The pandemic led to global disruptions across industries and sectors across the world. The financial crisis that emerged during the pandemic, made the lending industry endure a constant state of change and prolonged variance. However, with the recovery across sectors slowly gaining momentum, the lending industry does need to infuse stronger resilience in creating a seamless process that helps streamline the business and enables technology to drive innovation for the stakeholders. Fintechs have successfully leveraged emerging technologies to further disrupt and lead the change in building a lending industry that is tailored around convenience and comfort for the consumers.
Moving away from high-risk high-return investments
Within such a changing market, many traditional lenders hold onto the conservative approach and prioritize safety while handling the investment capital and forfeit gaining high returns. This stable and safe approach will give a higher preference to customers with a good credit history and those who are much more likely to repay their loans; while moving away from riskier investments, even though there are higher returns. By de-risking their portfolio of customers with high non-repayments, lenders are creating a more conservative narrative for the lending industry.
The convenience of offering priority services on a single platform
Fintechs have identified how convenience is the key to leveraging technology and attracting customers by providing a consolidation of priority services on one single platform. The emergence of neobanks has led to a steep rise in how a host of services are all offered to customers who are now exploring a one-stop-shop for fulfilling all their financial needs. Given how technology is continuously building the interplay between these services, fintech firms are cross-selling and upselling their services to a majority of customers. Artificial intelligence is employed to offer personalized services by prioritizing customer-centricity while technology such as chat-bots allow the lending industry to be available 24/7, for sharing comparable loan rates, product information, handling queries, details on processing fees, and helping lenders achieve their strategic goals.
Utilizing technology to tap into unreached consumers
The growing fintech phenomenon is increasingly penetrating denser segments of previously unreached consumers. With the rising appetite for personal loans, fintech lenders are adopting business models that leverage cutting-edge technologies such as big data, APIs, and AI algorithms. These aim to facilitate a seamless transition to customers’ hyper-personalized solutions that highlight the power of a systematic cash infusion technology by financial institutions to provide digital lenders with the low-cost expansion of customer base and extend their services to new customers. They are able to reach out to the underbanked and bring them into the financial fold by offering easy credit access and educating them on self-reliant services to ensure timely repayments.
Digital transactions driving consumers’ convenience
A thriving economy relies on financial inclusion as one of the prime pillars that build and safeguards the interest of consumers across segments. The pandemic-induced flux and continuous metamorphosis have injected the digitized offerings to go beyond the traditional lending patterns. During the pandemic, financial institutions promoted digital transactions to minimize the various touchpoints and build convenience around their services. These transactions were completed in the comfort and security of their homes and highlighted the rise in digital adoption among a growing set of consumers.
The influx of technology and innovation in lending models
Necessity is the mother of invention and innovation was desperately needed for the lending industry to transform itself during this challenging time. Fintechs utilized assessing and utilizing transactional data such as GST for MSME, banking for personal loans, underlying asset valuations to secure loans. By offering flexible EMI models such as buy now pay later (BNPL) concepts to factor in fluctuating income and use predictive technology to ensure repayments according to the borrower’s income timeline to eventually improve recovery rates and lower delinquencies.
Fintechs are focusing on building stronger repayment disciplines by driving customer engagement and educating benefits of good credit behavior, thereby increasing their overall collections. These changing dynamics are positively positioning the flow of funds in helping the recovery of the economy. Technology is transforming the lending value chain to enhance total customer experience, increase efficiency, reducing costs of financial products and operating platforms. Technology is quickly replacing traditional lending models with digital solutions and drastically lowering the turnaround time while helping faster disbursement of loans.
The boom in digital lending combined with the rise in new-to-credit consumers is ensuring instant loan disbursement for small and medium ticket purchases. Technology and digital innovation have the potential to change the entire scope of credit lending and achieve profitability for entrepreneurs who are changing the socio-economic framework of the country. Rising economic entitlement and accredited lending are changing the dynamics of the lending industry and will ultimately help augment the economic positivity of the country.
The views expressed above are those of HP Singh, Chairman & Managing Director at Satin Creditcare. Bfsinxt.com does not necessarily endorse it and will not be held liable for any direct or indirect damage made to any individual or organisation.