Banking

Lending in the Digital Age

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Snehal Fulzele

Snehal Fulzele

—– Snehal Fulzele, CEO and Co-Founder, Cloud Lending Solutions —–

We are taking a leap into the era of digital transformation. The times ahead are exciting as well as challenging, with businesses embarking on digital projects, app economy taking a lead and growing digital savviness of consumers.

Digital technologies are dissolving the boundaries between industry sectors. Banking is no exception. A report by Accenture estimates that competition from digital players could erode as much as one-third of traditional retail bank revenues by 2020. The reason being the ease and comfort of a transaction for an end user. Imagine a situation when you need to borrow a substantial sum of money. Some options before you could be borrowing from friends, family, maxing out credit cards, or the traditional bank. Now, imagine you could whip out your smartphone, answer some simple questions on an app, and your requirement is fulfilled. If the latter sounds appealing, then it clearly simplifies the reason behind the growing popularity of lending businesses across the globe.

We can already see the trend catching up in India. According to Viacom survey of millennials, 33 per cent of respondents in India believe that they won’t need a bank at all and nearly half are counting on tech startups to overhaul the way banks work. In fact, recently, Flipkart, Snapdeal and Amazon roped in non-banking lenders to woo sellers with easy loans in a bid to encourage more sellers join their online channels. With the growing demand, fintech businesses are launching their own app to make the process of lending easier for the end user. All this progression is fuelling a sense of optimism for lending industry in the country.

In today’s world, non-bank lenders are increasingly becoming an important source of funding, powered by the growing developments in technology and united with the evolving needs of customers to have access to more convenient online and mobile solutions for their banking demands. These platforms match borrowers directly with lenders based on their unique credit scoring model. These lenders not only address prime borrowers but also those borrowers who are creditworthy but unable to qualify for loans from banks. Furthermore, non-bank lenders are also providing funds to small businesses, which are often overlooked by banks, hence planting growth.

Digital LendingHowever, amidst the euphoria of flourishing ecosystem, lending businesses must not lose sight of the bigger picture. It is not just being technologically urbane, but to serve the borrower better.

Need of the hour – Serving tomorrow’s borrower

Beyond the jubilation of India emerging as one of the leading economies of the world where banks continue to remain the primary source of funds for industries, what can lending businesses do in such environment – an environment of changing regulations, technological advancements, increasing competition and demanding customers? While all of these factors are important and must be dealt with, either strategically or tactically, it is borrower-focus that they must prioritise above everything else. Today, the new entrants are targeting the digitally enabled customer segment but the big picture is that they are competing for a larger share of the pie.

Today’s borrower is social, hungry for information, and technologically savvy. He demands personalised services that are convenient to consume but challenging to deliver. Given this trend, it is safe to assume that tomorrow’s borrower will only be more demanding. The evolving behavior of a borrower presents a mass of opportunities as well as threats to the lending businesses. The biggest opportunity is being able to build customer advocacy by building credibility, trust and improved customer experience. We can do so through thought leadership, higher engagement with the borrower and providing personalized experience to the borrower. The biggest threat, certainly is that of the well-informed borrower discarding the relationship with your business and give business to your competitor who offers more promising proposition.

So, how can a lending business be prepared for tomorrow?

Factors like increasing use of non-traditional sources for credit decisioning, integration of cloud technology for quick and easy access to credit and seamless integration of multiple data sources and systems to provide a consistent user experience will be of paramount importance. Businesses which are pinning their hopes on push-strategy cannot survive and they must focus on delivering the right service at the right time through the right channel to the right borrower.

Well, borrower focus is about the only thing you can control – so don’t lose focus!

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