Over the past two decades, India’s digitalisation journey has been promising. A tremendous rise in mobile and internet penetration within the hinterland is providing newer opportunities for businesses to engage with customers despite geographical differences. Digitalisation has transformed business operations in almost every industry, emerging as a crucial strategy for companies seeking to make their presence felt in an ultracompetitive market.
Scenario of home ownership in India
India’s mortgage penetration to GDP ratio is one of the lowest in the world at 10.6 per cent. With long-term growth drivers putting real estate expansion back on track, the housing finance industry is poised for accelerated growth in the foreseeable future. After a prolonged period of stagnation, the sector is moving towards a demand upcycle. This can be attributed to an increase in income levels, growing affordability, stable property prices and larger housing space requirements owing to remote working norms, among others.
The under-fulfillment of loan requirements for Tier II and III towns is one of the main problems India’s housing segment is facing. Banks often prioritize large loans since they follow a branch-led business model in which costs are set and profits are based on the size of loans. Thereby, banks and other financial institutions only serve a small proportion of the population. This issue can be resolved by integrating technology into home loan offerings.
The pandemic has altered the homebuying patterns of people. Indians are now more inclined to invest in a home, either to live in or leverage as an asset with an additional income generation possibility that can be used during times of crisis. Millennials are more comfortable about accessing home loans online and the ease of securing a loan through digital tools has provided a fillip to the sector. Additionally, the need for larger spaces owing to remote working models and reverse migration has buoyed the demand for homes in Tier II and III cities.
Technology boosting the housing finance sector
Technology can help housing finance companies meet customer expectations by providing personalised financial solutions, better services, and real-time updates through channels that customers prefer. Collecting the borrower’s information is no longer a manual process requiring days, instead, it can be completed in a few minutes by uploading documents on the lender’s digital platforms. Moreover, customer onboarding is now generally faster, more effective, and seamless. Integration via Account Aggregators and ever-increasing surface area of ‘Know Your Customer’ through digital footprints is increasingly giving newer tools for smarter and accurate credit underwriting which eventually will help to improve the overall portfolio while excelling customer experience.
Predictive analytics, Artificial Intelligence (AI) and Machine Learning (ML) powered by data have been revolutionising various industries. Within the home loan segment, customer information and historical data from lenders can aid in the development of AI and ML, improving the accuracy of numerous data points, including the applicant’s income, expenses, other loan payments and investment earnings.
Additionally, as the loan application process requires the applicant to fill in several personal and financial details, ML can be used for autofilling, obtaining and validating the information. This would reduce potential human errors and vastly improve the efficiency of the entire procedure.
Summing up
By providing convenient services and enhancing operational effectiveness, digitalisation in lending can alter customer attitudes. On digital platforms, credit reviews and loan disbursals happen far more quickly, unlike traditional loans. The operating cost-effectiveness of digital alternative financing arrangements is another significant benefit, among many others.
In the digital era, for an organisation to stand apart, it requires a clear vision to be an industry first in an offering and continuously investing to build those core competencies. Companies like PNB Housing Finance have accelerated their digital journey by deploying contactless customer onboarding, digital verification and disbursal, thereby optimising costs and improving efficiency.
Views expressed by: Anubhav Rajput, Chief Technology Officer, PNB Housing Finance.
