Digital financing is already a disruptive force in the rapidly evolving worlds of technology and finance. The days of lengthy bank lines and mountains of documentation required to obtain a loan are long gone. With a few clicks these days, individuals and businesses can get the funding they need to reach their financial goals. This blog will explore the context of digital lending and look at its advantages.
What is Digital Lending?
Through online platforms, anyone can apply for and be approved for loans through digital lending, a type of loan acquisition approach that eliminates the need for in-person visits to banks or other financial institutions. With this approach, borrowers may apply for loans online, get them, and manage their repayments all at once.
Because of its convenience and flexibility, this type of financing has grown in popularity among younger, tech-savvy consumers. The proliferation of smartphones and the expanding array of credit choices have led to a remarkable surge in digital lending in recent times.
Growth of Digital Lending in India
Within the fintech industry in India, digital lending is a rapidly growing sector. This industry has grown at an astounding rate in the last few years, rising from a 2012 valuation of nine billion dollars to about 150 billion dollars in 2020. According to experts, the market will only continue to expand and is expected to reach an astounding 350 billion dollars in value by 2023.
Non-banking financial businesses (NBFC) and fintech startups have dominated this thriving industry. Through the use of technology, they are transforming the lending industry by offering quick, easy, and convenient loan services.
How Does Digital Lending Work?
With just a few clicks on the computer, you can quickly and easily finish the digital loan application process. The loan application is handled and authorized in a matter of hours to days once the applicant submits the required paperwork and personal information. The loan money is immediately deposited into the borrower’s bank account upon approval.
Fintech companies’ ability to swiftly and effectively underwrite loans using real-time data is one of the main benefits of digital lending. These businesses can provide credit-based payment products like Buy Now Pay Later (BNPL) or EMI products, which are swiftly taking the place of conventional offline transactions, by evaluating digital payment data. Fintech companies can slash loan application times by a significant amount by underwriting loans on an API-driven basis utilizing transactional and financial data from their consumers.
Customers will have a more smooth and hassle-free borrowing experience as a result of all of this. Digital lending has been significant in boosting financial inclusion and empowering borrowers in India by removing many of the barriers and inefficiencies typically connected with getting loans offline.
Benefits of Digital Lending
- Through digital lenders, people and companies that might not have been able to apply for loans through traditional lenders can now obtain finance.
- With good reason, digital financing is the way of the future. Here are a few advantages of digital lending for credit-seeking people and companies.
- In the financial services sector, digital lending provides speed and ease never before seen. There’s no need to visit actual bank locations, stand in line, or fill out voluminous forms and paperwork because the entire process is done online.
- Constant accessibility is an additional advantage. Digital platforms are available to borrowers at all times, including after regular business hours. People find it simpler to apply for loans at the most opportune time thanks to this flexibility.
Digital Lending Apps/Platforms (DLAs)
Apps for digital lending are web- and mobile-based programs with user interfaces designed to make digital lending services easier to use. Apps run by Regulated Entities (REs) and Lending Service Providers (LSPs) that are hired by REs to provide any credit facilitation services in accordance with RBI criteria are also included in DLAs.
In India, digital lending is starting to gain traction. Over time, the lending procedures and regulatory controls need to be robust. Notwithstanding the advantages, the sector nevertheless has to deal with a number of issues, including privacy issues and cyber threats. Therefore, in order to preserve confidence and guarantee seamless operations, digital lending platforms must adhere to the most recent legal regulations while also maintaining greater digital security standards.
Digital Lending Vs Traditional approach of lending
The traditional approach was used in India’s financing process. Traditional loan applications require an excessively drawn-out, difficult, and time-consuming process. It was necessary to create a new kind of lending that takes the borrower’s capacity to get a loan into consideration due to the shortcomings in traditional lending. In India, digital lending was offered as a solution to address the aforementioned shortcomings.
A program called “Digital Lending” has revolutionized the lending and borrowing process by enabling anyone to borrow money quickly and without the need for paperwork. Both lenders and borrowers have been freed from the laborious and time-consuming traditional loan process thanks to digital financing.