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Fintech lending apps and their viability

In recent decades, fintech has become a globally established norm. The powerful tailwinds in the FinTech sector show how the lines between business and technology are always blurring, forcing not only startups but also well-established financial institutions to use technology to create new products and solutions. One technological innovation that disrupts the financial services landscape is the FinTech or digital loan.

Recent advances in technological innovation and the consumerization of the FinTech lending app have reshaped the way consumers develop, distribute and use financial services. Powered by the 1100 FinTech lending app, India’s digital lending sector is projected to grow rapidly from $ 9 billion in 2012 to $ 350 billion in 2023.

By combining business models and championing technological innovations, these FinTech lending apps are tackling infrastructure, inclusion and risk management challenges that long-term banks and financial institutions have failed to address.

Expansion of smartphone and internet connection

The number of smartphones in India has increased from 100 million in 2014 to more than 700 million in 2021 With no signs of slowing down, the number is expected to only increase in the coming years This means ubiquitous access to the Internet for the majority of the Indian population. Accelerated by the availability of cheap smartphones and the explosion of faster and more affordable internet connections, a huge population is leaning towards the FinTech lending app.

Users, especially those in need of urgent short-ticket loans, have found joy in the option of downloading lending apps on their mobiles and taking loans without lengthy processing, numerous approvals and multi-faceted verification.

Key enablers for financial inclusion

For a long time, the formal loan needs of Indian borrowers have not been met and banks and financial institutions have been neglecting them. The infiltration of low credit into the informal economy and the continued reluctance of banks to lend to first-time borrowers and small borrowers with little or no credit history have further widened the credit gap in India.

Challenging the old rules, FinTech lending apps are moving forward where banks are afraid to run. The combination of business models such as peer-to-peer transactions and crowdfunding with innovative credit assessment models has enabled digital lenders to incorporate the invisible part of credit into a larger scale within the scope of financial inclusion.

Bound by government initiative

As FinTech lending apps chart a way to narrow India’s credit gap, the government is moving forward with increasing financial inclusion and digitization. The implementation of favorable policies and initiatives such as Jan Dhan Yojana, Aadhaar Listing, Digital India, India Stack, DG Locker and Unified Payment Interface (UPI) has helped Fintech lenders to capitalize on public digital infrastructure and create and install lending apps.

Benefits like Aadhaar authentication, e-KYC and e-sign have enabled digital lending apps to authenticate users, assess their creditworthiness, expedite loan disbursements and ensure security and transparency.

Remedy for epidemic suffering

The outbreak of the Covid-19 epidemic and subsequent lockdowns and restrictions disconnected a large population from banking and financial services. But the epidemic has forced consumers as well as businesses to transact online. When faced with financial and medical emergencies, these users receive instant loans from FinTech lending apps.

According to the Fintech Association for Consumer Empowerment (FACE), the amount of Fintech loans has doubled to Rs 18,000 crore. In FY 2021-22, 98 per cent of loans have been classified as personal loans. Because of their low overhead costs, technology-driven optimization, and minimal manual intervention, fintech lenders were able to operate efficiently and meet post-epidemic as well as growing economic needs.

A bunch of technological improvements

Data expands with the proliferation of smartphones. Using technologies such as data analytics, artificial intelligence, machine language, and cloud computing, FinTech transaction apps have been able to gain valuable insights from the abundance of data.

This has allowed them to better understand the needs of their customers, expedite loan processing and disbursement, and improve fraud detection. These technologies allow digital lenders to analyze customer behavior, assess risk, identify suspicious behavior, identify recurring defaulters, identify high-risk debt flags, and make neutral decisions. There is no denying that this prudent yet customer-oriented lending model has driven the growth of FinTech lending apps.

Key Takeaways

FinTech lending apps continue to dominate the credit market that was once dominated by traditional banks and conventional financial institutions. By providing alternative financing solutions, they are restructuring the lending process and revolutionizing the lending landscape using disruptive and innovative technologies. Thus, the winds of change are blowing in the fintech lending sector across the global financial services industry.

(Author Ajay Chaurasia, Head of Product, Rupiridi)

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