing arrangements is another major benefit. Contrarily, technology-enabled functional and commercial digital lending models require little to no human interaction, lowering manual operating expenses.

Fintech Firms will play a significant role:-

These lending platforms concentrate on providing customers with easy, quick, and widespread access to loans. From the lender’s point of view, they focus on lowering delivery times and costs while strengthening the credit process to manage credit risk better and serve a broader customer base.

NBFCs are establishing that lending to customers can be carried out at scale through partnerships, market linkages, smart data intervention, and a phygital approach. The cost of providing marginal services has considerably decreased since the development of digital technology, enabling them to offer in smaller packages to less fortunate clients. Fintech has created new methods for targeting and collateralizing lending, pricing, distributing risk, and structuring value chains.

The ultimate goal of economic mobility and financial inclusion will be possible once this sector receives the necessary push to enhance reach and viability to enter its next level of evolution.