New Age digital lending platforms go where banks fear to step

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Banking has always been a challenge for Indians, multiple government programs like Jan Dhan Yojana and multiple attempts by RBI trying to reach the masses can be seen each year. New age fintech companies with technological advancements in their services are trying to solve the daily problems of Indian consumers and make lending transparent, affordable and hassle free.

It has developed from physical space to digital space evolving in a hybrid banking model.

Over the past few years, India has experienced a massive disruption in the fintech space which has brought flexibility and a versatile digital customer experience in banking and lending.

With the rapid adoption of digitalization, the lending landscape in India has changed dramatically. In addition, the COVID-19 outbreak has created a huge space for consumers and businesses to intensify the growth of the loan market.

The digital lending industry is expected to grow from $ 110 billion in 2019 to $ 350 billion in 2023, according to a report. As a result, the field of digital lending will become the highest penetration sector by digital channels in India.

Analyze market gaps

According to estimates by the Reserve Bank of India (RBI), the demand for credit from MSMEs in India is $ 490 billion. However, the overall supply of formal sources is insufficient, amounting to $ 192 billion. Demand and supply estimates suggest that there is a huge $ 330 billion credit gap that banks and other mainstream financial institutions are unable to fill. One of the main factors affecting the offer is the lack of credit history and documentation.

This creates opportunities for new age digital lending platforms and NBFCs to grow in the market.

Growth drivers of digital lending applications in India

The lack of consumer-centric approach to finance and lending solutions has always been cited as a challenge for businesses and consumers. Old-fashioned financial institutions and banks are reluctant to lend, making it more difficult for both lenders and borrowers. Lack of formal financial data for credit assessment, long documentation process and long disbursement timeframe followed by high interest rates.

Better smartphone penetration, better internet penetration, and connectivity accelerated by COVID-19 lockdown have improved affordability. This has increased the demand for and supply of consumer loans, credit cards and business loans for SMEs. To meet market demand, application-based lending solutions continue to grow dramatically while driving the overall growth of digital lending solutions.

In summary

Loans have seen a notable evolution over the past few years, moving from home, auto and personal loans to consumer loans for purchases, medical emergencies, immediate purchases and short-term loans for an instant need to cover expenses. Last 10 days before the salary credit. However, there is a huge risk of collecting payments in digital lending solutions and no manual intervention in the application, disbursement and collection process. Many new age fintech companies and startups are meeting all the challenges that become the bottleneck of their development to further transform the market like never before.

(Ajay Chaurasia is a product manager at the digital lending platform RupeeRedee-new-age)

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Posted on: Friday November 12th, 2021 09:47 IST


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