Digital Credit is the New Normal
Gradually the Businesses are moving towards digital modes to settle payments, saying goodbye to conventional methods such as transacting in cash, cheque, demand drafts, etc. This is off late more prevalent in small businesses as well since they have started experiencing the convenience and benefits of such routes.
The offerings need to be in the space where businesses are operating, hence the shift towards digital transactions and making the processes completely digital, by most of the players in the ecosystem. The traditional czar of our Indian Financial ecosystem LIC ( Life Insurance Corporation ) has also invested into its digital business, not just on their core business of Life Insurance but also on their lending business. We will talk more about how this has changed the way lending services operate and scope of improvement for various players in the ecosystem.
Digital lending has changed the way people now view credit, the brick and mortar banks which had limited penetration have been substituted by a device in the hands of the common man. Thanks to the relatively better access to technology and mobile network.
Right from the step of Loan enquiry till Loan Disbursement to setting up the repayment system along with the loan closure has been made paperless and transparent by the entry of Fintechs into this space.The system is no longer an black box and a long wait, people now know what they can expect and how long it would take.
With this huge increase in demand from the market has posed a new set of challenges in front of the Fintech players, who are now looking for alternate methods which can help me evaluate the credit worthiness of the customer in a better manner, while doing so increasing their base of eligible customers.
The conventional method of evaluating credit worthiness of a customer by only looking at the credit history from the bureau is fast becoming obsolete and is all set to be taken over by alternate methods being deployed by the fintechs where they evaluate the customer also by his cash flows and transaction behavior.
Majority of the credit models are currently based on income based transactions, the expense side was much ignored and will play a major role in the development of newer and more robust credit models since it also takes into account the broader picture about the customer.
The increasing amount of data being collected from various sources like smartphones, websites and sensors etc. has pulled in technologies like Big Data and Machine Learning into the picture and these with the set of structured, semi structured and unstructured data can work wonders and bring to light plethora of possibilities which we probably never realized while working in the traditional mode.
The worldwide lock down following the outburst of the pandemic is pushing more challenges to these traditional lenders as well as the new fintechs with the historical data becoming increasingly irrelevant in the current scenario. The dependency on history will now start reducing and the present would be more relevant.
For more such insights, come check us out on https://loanjar.in or if you are looking for a loan start applying! #businessloans #smeloans #smecredit
