Digital Payments - Make or break for the Indian Lending Industry?
Technology is paving the way for a paradigm shift in the lending industry
India's digitalisation efforts now seem to be paying off. Lenders are leveraging technology to bridge the gap between borrowers and lenders, access to digital technology is increasing dramatically and so are BFSIs' investments in innovative solutions like blockchain-based credit scoring models.
Digital transformation is the process of re-engineering business processes to improve the customer experience, increase the efficiency of operations, and reduce costs.
Digital lending market is growing rapidly in India and this has led to a paradigm shift in how we approach financial services for many people across different sectors. The banking industry has already started adapting new technologies such as internet banking or smartphone apps that provide access to financial services across borders through mobile phones or tablets.
Saarathi - India's fastest growing Digital Lending Marketplace connecting 60+ lenders & NBFCs with Channel Partners across India
The Indian lending industry has been hampered by a number of factors, including high interest rates and difficult customer engagement. The government has been pushing for digitisation of all industries including banking and financial services, with the aim of making them more efficient through technology use.
Digitalisation has already started paying off for lenders- Lenders are leveraging technology to bridge the gap between borrowers and lenders:
- By reducing the time taken to process loans, lenders will be able to provide services more efficiently, thereby increasing their profits.
- They can also reduce the amount of money they spend on collection agents, thus increasing profitability by reducing losses due to underbilling or frauds committed by loan officers/agents/brokers etc..
- In addition, since it’s easier for a lender to track down information about a borrower using digital channels like transaction history reports on mobile apps than through paper documents alone (which means less paperwork).
Access to digital technology is increasing dramatically
Access to digital technology is increasing dramatically. The financial services and insurance sector (BFSIs) in India must accelerate their digital transformation efforts to keep up with fast-paced digitisation.
Accessibility, convenience and affordability are key drivers for adoption of technology by consumers—and these factors are also driving growth in the BFSIs market.
According to McKinsey’s Digital Banking Benchmark Survey 2019: India Edition Report released earlier this year,
A majority of Indian consumers prefer using mobile banking apps over traditional brick-and-mortar branches or ATMs because they see them as more convenient than other methods of payment options available at present time.
The lending industry leaders, who had already started their digital transformation journey over two years back, have already started witnessing positive results.
The benefits of digitalization in the banking sector include:
- Lower cost of operations (less staff)
- Reduced risk exposure for banks/financial institutions as a result of having more data at their disposal with less manual intervention; this also reduces operational costs for them since they are able to process transactions faster than before leading to improved customer experience which ultimately improves customer retention rates or churn rates etc., thus reducing overall costs associated with operations while increasing revenues through increased sales volumes etc., resulting in higher profits per share value over time
Digital payment channels are useful in creating and maintaining a healthier loan book as well as improving borrower experience.
Digital payment channels are useful in creating and maintaining a healthier loan book as well as improving borrower experience. The adoption of digital payment channels has been slow due to lack of awareness about its benefits among lenders, borrowers and intermediaries in the Indian financial services industry (BFSI). Digital payments will be core for financial services and insurance sector going forward as they provide immense value-addition over traditional methods of fund transfer, processing applications, collect dues from customers etc.
With the increasing adoption of digital technology by lenders, it is evident that the lending industry is going to look up in years to come. With the entry of new players the Indian lending industry has witnessed a massive growth since 2020 when the pandemic hit. Lenders are leveraging technology for seamless customer interactions and better outcome for both borrowers and lenders as well. Digitalisation efforts now seem to be paying off with more lending players entering this space every day