The term “digital lending” is used to describe the practice of obtaining a loan entirely online. Everything from filling out the loan application to receiving the money by the borrower – every communication and transaction between the borrower is done digitally.
The digital lending phenomenon has truly caught on in India thanks to the country’s supportive governmental climate and technical advancements; in addition, the digital lending revolution is spearheaded by innovative FinTech companies, and it has re-defined the rules of traditional banking in India.
How it works
Digital lenders rely primarily on data to entirely automate the underwriting of loans. As a result, they can capitalize on consumers’ need for instant access to funds with minimal friction. When it comes to lending money, traditional banks typically use manual, time-consuming and excessively onerous techniques to determine credit worthiness, whereas modern internet platforms aspire to be more streamlined and data-driven.The rise of FinTechs
People (and businesses) are using methods of payment like UPI, internet banking and mobile apps, and they are even discussing the possibility of using digital currencies, all thanks to the growth of the FinTech industry in this area. The stock market and other previously incomprehensible ideas are now commonplace. Due to the rise in FinTech start-ups, getting financial assistance has become easier. Depending on their specific requirements, businesses can choose from a wide variety of loan products provided by various FinTechs. These new financial technology companies are like offering a digital thali to those who are hungry for it. Businesses now can evaluate opportunities they may not have had before, all thanks to digital lending.The reason behind the growth of the digital lending space
The formalization and acceptance of the Indian credit rating system and the enabling policy of e-KYC, which allows users to verify their demographic details and other relevant information needed to fulfill regulatory requirements using the Aadhar framework, are two primary reasons for the exponential growth in the digital lending space. These two advances have allowed FinTechs to quickly onboard consumers digitally with minimal paperwork and to objectively evaluate individual credit risk with complicated mathematical models with the help of Artificial Intelligence. A loan’ application’s approval or denial is a breeze once the customer has been onboarded and an objective assessment of their creditworthiness has been made.Saving time and money
A digital loan is more likely to be approved for a company whose finances and other relevant information are easily accessible online. The information needed to approve a loan is readily available to these online lenders. That means a lot more people can acquire loans quickly so they can get to work. In this sense, lending is fluid. The gap between businesses and online lenders is closing. In addition, the digital lender saves money by not having to set up any additional facilities. These lenders can cut costs as a result. They are better also able to offer their clients whatever financial or other incentives they may have. Hence a better service is provided to businesses more efficiently.Opportunities for budding businesses
India’s businesses still have trouble gaining access to traditional financing due to the country’s poor credit rating. Getting a loan of any kind requires a lot of time and documentation. There are occasions when the sum is smaller. For inexperienced borrowers, online loan services are a lifesaver. These loan companies use an alternative credit scoring system. For startups with new ideas and a solid strategy for success, but lower-than-average credit scores, online financing may be a viable choice. Digital lenders can extend credit to more people because of this credit assessment method.The bottom line
Indian SMEs should take note of the fact that financial lending institutions are making progress toward making digital lending available to small, medium, and large organizations. Furthermore, they are investigating uncharted technological territories. These companies must select the appropriate online lender for their needs. They may see financial success just over the horizon. At UpScale by CredAble, we offer various lending solutions for businesses from 10+ leading financial institutions, completely digitally. If you want to learn more about our unsecured business loans, read our blog.What’s your Reaction?
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