3 Ways Technology Is Helping The Loan Business To Scale Quickly
By Joy Dumasia
September 23, 2021
- AI credit rating
- Credit ratings
- Digital loans
The rise of FinTech has resulted in a new and improved lending system with reduced processing time and minimal or no paperwork. The digitization of lending activity predates the COVID-19 pandemic; its demand will continue to grow at an increasing rate. While the target audience remains the digital and tech-savvy generation, they also go beyond conventional assessment systems and metrics.
One of the benefits of digital loans is faster credit approval. Credit reviews and loan disbursements on digital platforms have much faster turnaround times than traditional loans. Another key benefit associated with digital alternative lending models is operating cost efficiency. Digital lending models, on the other hand, have technology-based business and functional models that require minimal human intervention, thus reducing manual operating costs.
In 2008-09, when technology lending started to gain momentum, there was general disenchantment with traditional sources of credit. With technology and digitization, the credit application processes of yesteryear are being upgraded with a faster, safer and more transparent borrowing model offering low cost solutions.
Ankit Mehra, CEO and Founder of GyanDhan, said: âIndiastack has improved access to credit, allowing lenders to grant loans that would have been more difficult or much more expensive for the end consumer. When we started GyanDhan in 2015, we started a pilot project to enable loans for coaching courses. However, we had to abandon the initiative due to the high cost of creating a physical loan application and the challenges of scaling up and risk issues when we did not have the physical infrastructure to. across the country. We relaunched the domestic vertical last year amid huge demand from the domestic market. Adopting Indiastack elements allowed us to make smaller loans and also significantly reduced the overall cost of origination. More importantly, we don’t need physical infrastructure across the country to create and manage loans. With the entry into service of the account aggregation framework, we expect a further acceleration in the reach of lending in general. Enabling our clients to interact with our clients in the study abroad loan journey through basic technology changes has also allowed us to increase conversions at our partner banks by a factor of 2. , 5. “
Here are 3 ways technology is helping lending businesses scale quickly and efficiently:
- Reduced operating costs
FinTech has changed that by gradually moving all lending activity online. Today, many lenders offer pre-approved personal loans and easy credit options for SMEs. This change helps to reduce the costs and time involved in the process, which benefits both the lender and the borrower.
The online process requires minimal documentation, which can be downloaded directly without the need for physical collection. In addition, online processing, verification and assessment streamline the operational aspect of the loan process, making it more efficient. With excess capital and time, lenders are looking to expand their customer base and come up with better deals. Geography being another hurdle, it’s easily overcome when you can get credit at your fingertips.
- New age assessment models
Technology has made it easier to assess credit applications. Traditional sources of loan relied mainly on manual appraisal, which presents the risk of subjective decision-making. Good credit application can go unnoticed as personal biases set in. However, the automation and the online process made it possible to make an objective decision, precisely calculating the risk and default factor.
AI scoring is a great solution for credit scoring using more data for individualized credit scoring based on factors such as current income, job opportunities, recent credit history, and ability to earn. plus older credit history.
- Inclusion across the spectrum
Previously, each lender pursued more or less the same group of clients. Those without a credit or collateral history were largely ignored. In the education sector, the financing of short-term courses and vocational training has not been sufficiently taken into account. Traditional lenders and banks have been reluctant to offer credit to SMEs for a variety of reasons. But technology has helped solve these problems or has begun to attack these largely ignored clientele.
While collateral is always required for high priced loans, especially from a public lender, many FinTechs offer low priced and high priced loans without collateral or credit history, thus diversifying their borrower profile.
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