Tags:
Journalism of Courage
By Mr. Abhay Bhutada, Managing Director- Poonawalla Fincorp:
The financial services sector has been constantly evolving its way of doing business and is at a pivotal point. It is going through major disruption and innovative digital transformation, which is spurred due to several factors such as competitive environment, stringent regulations, and the rise of ever demanding consumers. The Covid-19 pandemic also posed a serious challenge to the industry amid a lot of uncertainties, which made the financial service sector relook at its way of doing business and assess its business models. After this assessment, financial service providers realized that to be relevant in the market one must be agile and solution-focused and this can be achieved only using technology and thus, focus has shifted from traditional way of doing business and it is now becoming end-to-end digital solution.
Today, Digital Lending is an intricate landscape in which non-traditional financial service providers are perpetually leveraging technological innovations to outperform their traditional counterparts. These zestful lenders skillfully integrate digitally native solutions with convenience, speed, and 360-degree customer service to optimize lending processes into a genuinely end-to-end experience.
As far as India is concerned, Digital Lending is one of the fastest growing fintech segments. As per the Statista reports, the digital lending marketplace has grown exponentially in India from a modest USD 9 Billion evaluation in 2012 to a whopping USD 110 Billion in 2019, which is only the tip of the iceberg. It is further projected to attain a market evaluation of a colossal USD 350 Billion by 2023. The constantly evolving digital lending landscape comprises tech driven NBFCs (Non-Banking Finance Companies), Fintechs, and Neo banks. Commercial banks are also joining this rapidly evolving domain, providing lending services independently or in collaboration with NBFCs or aggregators.
Here are some reasons why Digital Lending is a true End-to-End ecosystem and how it is accelerating the transformation of financial services in India.
Tech-driven digital lenders are constantly scaling their hyper-personalization efforts by leveraging vast stockpiles of data to understand how their customers interact with their brands. Companies are additionally segmenting their customers into well-defined subsets based on demographics, location, net spend, interaction history, and satisfaction, among others, to identify the most likely segments to opt for their services. By narrowing their audiences to a select few sections, lenders are now achieving greater conversion rates through well-timed and strategically targeted communication efforts.
Acquiring the loyalty of your customers goes a long way in ensuring a business’ continual growth over a sustained period. That is why lenders are more frequently engaging with their customers as distinct individuals rather than characterizing them as a statistic. The more the lender engages with its audience, the more knowledge it acquires to refine its services, products, and direct communication, creating bonds based on trust and mutual benefit. The data obtained through proactive engagement is transformed into efficient marketing channels and AI (Artificial Intelligence) driven actionable deliverables that satisfy even the most discerning customers.
Traditionally, lending is a highly-manual, paper-based procedure. However, digital lenders have revitalized the lending landscape by strategically incorporating basic yet robust technologies such as OCR (Optical Character Recognition), RBA (Robotic Process Automation), ML (Machine Learning), and ADR (Automated Document Recognition), among several others into their operations. With the successful implementation of these technologies, tech-driven lenders have significantly sped up the ‘application-to-disbursal’ process while resolving low-complexity applications using minimal resources.
In many ways, an exponential rise in real-time payments has overburdened traditional rule-based fraud detection solutions, leading to false declines at online or offline touchpoints. Machine Learning (ML) algorithms empower financial institutions to locate undiscovered patterns that would have been otherwise impossible to track utilizing traditional fraud detection methods. These patterns are stored in real-time within the system for detecting future fraudulent activities, in many ways functioning as a self-improving security mechanism. With the assistance of ML, digital lenders are now able to accurately determine the authenticity of transactions within a matter of milliseconds.
A SaaS (Software-as-a-service) delivery model offers robust automation across all the major verticals of the lending process and can be efficiently set up in a matter of days even for administering overly complex offerings like mortgages. The SaaS model offers a scalable solution that can effortlessly handle a wide range of borrowings, significantly diminish system costs, and free up precious resources for undertaking high-risk/high-value consumer interactions. By leveraging the model, lenders also access superior connectivity across and within enterprises by reusing and repurposing datasets as an element of a microservices architecture.
In Conclusion:
Digital lending has started disrupting the financial service segment and has tremendous potential to grow further. In India, it still has many miles to cover and many lives to impact. It can very well go hand in hand with the RBI’s Financial Inclusion Index and drive financial inclusion through last-mile connectivity using technology. In near future, it has the immense potential to become a ray of hope for rural, underserved communities just like it is already being preferred as the most borrowing channel by millennials and Gen Z and will further accelerate the transformation of the financial services segment.
