How Has Digitalization Changed the Lending Industry in the Last Decade?
Over the last decade, there has been tremendous growth in the financial technology sector, and some FinTech companies have started offering loans through computers and mobile apps. This helps both consumers and lenders in many ways.
Here are the top 3 benefits of digitalization for the lending industry:
Greater Convenience – Not only has the process of applying for a loan become easier, but also the process of providing one. Rather than manually collecting and filing documents, everything can be filled out and submitted online. Along with being highly convenient, this reduces human error as well as wastage of time and energy.
Higher Productivity – Unlike conventional loan providers, digital lending platforms can work with smaller teams and less physical paperwork. Since everything is handled electronically and many tasks can be completely automated, each person on the team can work in a more efficient manner, leading to higher business productivity.
Structured Processes – Traditionally, the process of taking and giving a loan was very inefficient. Documents would often get misplaced or delayed, causing a lot of confusion for both borrowers and lenders. With the ability to submit, store and access files online, the whole lending process becomes more structured and organized.
Digitalization has been making loan seekers happy, and in return benefitting the lending industry. The lending industry is able to experience a boost in growth compared to a decade or so ago and this will only grow at a faster pace. Some great benefits that lenders are able to offer loan seekers include:
Electronic Documentation – Instead of making multiple trips to a bank or financial institution for submitting paperwork, it can all be done online. Digital lending apps also tend to require less documentation than their traditional counterparts, since basic information about your creditworthiness is already available online.
Reduced Processing Time – With the online submission of applications and documents, instant access to credit scores and financial records, and real-time status tracking, the processing time for loan applications has reduced tremendously. Today, you don’t need to wait for weeks to know whether your loan has been approved or not.
Easy & Fast Disbursal – After the paperwork has been completed and verified, and the loan amount has been approved, app-based financial lenders and platforms can provide an instant personal loan disbursal with a money transfer to your bank account. In cases where you have been pre-approved, an application for a loan may also go through faster.
Financial Safety Net – When you need funds in a hurry, for unexpected medical expenses, wedding costs, education fees or even vacations, a digital loan or a get a MoneyTap personal line of credit online is often the safest bet. Rather than dealing with the hassles involved in traditional lending processes, you can get access to emergency funds within a matter of days or even hours.
Better Interest Rates – Generally, digital loans and lines of credit charge lower interest rates than credit cards. In fact, many of these products are designed for debt consolidation. And, even with a line of credit that has a slightly higher rate of interest than traditional personal loans, you only pay for the amount that you use.
Variety of Loan Options – A company that provides digital loans may tie up with multiple financial institutions instead of being restricted to a single provider. This allows you to explore various options in one place, compare interest rates, repayment terms and eligibility criteria, and then select the product that best suits your needs.
Flexible Repayments – Most digital loans and lines of credit allow various payment methods, and repayment schedules ranging from once or twice a week, month or quarter. Repayments made through a digital loan platform are instantly updated, and you also receive reminders or alerts through the app when a payment is due.
Greater Transparency – Like every other digital or app-based product, there is far greater transparency in online financial lending platforms than conventional ones. Not only can you track the status of your application anytime and anywhere, you can also learn what went wrong in case your application for a loan was not approved.
India has gained traction and there are several great lending platforms available to loan seekers now. Here are some examples of digital lending platforms for easy loan access:
MoneyTap – As the first app-based personal line of credit in India, this platform provides users with a revolving line of credit where interest is only charged on the amount used.
EarlySalary – This digital lending app provides users with cash loans and advances of up to 50% of their monthly salary, based on a smart algorithm-based risk scoring system.
Kissht – This startup provides a line of credit for online and offline purchases at digital points of sale, as well as cash loans for financial emergencies and other requirements.
Faircent – This P2P lending platform connects loan seekers with providers, with features that match borrowing requirements with lending criteria selected by different investors.
Rubique – This is another online marketplace that connects lenders with borrowers, offering various loan types from different providers to both individuals and MSMEs.
With the rapid growth and adoption of digital tools and technology, the FinTech sector is undergoing a revolution of its own. It is an interesting landscape to follow to see what’s in store next.