For traditional banks, digitization is being driven by digitizing credit proposal documents and automated processes for data gathering and credit underwriting.
Digital lending in India grew from 9 billion U.S. dollars in 2012 to nearly 200 billion dollars in 2021 and it is expected to reach around 350 billion dollars by 2023 – making it one of the fastest-growing fintech segments in the country. In a nutshell, the Digital Lending Market is foreseen to register a CAGR of approximately 13.8% during the forecast period (2021 – 2026).
The change in the lending landscape over the years can be attributed to the rapid adoption of digitization in the BFSI industry. Though traditional lending still prevails in many parts of the country, the benefits provided by digital solution providers remain prudent for growth.
Digital lending is also advancing in the wholesale segment but lenders are moving with greater caution and less urgency (given the relatively lower transaction volumes in this segment in comparison to the retail segment but with a high average ticket size per loan). Rather than reworking the entire customer experience, lenders are enhancing common processes – For example, digitizing credit proposal papers, and automating data aggregation so that the lenders have the most relevant data and risk-monitoring scores at their fingertips—including financial performance, industry performance, market and sentiment data, and pertinent news and external risk factors resulting in faster credit decisions and improved customer experience.
The Indian lending industry, today
According to CRIF High Mark, an RBI-approved credit bureau, the size of the loan market in India, as of March 2021, was 19.64 Billion USD, representing a 100% increase from 2017. Additionally, retail lending has increased by 91%, micro-lending by 157%, and commercial lending by 93% in the last 5 years.
According to estimates, the micro, small, and medium companies (MSMEs) have a high loan demand and the supply from formal sources is barely sufficient to meet this demand – therefore, banks and other established financial institutions are unable to fill a credit shortage of 67.3%.
The inability of banks and other established financial institutions to provide credit to the MSME sector has enabled the rise of new-age digital lending platforms that are progressively emerging from the metro as well as non-metro cities.
Trends in Lending Sector
Technology has emerged as a significant game changer in recent years – empowering fintechs to revolutionize lending in India while reshaping the way traditional financial players approach the industry.
Here are a few of the most important technological developments in the lending landscape
1. End-to-End Digitisation: Digitisation will assist financial organizations and banks in streamlining activities such as data gathering, the credit evaluation process, credit analysis, collection, and monitoring. Automated platforms will provide consistent and quick credit approval, while digital lending platforms will streamline the loan servicing process. Employees will benefit from automation, and businesses will experience increased efficiency.
2. Blockchain to break new ground in lending: Blockchain is already revolutionary, but it’s currently being explored to enhance a variety of financial services and products. Currently, blockchain is being used to help with a variety of lending operations, including expediting loan processes, providing data on real-time transactions, enhancing borrowers’ control over their loans, managing loan payments, and more.
3. The rise of AI/ML in lending business processes: Machine Learning (ML) and Artificial Intelligence (AI) have already shown to be disruptive forces in the financial sector. Several companies are now implementing them in other parts of the market, including lending. Lenders are increasingly investigating how AI and machine learning can automate complicated procedures such as fraud detection, automated loan offer generation, credit rating, and more.
Lenders use advanced analytics to extract information about possible leads from primary data sources (such as loan applications, GST statements, bank statements, credit history, and recent transaction details). They also employ open banking practices (which allow banks to share client data with third-party financial institutions via Open APIs with the user’s permission) to better understand borrowers’ credit behavior, financial circumstances, and anticipated future cash flow. This technological ecosystem is assisting lenders in addressing frequent inefficiencies in the loan decision-making process.
One of the prime examples of automated credit disbursal is the Digitization of Corporate Lending. By making the algorithms do the heavy lifting—from the origination of the loan to disbursal, digital transformation of the end-to-end credit journey. With the help of Open banking, Data analytics, and advanced AI/ML algorithms – fintechs, like Yubi, are helping banks democratize credit. They are making the credit decision-making process more programmable. This is done by first capturing data via Open APIs from Credit Bureaus, Banks, ITRs, GST filings, and Credit Information reports. Advanced algorithms process this data to gain deeper insights into borrowers’ creditworthiness. Finally, the software helps lenders create a custom risk assessment framework to align this automated process with their internal lending policies.
“Yubi Loans has built a lending infrastructure for banks to get access to thousands of enterprises through our AI/ML-based match-making algorithms. “Banks have started digitizing complex procedures like credit underwriting and appraisal to speed up loan disbursal, Yubi Loans acts as an operating system for banks to assess, lower risks, and monitor a large number of enterprises on a real-time basis”
India’s Leading Corporate Lending Platform
Yubi Loans is India’s Leading digitized corporate Lending Platform – Trusted by more than 750 lenders, with more than 3000+active enterprises on the platform. We help businesses get quick access to funds at competitive rates by
connecting them with India’s top lenders on one platform. To date, more than INR 10000 Crore+ worth of loans have been disbursed on YubiLoans enabling hundreds of Indian enterprises to grow and operate at their full potential.
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