Digital lending is changing the face of the traditional lending scenario of the country. Where it used to take months to get the loan sanctioned can now be done in short span of time. But the real question arises is what to expect from future digital lending market.
The challenge is how to minimize the effort of people to go on the ground to fact check their clients. According to Ashok Mittal, Chief Executive Officer, Prest Loans, the future digital lending space will require three ‘V’, which are:
- Voice: A system which will allow the poorest of the poor to access the technology by just their voice. This will in turn help banks to analyze their clients.
- Video: It will help us to understand a person through his body language and also we don’t need to revisit for data collection.
- Vernacular language: A system which can detect vernacular languages.
Digital lending can be successful if the future brings down the fully digitized system. Digitization in terms of collection and disbursement doesn’t play a very significant role for Micro Finance Institutes (MFIs) right now.
According to Somya Srivastava, Chief Executive Officer, Prayatna Microfinance Ltd, a business model that requires above average interaction with the customers, like Hi-tech and Hi-touch models are playing an important role in Microfinance Institutions. But we still need to find a way where digitalization can help to identify the clients who have already paid enough cycles and are creditworthy.
However, despite having the power of reinventing the financial institutions through digitization the MFIs has to grow through a lot of challenges. The delivery of services, the collection models, the execution business is completely different compared to the Fintech world. People feel the distribution of loans is easy but they forget that it is much more difficult to collect that loan. This is the challenge we are facing from both Fintech and MFIs side,” says Amit Jhanvar, Vice President, Unitus Capital Pvt Ltd
Every company in the financial sector is trying to make extensive use of technology to offer low-cost solutions to their customers that are easily accessible and simple to use. Thus, a huge amount of investments is being made to attract new customers and at the same time retaining the old ones.
Though new technology is entering into the market there is still a lot to be done. Sameer Aggarwal, Founder & CEO, Revfin said, ” we are currently using technologies like biometrics, psychometrics and gamification which are helping us in knowing our customers better.
Talking about the role of Machine Learning (ML) and Artificial Intelligence (AI) in future for repayment of loans, Yashwardhan Sahai, Chairman & Managing Director, Ajivika Finance Ltd said, “ML can be used to know the clients’ worthiness whether you should go underwriting or not. It will take into account the track record, take inputs from the other sources, you can look into the history of the client’s credit rating and positioning with the other lenders as well. This will eventually help in bringing down the cost of lending.”
Expressing his views on the same, Vaibhav Pandey, Co-Founder, i2iFunding said that automated credit evaluation data has reduced the time of evaluation bringing down the cost of lending from what it was when it use to be done manually. And here ML can play an important role.
Talking about what future hold for the digital lending companies, Puneet Gupta, Managing Director, Simplified FinTech, says the future in digital lending will be of folks who move beyond the digital stack and start to create additional product that enables loan indication, co-lending and provide liquidity through the securitization mechanism over the period of time.
Microfinance is a type of banking service that is provided to unemployed or low-income individuals or groups. Satyavir Chakrapani, MD & CEO, Shikhar Microfinance Pvt Ltd said, when you talk about financial inclusion you are not talking about transforming lives. we are not doing economic inclusions, companies have grown, but clients haven’t grown as such. we have a large number of mobile phone users and so is the bank accounts.