Traditional banks did enjoy a monopoly in financial markets for the longest time as they boasted of licenses and regulations to back them up. With the advent of globalisation, banking in itself has undergone a tremendous revolution of sorts. Today, there is an intense global competition, large markets to serve and the popularity of technical innovations to improve processes. One of the severe aftermaths of globalisation was an intense competition that surfaced between different players in the financial markets. For example, Indian commercial entities felt the need to introduce high-end services, curate superior customer experiences and offer privileges or concessions to attract and retain their customers.
Lending Landscape: Today
According to a DataLabs report, the credit demand in India is estimated to be worth $1.42Tn by 2022. Small businesses form a chunk of the total number of enterprises today. Due to the limited scope of their working, they lack collaterals and have limited credit histories. These factors prevent them from acquiring funds, unlike more significant businesses. There is a new breed of tech businesses trying to ease this particular inefficiency in the market.
How are Digital Lending Startups Leading the Fintech Revolution?
Despite the odds, the digital lending startups seem to have made a good start in India.
Redefining the Customer Experience
Digital Lenders are setting clear cut benchmarks when it comes to offering customer experiences for others in the industry to pursue. With ‘digital-first’ strategies at their core, they curate services with a customer-centric perspective. They take each customer interaction as an opportunity to garner insights that would guide them into delivering seamless customer experience in the future. Such research helps them find newer ways of customer acquisition. Digital lending start-ups invest heavily in social media and web analytics seeking lead conversion. They process unstructured social media and web data using AI technology to predict a customers’ intent to buy.
With digital technologies, lenders also mine the core transaction and IoT data to deeply analyse customer spend and payment patterns for making suitable recommendations to customers. They make every effort possible to win their customers’ trust and loyalty by optimising the product design and innovation at their end. In the view of intense competition and shrinking error margins, offering a superior customer experience is the key to success.
Optimal Customer Onboarding
Even simple processes like account opening incur high turnaround time due to cumbersome manual processes like ‘KYC requirements.’ To simplify the onboarding of customers even further, digital lenders are leveraging advancements in technology and streamlining the customer onboarding process by digitising it completely.
Modern Fintech players are allowing their customers to automatically prefill customer fields by linking them with external sources of data. Use of AI tech along with advanced video technologies allow digital interfaces to identify and validate customer identities visually.
Hyper-personalisation is the norm today. Most digital lenders use chatbots as ubiquitous tools that serve as a virtual private assistant to borrowers. Use of chatbots offers the flexibility of a self-service option to users. Further, the integration of AI tech allows contextual insights into customer preferences and can help in boosting the sales conversion of products that the fintech has to offer.
In addition, digital lenders can incorporate feedback from past customer interactions using ML algorithms to strengthen customer relationships. AI-powered chatbots can efficiently predict the probable cause of a customer’s call by analysing their recent transactions, and even offer preemptive solutions to delight a customer in distress.
Reducing NPAs and Detection of Fraudulent Activities
It can be pretty challenging to keep track of constantly changing strategies that fraudsters use to evade detection by authorities. Digital lending players in the market count on ML technologies for fraud detection. These techniques easily spot shifting patterns and promise improved detection rates, thus reducing a large number of false positives. Digital lenders can easily predict a borrowers’ propensity to default and issue proactive measures to address it.
Advanced analytics plays a crucial role in NPA prediction. For example, AI-powered evaluation systems predict potential delinquencies early on and help manage credit risk exposures through the use of advanced analytics to mine both external and internal sources. They facilitate real-time sharing of strategic information through interactive dashboards and multiple intelligence reports and prompt internal stakeholders for taking the required corrective steps to prevent asset slippages to NPAs. Digital lending startups indulge in ‘smart collections’ strategies for successful loan recoveries too.
Profitable Loan Collection
Digital lending startups automated their loan collection process with the help of AI technology. They effectively modulate their communication with their borrowers. Integration of AI-powered decision engines automate the loan collection process, and in turn, makes it easy, hassle-free, and cost-effective for them. Digital lending start-ups monitor customers’ profiles and analyze their past transaction for sending customised communication to borrowers about payments that are due or otherwise. They shoot such contact at specific time intervals to boost the chances of repayment. Further, personalised content-based communication is likely to improve the performance of lenders and reduce borrowers’ defaults.
To Sum Up
With the introduction of advanced technological solutions, Indian economy changed courses between internet banking, mobile banking, and lately digital banking. With increased mobile penetration, affordability of data services and well-regulated e-commerce platforms, a new digital lending trend is revolutionising the financial markets. Despite the evident shift in consumer preferences towards digital lending, there are significant hurdles that they face such as inadequate financial literacy, the digital discrepancies between urban and rural audiences, and a lack of robust banking infrastructure in India.
The Indian government is consistently working to improve the financial literacy of the public with initiatives such as Rupay Cards, Kisan Credit Cards, and Jan Dhan Bank accounts, etc. In times to come, Fintech startups can fruitfully capitalise on these initiatives by entering into synergies with public institutions in a quest to penetrate the informal economy.
Finezza is a digitised lending management tool that allows lenders to automate the process for maximum efficiency and better returns. It comes with efficient data extraction and segregation modules to help with onboarding. The AI-based algorithm helps the framework streamline the origination process, and ML tech allows it to generate intelligent reports to assist loan evaluation officers. Finezza brilliantly reduces changes of NPA with its smart decision-making reports that take into account credit data as well as alternative data.
Last but not the least, Finezza also helps lenders digitise the loan collection process and optimises the ROI of the business.