By Monish Anand
In India, a significant part of the population lives in semi-urban and rural areas and are digitally excluded. Mostly due to illiteracy, low income, the fact that economic activity is concentrated in urban areas and lack of access to funds to run small and medium businesses. That’s why financial inclusion of the underbanked population is important to creating double-digit earnings growth and sustainable employment. This is made feasible by credit accessibility, which leans heavily on technology.
Although we live in the digital world, many people still lack access to basic financial services like securing a real-time loan. FinTech’s were born as a result of technological innovation, which presented a platform for changemakers. People of all ages can now access a variety of financial services and are much more aware of financial products, thanks to fintech companies. The emergence of digital apps and platforms, as well as the onset of the COVID-19 pandemic, has aided this transformation of removing the digital divide.
The New-to-Credit population has become active borrowers as a function of internet use in financial services. As they seek formal lending institutions to fulfil their financial demands, the entry of digital lending firms into the market has aided in the timely extension of credit to this demography, which also includes Gen Z and millennials. FinTech’s are providing a variety of services such as personal loans, home loans, and insurance to customers around the country, with attractive interest rates and low pricing. Customers have multiple choices when it comes to the types of credit available to them. With this, Tier 2 and Tier 3 cities are now included in the digital financial market. This trend has been aided by the rise of digital apps and platforms.
Tech & Touch
It’s critical for digital lenders to create a simple user experience, provide a secure platform, and provide information in simple languages. Because of modular technology and data-driven credit models, fintech’s now can offer customized client experiences and products such as personal loans, earned wage access, short-term loans, embedded finance, buy now pay later options, and so on.
Digital lending is getting secure by the day
Workers from all sectors, including manufacturing, self-employment, and service, can now easily access financial services, including Tier 2 and Tier 3 cities, thanks to the advent of digital financing. FinTech’s can scale up their operations and reach larger segments in need of development owing to the acceptance of digitization in rural areas. We see smartphones in the hands of local retailers and even street hawkers who are semi-financially literate this day and age. Customers’ security is ensured by legitimate digital lenders using sufficient verification mechanisms (for instance, OTP-based profile
Credit Risk Assessment & Fraud Prevention
Early on, digital lenders developed a simple lending model for lending with readily available bureau data. Over time, digital lenders have leveraged alternative data sources such as employment history, telecommunications payments, e-commerce payment history, and other spending patterns to create sophisticated lending models. The use of machine learning and data science is particularly insightful for digital lenders in the design and development of these lending models. The models help with loan recovery, early warning systems, avoiding the risk of loan fraud, and most importantly, financial inclusion. As the cycle progresses, getting more people involved in the formal lending system helps lenders analyse the creditor’s creditworthiness, even before the process begins.
With the proliferation of smartphones, more and more people in Tier 2 and Tier 3 cities are leaving a digital footprint and traceable through a powerful KYC verification process (eg mobile phone numbers linked to Aadhaar). Lenders who adhere to strict compliance and procedures win in the long run because they can detect fraud early and at the same time provide the borrower with a credible experience.
Data Analytics & Inferences
FinTech’s are responsible for updating itself in response to new trends to serve customers and provide the right choices. This can be achieved by adapting to trends and creating customized products. Staying at the forefront of changes, understanding customer preferences and aligning them with policies that can help provide contextual lending and other financial services to different customer segments are key to advancement in data sciences. New era technologies such as artificial intelligence and machine learning are becoming add-ons, providing lenders with positive analytics to improve customer retention. Improving customer satisfaction leads to increased onboarding, and compliance-based technology helps fight fraud early in the process.
FinTech is responsible not only for keeping up with trends, but also for providing effective customer service to satisfy the products and services available. Leverage a variety of channels accessible via AI to provide customers with point-to-point services through chatbots, IVR, app notifications, SMS and WhatsApp campaigns. By supporting our products at every stage of your journey, we provide support until the product is available and keep people happy. This also leads to the creation of trust with the customer base.
The way forward
Digital lenders have started a movement. They are on the path of making a revolution in digital financing. FinTech in partnership with channel delivery partners cater to credit delivery in Tier 2 and Tier 3 cities, with the help of new tech and connectivity. Digital lending has proved to be the answer to the credit demands around various target segments.
(The author is CEO and founder, MyShubhLife. Views expressed are personal)