By Yogendra Goyal
In today’s fast changing world, technology has played a critical role in making education more accessible to people across geographical domains and financial strata. A recent report states that as many as 83% Indian students want to study abroad. With the perpetually rising education costs across the world including India has led to a significant rise in demand for education loans.
India is in a unique position to harness the benefits of latest technological advancements to transform the student loan domain. The widespread rise in adoption of technology in India is helping create a powerful eco-system for student loan management that would not only reshape the entire customer experience but would also help the lending companies provide superior service at optimal costs.
Some of the inroads made with the help of technology are listed here:
Seamless customer on boarding
The Know Your Customer (KYC) process which is a critical step in a loan transaction has seen a substantial change with the advent of online Aadhar Card and PAN Card authentication. Collection of other data and information related to customer has also become notably easy. This leads to higher level of accuracy, drastic reduction in time, effort and ease with a concomitant reduction in overall costs.
The automated collection and validation of data and information at the source is going to dramatically reshape the customer experience. Multiple physical visits to branches, duplication of efforts, loss and repetitive submission of documents are all going to become a thing of the past. The faster pace along with the ability to handle large number of transactions is resulting in getting more and more students under the gambit.
Decision-making and loan underwriting
AI and data science are now integral part of the strategy for any futuristic student loan company. By utilizing several analytical tools, efforts are being made to understand data in a meaningful manner and draw intelligent inferences. Machine learning is applied to gain actionable insights that would make the credit decision making engines more effective and accurate. This is going to help with quicker and more accurate evaluation of a student’s loan application with minimal human intervention.
By utilizing empirical data with respect to hundreds of courses globally and charting the earning potential of the student pursuing these courses over a long horizon of time, data driven insights and intelligence is being developed. This is aiding in the development of innovative student friendly loan products like collateral-free loans without the parents having to sign-up as a co-borrower. This is revolutionary in itself. Historically, student loans were given against collaterals furnished by the parents and based on the earnings of the parents.
Dedicated and focused application of AI and ML would help increase loan penetration to the large unserved segment in the country, promoting financial inclusion.
Process automation
Long waiting periods and delays in disbursement are a big hassle for customers. These delays are usually caused by the time taken to process documents manually. Automated services like acknowledging loan application forms, sending reminders about due dates, and making direct payments into accounts go a long way in improving customer relations and reducing work pressure on the financial institute.
Fraud Detection and Risk Management
Due to deeper adoption of technology, every day new developments are emerging with respect to early fraud detection and effective risk management. There are account aggregators from which various financial information, bank statements and GST data of a customer can be collected. Since, the data is collected from source, it is going to dramatically reduce errors, oversights and frauds and bring heightened efficiency in operations and risk management for the lending company.
AI and ML aiding efficiency and growth
To keep up with changing times and evolving consumer awareness, new age fintech companies are using machine learning, to build superior customer experiences and also create a secure infrastructure for the customer’s data.
Through a concerted focus on using technology for innovation, student loan industry in India can nurture inclusivity and help every student in India to become self-reliant and move unbridled to fulfill their dreams and aspirations without putting a burden on his or her parents.
The author is chief technology officer, Kuhoo Fintech.