| |October 20218VANTAGE POINTT he last 18 months have been tumultuous for the world at large, as individuals and businesses struggled to make sense of the new normal and adapt to it. People had to adopt new ways of shopping, studying, transacting, entertaining and doing business. Businesses stepped on the gas to accelerate the process of digital transformation. The effects were fairly pronounced on the banking industry as they had to cope with a spike in credit costs and a high NPA ratio, job losses, pay cuts and a debilitating liquidity crunch.The unexpected situation led to a change in consumer behaviour including the consumption of financial products such as loans. Due to the pandemic, consumers preferred to shop for loans on the internet rather than visit lenders. India has emerged as the second largest online market with over 560 million internet users. The data revolution has contributed to the rise in digital lending through web platforms and mobile apps. Banks and NBFCs have set-up their own digital platforms with specific private players. In addition, there are fintech companies and loan aggregators who have used smart technology to create online platforms that can provide users with a contactless, seamless lending experience that is faster, cheaper and more convenient to the end-user.In short, digital technology has disrupted the traditional lending business. Today's aware consumer seeks a superior customer experience that has led to the emergence of smarter business models, quicker turnaround times and lower costs. This has been made possible by the adoption of modern technology like the cloud, Artificial Intelligence and Machine Learning.The user simply has to select the loan product and upload his basic identification documents on the digital lending platform. The software uses the inbuilt APIs to complete the background verification, confirm the credit score & bank details and approve the loan application. This is done in a matter of minutes through complex algorithms without any human bias. Once the loan is approved, it is a matter of time before the bank details are verified via penny drop and the amount is credited to the account. The emergence of digital lending has struck a body blow to the informal, unorganized lending sector that was ruling the roost in the small towns and villages prior to the smartphone revolution. With the increase in internet penetration, digital lending is finally reaching the underserved segment of the population.What are the reasons for the surge in digital lending?Changed Consumer Behaviour with a Preference for Digital Offerings: The increase in smartphone usage combined with the rise in internet penetration has led to digital channels influencing the purchase of over 40-60 percent of loan products. Over 55 percent depend on online tools/recommendation of credit options.Younger Demography: The age of new borrowers is falling everyday with over 49 percent of consumers falling under the 30-year bracket which explains the influence of the digital avenues.RISE OF DIGITAL LENDING POST COVIDBy Praveen Paulose, MD & CEO, Celusion TechnologiesPraveen Paulose
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