The Association for Information and Image Management (AIIM) organises the World Paper Free Day, every year on November 6 (since 2010). The previous loan subscribing process where regular physical presences in banks were necessary, apart from the weighty paperwork requiring multiple meetings to get your creditworthiness substantiated, was indeed time- consuming (still is). Then there was the credit underwriting process running for months to conclude. The yesteryear banks also offered a preferential treatment only to its current customer segment having already subscribed to either of the services offered by the banks. The concept of “consumption loans or loans for the unbanked and underserved” was alien and passé for the banks.
The global shift from paper-led commerce and banking to the now pertinent digital interfaces has shifted the consumer base to the digital services landscapes. This phenomenon has also increased the diffusion of the new trading (for buying the daily used goods and services) interfaces among the so far underserved populace in the developing economies. From telecom services ecosystems to online grocery and food deliveries, from medicines and medical supplies to utility services bill payments, the digital discourse is now omnipresent in our commercial, economic, social, and personal spheres of life. The advent and acceptance of digital architectures and transformation platforms across sectors and industries have now also reached to the credit lending arena. We are now witnessing multiple consumer internet companies (benefitting from their brand value, healthy consumer base, and solid distribution network) venturing into digital lending (financial services) space by leveraging on their widespread digital access of the prospective consumer segments.
In India, the existence of a level playing field, the absence of dominance of any currently operational digital lender, almost no entry barriers for new entrants, and fine prospects for adopting a variety of business models, are the enabling factors harmonising the incoming of digital lending (via an integrated lending approach). In the consumer lending space in India, the regulatory framework of digital lending put in place is also apt to regulate the sector. The next wave of revolution in the consumer lending space is poised to emanate from the robust framework built upon the foundations laid by the regulatory mandates such as Aadhar, UPI, Digilocker, eKYC, APIs, eNACH, and eSign services. This mechanism has democratised the lending sector allowing several companies to offer multiple competing products on the same platforms as seasoned financial companies. Where previously the CIBIL score was the deciding benchmark to qualify for speedier loan sanction and disbursement, now, the advent of FinTech is promisingly allowing the underserved and unbanked qualify for financial services. The introduction of New-To-Credit (NTC) loans in Banks, NBFCs and FinTech of late will fuel the engine of growth in the coming years.
The digitalisation of consumer lending has also minimised the duration required for credit underwriting. Furthermore, the smartphone penetration in the millennial generation of India is also set to result in attracting a considerable volume of the thus far underserved or underserved population into the mainstream of financial services. The creation of a seamless experience for the new (millennial, unbanked, underserved) customers will also be supported vastly by the development of afresh distribution channels—with intelligently designed user (customer) experience (UX) on smartphone Apps for eased sales funnels—at a fast pace in the digital environment.
In the era of data analytics, artificial intelligence (algorithms for credit rating) and machine learning, and digital technology, the NBFC-FinTech services sphere is also set to benefit from the possibilities to better and speedily serve the borrowers. Yes, as discussed in the above paragraphs about speedy creditworthiness determination and APIs, these ultimately would result into fastest qualifying and disbursement (paperless credit in under a minute) of the loans ever experienced. Then there is the advent of Blockchain technology that can necessarily instil the distributed trust and transparency in the entire digital credit lending value chain. However, with both local and international consumer lending firms entering the Indian market, there is a need to have a crystal clear and solid regulatory framework in place for such new forms of FinTech players. The current regulatory watchdogs overseeing the conduct of such FinTech firms are Reserve Bank of India (RBI), Insurance Regulatory and Development Authority (IRDA), Securities and Exchange Board of India (SEBI), and Telecom Regulatory Authority of India (TRAI). There is a need for a comprehensively drafted set of meticulous guidelines and a dedicated regulatory body for the FinTech players, to make the digital lending space a financially inclusive, transparent, economical, and resource-friendly phenomenon in India.