Transforming the lending sector: why digital expertise is crucial

India’s lending sector is one of the largest in the world, with numerous small and medium enterprises (SMEs) perpetually propelling its growth. However, this rapidly-growing industry is plagued with the problem of bad loans, which makes it difficult for financial institutions to trust borrowers easily.

This persistent issue of bad loans is, in turn, adversely impacting small businesses across the country who are genuinely in need of loans to keep their businesses afloat in highly competitive markets.

As lenders such as banks and Non-Banking Financial Companies (NBFCs) remain sceptical about offering loans to small businesses due to their lack of sufficient capital, access to formal credit has decreased drastically for small businesses.

Furthermore, the ongoing COVID-19 pandemic has only added to the woes of small businesses in the country.

Fortunately, there is one element that will be able to bring about a wave of transformation in the lending sector – and that’s technology. With the world rapidly evolving, thanks to technological advancements in almost every sector, the lending industry is in dire need of digital expertise to augment the next phase of its growth.

For this, there is an immediate requirement of technologically skilled professionals in the industry whilst simultaneously digitising routine processes. Upskilling will help professionals become adept with the latest trends and technologies to a great extent, and most importantly, gain digital expertise.

Here’s a look at how digital expertise can help transform the lending sector in India.

Enabling faster approval of loans  

One of the main pain points in the lending industry is the slow processing and approval of loans, and small businesses are bearing the brunt of this. Traditionally, banks take up to five weeks to simply decide on whether to lend to a customer or not. But it does not end there. There is an even further delay in the customer actually receiving the loan sum, which can take up to three months.

Digitisation of this process will enable loans to be processed and approved much faster. By incorporating technology powered by artificial intelligence (AI) and machine learning (ML), banks and NBFCs can assess the creditworthiness of a customer in minutes.

Thus, the decision-making process and the time taken for a customer to receive the loan can be reduced from three months to 24 hours, making lending more convenient and hassle-free. Also, training professionals thoroughly in utilising digital methods will further quicken the loan approval process, as better understanding will help them work faster.

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Maximising revenue and minimising costs

The digitisation of lending is mutually beneficial for both lenders and borrowers. It will not only save time for customers, but will also prove to be a cost-efficient process for banks and other lenders. Through a digitised lending process, they can reduce the manpower required to assess whether a customer is eligible for a loan.

Again, AI and ML-based systems can determine creditworthiness and make the decision faster, so that human agents can focus on other important aspects such as customer relations.

Improving customer relations

Credit and lending are actually the bedrock of cherished customer relationships for banks and NBFCs. Customer satisfaction is directly proportional to the seamlessness introduced in processes with innovative technologies. Digitisation will only help in customer acquisition and retention for financial institutions.

However, digitisation of lending services does not necessarily mean the elimination of the human element from the industry. Relationship managers will still play a vital role in the lending process regardless of digitisation.

As mentioned above, human agents are required to build meaningful relations with customers, boosting retention and satisfaction. Moreover, professionals who are adept with technologies such as AI, ML, etc. will be able to oversee the day-to-day operations and long-term growth of tech-based lending systems.

It is for the above-mentioned reasons that the lending landscape requires skilled professionals who can unlock growth opportunities within this booming sector with their forward-thinking ideas and innovation. With the infusion of FinTech specialists, India will be well on its way to becoming a leader in SME lending.