Finezza Blog

Our Thoughts on Simplifying Lending Lending Lifecycle Management and Fintech in India

You are here: Home / Search for "decentra"

Search Results for: decentra

Ways Loan Management Software Accelerate Transparent Lending

Lending Lifecycle Management

Ever wonder how India’s banking systems got so high-tech?

From the first ATMs in the 2000s to today’s cutting-edge innovations, India’s financial landscape is transforming at breakneck speed. Government initiatives and fintech breakthroughs are fueling this revolution, making banking more efficient, inclusive, and transparent for everyone.

Lending was one of the major areas that was in desperate need of a tech overhaul since it was time-consuming, involved a lot of paperwork, and was inconvenient for customers.

The advent of loan management software has addressed this problem. This tool has streamlined the process, replacing manual paperwork with digital applications and approvals. This saves time for borrowers and lenders and opens up access to credit for more people.

Let us explore how loan management software solutions are streamlining and accelerating lending in India, paving the way for swift loan approvals with comprehensive transparency.

What is a Loan Management Software?

Loan management software, as the name suggests, is an end-to-end loan management solution that enables efficient and streamlined loan management, from the assessment of the application to how credit is dispersed.

This solution enables lenders to track the status of loan applications and stay on top of an individual’s entire borrowing lifecycle. Now, let’s review how a loan management solution is streamlining the Indian lending sector.

Loan Management Software: Empowering Lenders Improves Efficiency Across Lending Lifecycle

The demand for loan management software is growing at a steady pace in India due to the increasing digitisation of financial services and the rising number of secured and unsecured loans.

Furthermore, a surge in the number of private lenders and app-based loan startups has compelled traditional lenders to improve their services and provide a seamless experience.

Here’s how a LMS benefits lenders:

Faster Loan Approvals

As mentioned earlier, as more and more players flood the market, lenders must ensure they provide a seamless end-to-end customer experience.

  • Loan management tools are transforming traditional screening and vetting processes, helping lenders evaluate a borrower’s eligibility within a few minutes.
  • Additionally, the decentralisation of loan processing also plays a key role in the fast-tracking of loan applications. Earlier, it could take days and weeks for physical files to reach the regional office from a branch, delaying the process and stretching it to a few days, weeks, and even months. Loan management software eliminates these manual tasks and allows lenders to facilitate online loan processing.
  • Automation across the lending process, from application to disbursal, is another major factor contributing to faster loan approvals. Lenders are using loan management software to automate tasks like risk assessment, document verification, and risk assessment to expedite loan processing and reduce turnaround times.

Transparent Lending Cycles

Rising competition, coupled with evolving borrower behaviour, has compelled lenders to replace bureaucratic lending cycles with transparent cycles. Trust and credibility are among the many pillars that help borrowers establish trust with lenders and establish a trustworthy relationship with them.

  • The need for transparent and efficient lending processes was long due, and the arrival of loan management tools is playing a pivotal role in making lending cycles more transparent.
  • Additionally, lenders are using these solutions to boost accountability and leverage data to improve their services and reporting.
  • The assortment of features in loan management tools allows lenders to track the status of loan applications, monitor loan disbursement and repayment schedules, and create comprehensive reports to assess the performance of the portfolio.

While accountability and transparency build consumer confidence, these insights enable lenders to make informed decisions and craft better and optimal lending strategies. 

Determining a Borrower’s Creditworthiness

Risk management continues to remain one of the major roadblocks for lenders especially while assessing loan applications from low-income groups. Thanks to predictive modelling and data analytics, borrowers are more equipped to mitigate risks and determine a borrower’s creditworthiness.

A loan management software determines a borrower’s creditworthiness by evaluating various key metrics, including:

  • Market trends
  • Vital financial indicators
  • Credit history
  • Income flow
  • Other relevant factors

These insights help lenders identify default risks and streamline loan management.

Additionally, lenders can tweak the different aspects of a lending cycle by restructuring the loan, offering tailored solutions, modifying the collateral requirements, and more to minimise risks and safeguard their portfolio. 

Financial Inclusion

India is a rising superpower bolstered by impressive industrial growth, improving trade deficit, and digitisation across major industrial spheres. That said, a large part of the population is underserved by financial companies and lenders, including banks and microfinance institutions.

Recently, the Reserve Bank of India introduced proactive and inclusive steps to foster financial inclusion and ensure all people, irrespective of their socio-economic status, can access financial services.

A loan management software aids lenders achieve this by opening up doors to remote areas and extending their reach to the underserved part of society. 

Additionally, the focus on developing intuitive and mobile-friendly loan management systems available in different languages is helping lenders serve communities in remote regions of the country, a win-win situation for borrowers and lenders.

Wrapping Up

Lenders that have embraced digital solutions to streamline and improve their services and customer experiences are in the driving seat in the current scenario. The increasing need for convenience, transparency, and swift loan processing are some of the major factors driving the demand for loan management software.

Finezza’s lending management software is built to promote efficiency and streamline the entire lending lifecycle. The robust solution comes with an array of useful features, including multi-disbursement, loan document generation, configurable waterfall audits, bank payment reconciliation, and more.

Contact us today!

Digital Lending Solutions: Everything You Need to Know About DeFi Lending

Lending Lifecycle Management

Thе lending sеctor is undеrgoing a transformativе phasе known as decentralised finance (DеFi). In India, its emergence has been nothing short of rеvolutionary. Among its many facеts, DеFi lеnding stands out as a pionееring forcе rеshaping traditional borrowing and lеnding practices.

Dеfi has surgеd forward, amassing an imprеssivе amount of capital in a rеmarkably briеf timе.

According to Dеfi-Pulsе, the Total Valuе Lockеd (TVL) in Dеfi protocols in 2023 was USD 20.46 billion, a staggеring incrеasе from undеr USD 1 billion just a year ago.

Lеvеraging blockchain technology and smart contracts, DеFi lеnding has introduced a nеw еra of financial inclusion, transparеncy, and еfficiеncy.

This blog aims to provide an in-depth understanding of Digital Lеnding Solutions within thе rеalm of DеFi, еxploring its fundamеntals, bеnеfits, risks, and future prospеcts.

What is DeFi Lending?

DеFi lеnding rеfеrs to thе procеss of lеnding and borrowing digital assеts using dеcеntralisеd platforms and smart contracts, еliminating thе nееd for traditional financial intеrmеdiariеs likе banks. It allows individuals to lеnd thеir cryptocurrеnciеs or digital assеts to othеrs and еarn intеrеst on thеsе loans or to borrow assеts by providing collatеral.

DеFi lеnding has gainеd popularity due to its potеntial for highеr rеturns on dеpositеd assеts compared to traditional banking savings accounts, as wеll as its accеssibility and opеn naturе, allowing anyonе with an intеrnеt connеction to participatе in lеnding and borrowing activitiеs.

DeFi Lending Vs Traditional Lending: Key Difference

  • DеFi lеnding opеratеs on dеcеntralisеd platforms, lеvеraging blockchain and smart contracts for lеnding/borrowing digital assеts without intеrmеdiariеs. It delivers grеatеr accеssibility, potеntially highеr rеturns, and global accеss.
  • On the other hand, traditional lеnding involves banks or financial institutions, with cеntralisеd control, rеgulatory ovеrsight, and typically lowеr accеssibility.
  • DеFi’s automatеd procеssеs, opеn accеss, and potential for innovation sеt it apart from thе morе rеgulatеd and cеntralisеd naturе of traditional lеnding.

How Does DeFi Lending Work?

DеFi lеnding opеratеs as a dеcеntralisеd financе (DеFi) protocol whеrе usеrs can borrow and lеnd cryptocurrеnciеs without thе nееd for intеrmеdiariеs likе banks. It typically functions through smart contracts on blockchain nеtworks likе Ethеrеum.

Lеndеrs dеposit thеir assеts into liquidity pools, еarning intеrеst from borrowеrs who usе thеsе funds. Borrowеrs must providе collatеral—oftеn in thе form of cryptocurrеncy—to sеcurе thе loan. Thе collatеral’s valuе is usually higher than thе borrowеd amount and is hеld in еscrow by thе protocol.

Intеrеst ratеs, loan durations, and collatеral rеquirеmеnts vary basеd on markеt dеmand and supply dynamics. Smart contracts automatically еxеcutе transactions and manage rеpaymеnts. If borrowеrs fail to rеpay, thе collatеral may bе liquidatеd to covеr thе loan, prеvеnting dеfaults and maintaining thе systеm’s stability.

DеFi lеnding platforms use dеcеntralisеd govеrnancе modеls, allowing usеrs to participate in dеcision-making processes, such as proposing changеs to protocols or voting on systеm upgradеs.

Benefits of DeFi Lending

DеFi lеnding offеrs sеvеral bеnеfits, including:

1. Fastеr Loans

Digital lеnding platforms lеvеragе modеrn technology for spееdy loan procеssing. Utilising cloud-basеd sеrvicеs, fraud dеtеction, and machinе lеarning algorithms, thеsе platforms swiftly еvaluatе and approvе loans.

Thе usе of еlеctronic contracts furthеr accеlеratеs thе lеnding procеss, allowing lеndеrs to promptly prеsеnt proposals oncе approval is grantеd, еnsuring a quickеr turnaround timе for borrowеrs sееking funds.

2. Smart Contracts

Blockchain’s dеcеntralisеd structurе еnsurеs data intеgrity and sеcurity. Smart contracts arе еasily customisеd and sеlf-opеrating, allowing for thе crеation of nеw digital assеts and financial tools.

3. Compatibility & Sеcurity

Intеrconnеctеd softwarе systеms in DеFi amplify thеir collеctivе еfficacy. Intеgration with Wеb3 wallеts, such as Mеtamask, еnhancеs sеcurity by еnabling usеrs to rеtain strict control ovеr thеir assеts and data.

This compatibility fortifiеs thе sеcurity mеasurеs of DеFi protocols and apps, еnsuring a robust and usеr-cеntric еnvironmеnt.

4. Optimisеd Opеrations

Analytics arе crucial for forеsееing and adapting to thе changing borrowing patterns. By еxamining loan applications across specific timе framеs, lеndеrs can smartly distributе rеsourcеs to match varying nееds.

5. Opеn Accеss

DеFi’s fundamеntal еthos of inclusivity еnablеs individuals with any amount of cryptocurrеncy to accеss DеFi applications built on blockchain tеchnology. This pеrmissionlеss accеss fostеrs financial inclusion, allowing broadеr participation in thе dеcеntralisеd financial еcosystеm without thе constraints of minimum capital rеquirеmеnts.

6. Lеgal Compliancе

DеFi platforms uphold adhеrеncе to rеgulatory framеworks by mеticulously documеnting and tracking rulе sеts. Thеsе rеcords sеrvе as еvidеncе of compliancе with fеdеral, statе, and local laws.

7. Transparеncy

Transactions within thе DеFi еcosystеm arе publicly rеcordеd on blockchain nеtworks, providing unparallеlеd transparеncy.

Some Risks Associated with DeFi Lending

Hеrе arе thrее significant risks impacting thе DеFi еcosystеm:

1. Impеrmanеnt Loss

Onе of thе forеmost risks in DеFi lеnding is impеrmanеnt loss, primarily causеd by thе volatilе naturе of cryptocurrеnciеs. Whеn invеstors lock thеir assеts in liquidity pools for DеFi lеnding, pricе fluctuations of thеsе assеts within thе pool rеsult in tеmporary lossеs.

Thеsе pools hеavily rеly on arbitragе tradеrs to adjust tokеn valuеs according to thе markеt. Fluctuations prompt tradеrs to еxchangе tokеns to mitigatе lossеs, causing impеrmanеnt loss for lеndеrs.

2. Flash Loan Attacks

Unlikе traditional banking, DеFi introducеs flash loans, unsеcurеd loans without collatеral rеquirеmеnts. This innovation brings a risk whеrеin malicious actors might еxploit thеsе loans to manipulatе markеts or fulfil pеrsonal objеctivеs.

Wеak DеFi lеnding rеgulations makе it possible for individuals to usе flash loans for markеt manipulation, posing a significant dangеr to thе еcosystеm.

3. DеFi Rug Pulls

DеFi Rug Pulls arе similar to having thе rug pullеd out from undеr you whilе you stand on it. Trust in DеFi platforms is crucial for invеstors to lеnd assеts or purchasе tokеns.

Howеvеr, thе lack of clеar rulеs in thе DеFi еcosystеm еxposеs invеstors to rug pull scams, whеrе platforms abusе trust by dеcеiving invеstors, rеsulting in significant financial lossеs.

Popular DeFi Lending Platforms

Top DеFi lеnding platforms include:

  • Makеr: Known for еxclusivеly allowing borrowing of DAI tokеns, which arе pеggеd to thе US dollar. Usеrs can crеatе a vault using collatеral likе ETH or BAT to gеnеratе DAI loans.
  • Compound: An indеpеndеnt intеrеst protocol whеrе compound holdеrs can votе on platform changеs and rеcеivе CTokеn rеwards basеd on thеir contributions to thе liquidity pool.
  • Uniswap: A dеcеntralisеd еxchangе on Ethеrеum. Its dеfault smart contract simplifiеs currеncy listing, еnabling quick ERC-20 tokеn еxchangеs.
  • Aavе: An opеn-sourcе lеnding protocol that usеs a non-custodial liquidity systеm. Usеrs dеposit and borrow assеts to gеnеratе incomе, with intеrеst ratеs adjustеd by Aavе’s algorithm.

Way Forward

Digital lеnding solutions within thе DеFi landscapе mark a significant shift in thе accеssibility and dеlivеry of financial sеrvicеs. This transformation dеmocratisеs financе, strеamlinеs procеssеs, and offеrs thе potеntial for hеightеnеd financial rеturns, positioning DеFi lеnding as a disruptivе influеncе in thе financial sеctor.

Additionally, collaborations bеtwееn DеFi and CеFi (Cеntralisеd Financе) еntitiеs may bridgе gaps, providing usеrs with hybrid platforms that combinе thе bеst of both worlds.

Finеzza stands as a pionееring platform for crеdit assеssmеnt and lеnding lifеcyclе managеmеnt, offеring banks and NBFCs invaluablе optimisation and еfficiеncy.

Rеach out to us to еxplorе furthеr.

Future Trends in Loan Management Software: AI, Automation, and More

Loan Origination System

Thanks to technological advancements, loan management software has evolved immensely over the past decade. By 2032, AI and automation market in the banking industry is estimated to be worth USD 182 billion.

In today’s digital age, lending institutions seek new and innovative ways to streamline their loan management processes. Artificial intelligence (AI), automation, and blockchain technology are emerging trends transforming the loan management software landscape.

This article discusses how artificial intelligence, automation, and blockchain are revolutionising the loan management landscape.

Loan Management System: An Overview

A loan management system helps financial institutions manage the entire loan process, from origination to repayment. Lenders can make better lending decisions using real-time loan data by streamlining the loan process and automating routine tasks.

It also helps lenders monitor loan performance, track payments, and manage collections. The system can manage various types of loans, including personal loans, auto loans, mortgages, and small business loans for banks, credit unions, and mortgage companies.

With a loan management system in place, lenders can improve their efficiency, reduce operational costs, and provide better customer service to borrowers.

Overall, it assists lenders and borrowers in lending and ensures that loans are managed efficiently.

Role of AI in Loan Management Software

Artificial intelligence (AI) can potentially transform the loan management industry significantly. It can automate routine tasks, improve decision-making, and enhance customer experience.

 AI-powered loan management software can analyse vast amounts of data to identify patterns, trends, and anomalies that traditional systems cannot detect. It can also give lenders insights that enable them to make informed decisions.

Some AI Trends in Loan Management Software

There are several conceivable trends to watch for regarding artificial intelligence in loan management software:

1. Risk Assessment

AI can help lenders better assess risk by analysing data from multiple sources, including credit reports, financial statements, and social media profiles. This enables lenders to make more informed decisions about approving a loan and at what interest rate.

2. Fraud Detection

Using artificial intelligence (AI), lenders can detect fraud by analysing patterns in data that may reflect fraudulent activity to identify and prevent fraudulent loan applications from being submitted. This method allows them to detect and prevent fraudulent loan applications from being submitted.

3. Chatbots and Virtual Assistants

AI-powered chatbots and virtual assistants can provide borrowers personalised guidance and support throughout the loan application process. This can help borrowers navigate complex loan requirements and increase the chances of successful loan approval.

4. Predictive Analytics

AI can be used to analyse historical data and predict future loan performance. This can help lenders identify potential risks and proactively manage their loan portfolios. As technology evolves, we can expect new and innovative ways to use AI in loan management software, which could redefine loan management software.

Automation in Loan Management Software

Automation involves the use of technology to streamline and automate various processes associated with loan management, such as loan origination, underwriting, and servicing.

The use of automation in loan management software can significantly reduce the time and cost associated with lending.

Impact of Automation on Loan Management Software

Here are some of the ways automation is changing loan management software:

1. Faster loan processing

With automated loan management software, lenders can process loan applications much faster. The software can automatically pull in borrower data, verify employment and income information, and check credit scores.

This means that lenders can make quick decisions about loan approvals and get funds to borrowers more quickly.

2. Improved risk management

Automation can also help lenders manage risk more effectively. With automated underwriting and loan analysis, lenders can quickly identify high-risk loans and take steps to mitigate that risk. This can help prevent defaults and minimise losses.

3. Personalised borrower experiences

With automation, lenders can provide borrowers with a more personalised experience. For example, automated loan management software can send borrowers targeted messages based on their loan status and payment history. This can help improve customer satisfaction and retention.

4. Better compliance

Automation can also help lenders stay compliant with regulations and avoid costly fines. Loan management software can automatically generate reports and disclosures required by regulators, ensuring that lenders are always in compliance.

In the coming years, automated loan management software will allow lenders to process loans faster and manages risks more effectively.

Blockchain Integration in Loan Management Software 

Blockchain integration is an emerging trend in loan management software that has the potential to revolutionise the way loans are managed and processed. Blockchain is a decentralised digital ledger that records transactions securely and transparently.

Using Blockchain in loan management processes 

Here are some potential future trends in loan management software that are related to blockchain integration:

1. Decentralised lending

The integration of blockchain technology makes transactions between lenders and borrowers faster and easier. Ultimately, this could reduce transaction costs and increase access to credit for underserved populations by decentralising lending.

2. Smart contract

It is a self-executing contract where the terms are coded directly between the buyer and seller. With blockchain technology, these contracts can be recorded and executed automatically without intermediaries, reducing the time and cost of processing loan applications.

3. Improved data security

The blockchain can protect user data by ensuring that sensitive information is not compromised, as it provides a decentralised, tamper-proof system for storing sensitive loan information. Data breaches and other security risks will be reduced because of this.

Final thoughts

The financial ecosystem is evolving, and lenders must adopt new technologies to remain competitive. AI, automation, and blockchain integration are the future trends transforming the loan management landscape. Adopting these technologies can enhance efficiency, reduce risks, and improve customer experience.

Integrated with such technologies, loan management software can lead the digital revolution, and lenders that embrace these changes will emerge as winners in the competitive landscape.

Also, with the introduction of fintech tools to loan management, loan approvals and disbursements are further streamlined and automated.

A cutting-edge tool offered by the fintech platform Finezza is the Loan Management System (LMS), which combines bank and NBFC synergies to create an effective tool. In addition to managing the entire lending lifecycle, this module provides clients with unique document recognition and data extraction capabilities.

Aside from automating the entire lending process, it also offers analytics and other specialised solutions like API integrations, allowing traditional lenders to quickly process a high volume of loans.

Sign up to learn more about Finezza!

The Coming of Age of Fintech-as-a-Service (FaaS)

Updates

With Fintech, the financial sector has rapidly adapted to the changing technology landscape. Fintech has enabled financial institutions and banks to provide personalised digital services. This increasingly popular solution is known as Fintech-as-a-Service (FaaS). 

FaaS provides a complete stack of payments, commerce, and financial services capacities integrated into any application – web or app.

This article discusses how Fintech-as-a-Service is evolving and securing digital solutions to change the way transactions are done.

What is Fintech-as-a-Service or FaaS?

Fintech, the catch-all for “financial technology”, helps scale up, streamline, digitise, or disrupt traditional financial services. By offering fintech services, also known as Fintech-as-a-Service (FaaS), the FaaS service providers use APIs to integrate financial capabilities into clients’ existing applications, products, and services.

As such, FaaS enables businesses to leverage fintech solutions to optimise their end-to-end processes, delivering the best experiences to their clients and delivering commercial services to much higher standards than in the past.

According to the Market Data Forecast, the global financial technology market is expected to reach a market valuation of around $324 million by 2026.  

FaaS can be provided in three principal areas:

  • Systems: Banks and financial institutions use technology to make corporate and process up-gradation, either internally or as participants. Example: a mobile payment system. 
  • B2C: FinTech companies compete against incumbent banks and other financial institutions for market share. This can be done by reimagining conventional services and products such as loans and payment services for better user experience and customer value or providing technology to build a market that traditional financial service providers have failed to meet. Some fintech firms also assume the role of P2P lending and insurance platform. 
  • B2B: Here, a bank is a client or partner to a fintech company, where it could invest, purchase, or work with the latter to co-develop FinTech products.

Read more: Banks and FinTech: Rivals or Partners?

How Can Fintech-as-a-Service Companies Help? 

The enormous legacy infrastructure of traditional banks with physical offices has several shortcomings. These shortcomings include, but are not limited to—slow digital transformation, absence of customer customisation, and inconsistent customer service.

FaaS platforms aim to solve these loopholes of legacy banks by meeting the current market demands.

Today, small and medium-sized businesses need quality information, confidence, timely and reliable financial performance. These businesses need to integrate their business strategy, financial strategy, and accounting streams to address the economic challenges.

This is exactly what FaaS providers offer, which can help these companies focus on the business side of things, consolidating all value streams in one place and saving up on full-scale services.

Here are some advantages of FaaS:

  1. Faster time to market: The use of a third-party payment platform to implement the payment flow and bring a product to the market is agile about developing the entire system from ground zero.
  2. Less processing costs: FaaS platforms enable merchants to direct their online transactions via payment service providers (PSPs), which gives merchants the option to choose providers for their transactions. FaaS providers also enable automation, improve financial reporting, and address companies’ unique needs that significantly reduce costs.
  3. Customisation: FaaS platforms tend to be customisable with easy development and maintenance in most instances.
  4. Fraud prevention: Since merchants do not have to develop their payment gateways, opting for a FaaS platform that follows compliance rules can help avoid online payment frauds. FaaS solutions also integrate financial management systems to allow higher transaction volumes while ensuring fraud reduction.
  5. Scalability: FaaS providers are appropriately structured and can provide companies with the right level of resources for specific tasks. Compared to an in-house department, FaaS providers allow companies to be more scalable by setting up suitable systems and streamlining processes.

Fintech Trends you Can’t-Miss!

FaaS solutions are already transforming how consumers access and access financial services.

The future of FaaS looks bright with virtual reality, robotic process automation, DeFi, smart contracts and artificial intelligence. Here are some domains which are propelling the FaaS revolution:

Blockchain

Blockchain, the technology behind Bitcoin and other cryptocurrencies has been increasingly acting as the infrastructure of the digital world lately.

It can disrupt the financial services industry through trends like digital payments, smart contracts, decentralised finance (DeFi), identity management and much more.

As blockchain gets increasingly adopted, Fintech companies can leverage their solutions with security, scalability, and decentralised solutions.

Mobile payments and digital banking services 

Neobanks is increasingly becoming one of the most popular fintech services. Customers can open an account using mobile applications instead of visiting a brick-and-mortar branch.

They offer better functions such as account management, security checks, payment processing, verification, and risk assessments with technical expertise.

Open Banking 

Open banking allows banks to connect third-party APIs to their banking platforms with use-cases such as personalised offerings and payment suggestions based on past spending habits or transaction history.

With APIs, third parties have easier access to the financial information that facilitates the creation of various applications. In addition, open banking encourages companies to come together and offer product packages that complement each other.

Robotic Process Automation (RPA)

RPA uses programs (bots) or digital robots to automate repetitive and routine activities. This can help businesses free up resources, improve accuracy, and be used in simple tasks such as information processing and data entry.

RPA ensures operating costs in Fintech companies without compromising quality or productivity.

Smart Contracts 

Smart contracts are gaining widespread use and are available to optimise business and financial processes with their self-executing and self-enforcing abilities. This new form of agreement can improve the accuracy and verification of global transactions and solve the issue of trust in conditional transactions. In addition, automating the flow of payments and digital assets can foster new business models and products within Fintech.

Finezza is a leading credit evaluation and lending lifecycle platform that assists banks and NBFCs in optimising and streamlining their performance. Contact us at contactus@finezza.in to know more.

How Can Embedded Finance Transform India’s Healthcare System? 

Updates

Roughly 75%of the Indian population remains without any form of health insurance to date. On the other hand, those who have health insurance are practically in it to save taxes but are unaware of the terms and conditions of their policies.

The majority of Indians still depend on their hard-earned savings or even borrowings for paying their medical bills — thanks to the nation’s decentralised approach to healthcare that makes it optional.

Naturally, it is safe to say — there has hardly been any progress on the medical lending front or making healthcare borrowing simple for the general public.

Indians are getting accustomed to multiple credit products such as ‘buy now pay later schemes for purchasing a mobile phone or even a washing machine.

But it is ironically impossible to find such a payment ecosystem against fundamental human rights such as health and medical emergencies.

This is where the opportunity for embedded finance in the healthcare system of India makes a strong case. This is also where embedded finance can transform the system.

How Can Embedded Finance Transform the Healthcare System in India?

India is one of the most insurance-stricken markets when it comes to healthcare. Research tells us there are many reasons for this discrepancy. One of the primary reasons is exorbitant charges incurred by private health insurance firms.

On the other hand, government health insurances suffer from their issues of insolvency and underfunded statutes.

But things can change with embedded finance.

Embedded finance is the seamless integration of financial services into a non-financial company platform that gives easy payment access to the latter’s customers.

Without creating a separate fintech arm, different businesses can leverage the power of embedded finance and ‘embed’ native financial services right within their platforms.

Now, the question is — how can healthcare companies integrate embedded finance and assist both hospitals and patients in solving the decades-long problem of complex medical payments?

Let’s explore how embedded finance can prove to be the next significant financial disruption and transform India’s healthcare system.

Ways to Incorporate Embedded Finance in Healthcare

Here are the possible ways to ‘embed’ finance into the healthcare ecosystem of India and make credit easy for the general public:

Via Hospitals

The healthcare providers like hospitals, clinics etc. are partnering with the various embedded finance providers being the fintech companies, under which financing is being provided right at the point of care, by way of embedded finance.

How does that work?

Hospitals are paid by the embedded finance providers upfront for any patient invoices, and the patients receive minimal to zero interest instalment based payment options.

However, the catch here is that hospitals have to share confidential patient data with the lenders, which runs the fear of being leaked or misused, making big names in the healthcare industry hesitant to go ahead with the partnership in the first place.

Via the Employers

Employers can offer embedded health care financing to their employees as a solid employee retention and acquisition strategy.

An employee’s creditworthiness rises north when their loan application is backed by a solid employer, and their chances of receiving credit increase substantially.

To add to that, employers already possess a chunk of relevant data on their employees, acquired after a thorough background check and backed by valid proof, making it easy for lenders to underwrite and approve their loans.

By embedding finance directly into their HR tech platforms, employees can receive quick access to healthcare-related credit. Lenders are also repaid on time after deducting TDS from their salary.

Via B2C Platforms

Thanks to technological advancement, many online healthcare platforms within the value chain connect patients, healthcare providers, doctors etc. (for example, Practo).

These platforms have managed to transform how the commoner can access medical services today.

Fortunately, these platforms can serve as the perfect catalyst in offering in-context credit like a BNPL solution and pave the way for embedded finance opportunities in healthcare.

These B2C apps only stand to gain in this situation as they open a plethora of credit options for their customers, leading to better customer retention and an improved user experience.

Benefit of Embedded Finance in Healthcare

Embedded finance in the healthcare sector can be viewed as a frontier in providing quick and seamless finance by connecting the healthcare providers with the lenders.

Here is a bird’s eye view glance of the different benefits to all the stakeholders of the healthcare industry:

Patients

  • Better access to formal credit during times of immediate need or emergencies.
  • Better access to an improved healthcare infrastructure doesn’t have to hinder themselves in search of finance.
  • Plan their finances in a much better manner and avoid pressures of sudden out-of-pocket financial expenses.
  • Enjoy better chances of loan approval.
  • Choose to have elective surgeries more often (dental, cosmetic) and not avoid them for later.

Hospitals

  • Upfront payment from the embedded finance providers.
  • Enjoy customer loyalty from their patients by providing quick and hassle-free payment services.
  • Build better relationships with their customers.
  • Gain access to more and better revenue streams.

Lenders

  • Expand their loans customer portfolio substantially
  • Cross-sell other products and offerings
  • Improve underwriting models considerably by leveraging employees’ data gathered from employers

Embedded Finance and Healthcare – a Transformational Force

Embedded finance has a lot of potential in the healthcare sector in India, from more excellent health insurance coverage to providing better preventive medicine services.

It can also make pricing transparent and provide customers with a variety of payment methods. But, at the same time, it can make the healthcare business more profitable by lowering costs.

Finezza is a cloud-based platform that offers a range of credit evaluation services, lending lifecycle management services, along various embedded functionalities to help financial institutions ramp up their business solutions. Contact us today for more information.

 

The Future of Blockchain and Cryptocurrency in India

Updates

Gartner, a leading research and advisory company, had predicted that the banking industry will derive 1 billion dollars of business value from the use of blockchain-based cryptocurrencies by 2020. Moreover, blockchain can be used for launching new cryptocurrencies that will be regulated or influenced by monetary policy.

While 2020 has been topsy-turvy for most industries, blockchain and cryptocurrencies have survived and are making their presence felt.

We have all heard about the Bitcoin resurgence, right? Bitcoin is a type of cryptocurrency. But what is cryptocurrency in reality?

A cryptocurrency is a digital or virtual currency that is secured by cryptography. Cryptography is a scientific methodology of securing the data during storage and also while transmitting. There is no underlying asset or goods or any commodities attached to the cryptocurrency.

Some Facts about Cryptocurrency

  • Cryptocurrencies are not issued by any central banks or central authority, thereby making them immune to government interferences or even inflations. As a result, it can also make them almost totally shielded and potential global currency.
  • Cryptocurrencies can be bought and sold in the exchanges specifically meant for this purpose. There are a lot of exchanges in the international market and a good number of exchanges that are home-grown within India in the last decade.
  • Cryptocurrencies are secured through private and public keys, it is nearly impossible to counterfeit.
  • The first cryptocurrency – Bitcoin, came into existence in the year 2009. Since then, more than 5000 cryptocurrencies popularly called ‘altcoins‘ have emerged. Though every altcoin has a unique name in which it is issued and traded.
  • The most popular cryptocurrencies worldwide as of 2020 are Bitcoin (BTC), Bitcoin Cash (BCH), Litecoin (LTC), Ethereum (ETH), to name a few.

With the burgeoning interest in cryptocurrency trading, the list of cryptocurrencies is steadily increasing and the cryptocurrency exchanges all over the world are also steadily increasing their offerings and listings of the cryptocurrencies.

The Underlying Technology of Cryptocurrency

Cryptocurrencies are stored in a geographically distributed decentralized network of computers called nodes, using blockchain technology.

Blockchain is a type of database but different from a typical relational database. A typical relational database stores the data as tables, whereas blockchain stored the data as blocks. It is nothing but a fixed storage space used to store information. With respect to cryptocurrency, blocks are typically used to store the transaction details and the blockchain serves as a ledger for transactions.

How does it work?

  • Once a block is filled with data, it is chained to the previous block, thus making the data chained together in chronological order. Every block will have a unique hash on its own and also store the hash of the previous block it was chained to.
  • As soon as a new block is added to a blockchain, the entire blockchain record is updated in all the nodes that are part of the blockchain network, thereby creating a lot of replications of the blockchain so that even if one computer is corrupted or compromised, the entire blockchain data is available in all other nodes.
  • Public keys and private keys are tied to a wallet. The public key is used to receive cryptocurrency and the private key is used to post a transaction in the public ledger, vis. transferring a cryptocurrency to somebody else.

Future of Cryptocurrency in India

Post ban of old currency notes in 2018 by the Indian Government, the Indian central bank banned the trading of cryptocurrencies since a string of frauds were reported. But the cryptocurrency exchanges filed a lawsuit in the Supreme Court of India asking to revoke the ban. Finally, after almost two years, the ban was lifted in March 2020, bringing cryptocurrency trading back in India.

As per estimates, there are at least 10 exchanges in India as of 2020 that allow investors to trade cryptocurrency. Experts believe that with proper law and more regulations to maintain the autonomy and making sure the cryptocurrency exchanges follow some basic KYC verifications of the owners, it will give way for widespread adoption of cryptocurrencies for a myriad of applications.

Though cryptocurrencies, when used to their full potential, are expected to disrupt many existing financial systems, there are many technological challenges in creating a complete ecosystem that embraces cryptocurrencies. Financial institutions are taking baby steps in including cryptocurrency in their portfolio of offerings.

Some of India’s bigger technology firms also started showing interest in creating a platform to trade cryptocurrencies. As more and more financial institutions show interest in adopting blockchain technology and cryptocurrencies, with support from the governments and regulators, cryptocurrencies are only expected to become more prominent.

As of now, blockchain technology and cryptocurrencies are still considered niche and the technology cost involved in creating and maintaining is very high. But as more and more players emerge in the market, newer and cost-effective technologies are expected to emerge, paving the way for widespread adoption of cryptocurrencies.

Why is there reluctance in the widespread adoption of cryptocurrency?

How-A-Digital-Solution-Can-Help-You-Manage-Your-Debt-Recovery-Business

Though there is a widespread acknowledgment of the advantages of blockchain technology, financial regulatory authorities and central banks worldwide are not too keen on embracing cryptocurrency so soon for several reasons. Here are some reasons why:

Lack of Mandates

Firstly, cryptocurrencies are not controlled by any central authority or any central bank. Hence, controlling the currency is naturally stripped off from the financial regulators if all the governments and financial institutions embrace cryptocurrency.

Prone to Security Risks

Though all the cryptocurrency blockchain transactions are publicly available for anybody to view, the wallets that store the public and private keys or the addresses are not tied to people making the owner of the cryptocurrency anonymous.

Misconceptions

There is a widespread belief that cryptocurrencies are used for illegal activities, including drug trafficking and terrorist financing. Though the advocates of cryptocurrency argue that blockchain technology provides so much transparency that the entire chain and movement of a cryptocurrency can be tracked from the origin to the destination, although with a caveat, that the owner of the cryptocurrency can remain anonymous if he or she chooses to.

Cost Considerations

Validating a transaction, called mining, is a very complex and heavily technology-oriented operation. This involves a network of specialised machines with high processing capacity. These specialised machines are used to generate unique hashes using complex hashing algorithms and these hashes are tied to every block. With the increasing number of cryptocurrencies, the cost of generating hashes for mining is increasing and the overall phenomenon is still less understood by the majority of the financial institutions and the regulators

Who knows, sometime in the near future, financial institutions may even lend or buy cryptocurrencies from normal investors just like how they do for all other national currencies. When such a time comes, early adopters who are ready with such buying and lending platforms are expected to have a huge advantage over others.

If you own a lending business in the 21st Century, you will need a dynamic Loan Management System (LMS) and Loan Origination System (LOS) to ace the market competition. This is where Finezza’s industry-leading technology can help your business. To know more, get in touch with us today.