With advancing digitization, digital lending is a phenomenon taking shape at a fast pace, making the lending process a whole lot easier and more convenient. The market for lending digitally is increasing, with each year taking the level a lot higher.
The increasing demands of the customers, as well as the increasing expectations of their financial institutions while they take a loan from them, are the major reasons behind the development of this lending market. While the traditional method required a lot of time and hefty paperwork, this alternative method has captured the market.
The millennials and the new generation are looking at the growth of digital lending and finding it to be the easiest way to get a loan quickly and conveniently. In this blog, we will be looking at the meaning of what exactly is digital lending, the benefits that distinguish it from traditional lending, and what to look for in the platform while taking this service.
What is digital lending?
Digital lending is the process through which financial institutions or banks provide loans and credits to businesses or individuals through digital or online platforms. The lending process, from application and underwriting to disbursal and repayment, is streamlined and automated by utilizing technology and digital tools.
Comparing digital lending to traditional lending, a lot of time and resources are saved. Once lengthy paperwork, in-person meetings, and endless waiting time are now replaced with easy online applications and automated decision-making.
The key features of this digital lending look easier to understand but are very complex and require careful handling. While the process is feasible and convenient, there is a lot more to understand before the technology is used.
Overview of the difference between digital and traditional lending
Traditional lending, which is being consumed, involves tonnes of paperwork, making the whole process tiresome for all the parties involved. While the receiver had to carry ID proofs and documents in physical form, there was always some problem with them, like mismatched signatures or photographs.
But with the arrival of digital technology, the whole process became a lot easier, more automated, and hassle-free. All the verifications and documentation can be done with digital copies and with only a few documents. The process, which earlier used to take months, can now be done within weeks with little to no errors.
Not a single party is troubled with frequent visits to the nearest branch, thus saving a lot more travel and indulging in verbal communication. For more detailed information, the net section of benefits can be viewed.
Benefits of digital lending system
After understanding the meaning of digital lending, it’s only understandable to look at all the benefits it provides. These benefits will also provide a clear difference between traditional lending and digital lending.
- The application process is simplified: The digitalization of the lending process enhances the customer experience with easy application and quick decision-making. The transparency that is brought out of the process and the diminished dissatisfaction that results are some of the many benefits of digital lending.
- Digitised lending information: Digitizing lending information is a benefit for the credit team because it gets all the data collected in one place. This helps them acquire information about a lending seeker and their credit updates, thereby enhancing the decision-making process and progressing the digital lending process. It also increases transparency within the system.
- Electronic signing and mobile lending: If we talk about the digitized generation, they prefer doing everything through smartphones while sitting in their comfort zones. The same is true when they are looking for loans; they prefer to get it done through their smartphones, and that too without the pain of being physically present. Due to this, they might switch to digital lending rather than traditional lending.
- Alternative Credit Assessment: Digital lending platforms frequently use alternative data sources, such as digital footprints, social media profiles, or transaction histories, to evaluate the creditworthiness of potential borrowers.
- Quick disbursal: Once the lending is approved, the disbursement of the funds is quick to reach the borrower’s account. This is because the system uses predefined norms and risk models to make quick and precise decisions.
- Providing various loan options to choose from: For those who are underserved or who have limited credit histories, digital lending makes credit more accessible to them. Traditional lenders might not provide loans to first-time borrowers or people who have no credit history, but for them, this feature is a big boon.
Digital lending services to look for in a lending platform
As a person seeking digital lending, what are some of the crucial points that should be looked after? Here is a summarised list of all the key features that must be considered while choosing a digital lending platform.
- A friendly user interface for an easy and guided process of form filling from the very start to the very end.
- The self-service application pre-approval system, which quickly makes application choices.
- The date verification software used will verify the borrower’s data while using secure financial databases.
- Digital lending software that will collect, manage, and transfer data with all the relevant departments involved.
- A system that will monitor the whole process and inform you immediately in case of any error that can result in the rejection of an application.
Digital lending and the Indian fintech market
While digital lending is advancing worldwide, India is also a place that is witnessing rapid progress through this new lending process in the fintech industry. The credit for this flourishing industry goes to the fintech startups and non-banking financial companies that are dominating the market.
It is anticipated that the growth graph of digital lending growth will go exponentially in the coming years, as per the trends observed in the past decade. The revitalizing lending system is leveraging technologies that help with quick, easily accessible, and convenient ways to get a loan.
After understanding the scope of digital lending, one can conclude that businesses that will have more transparency, meet customer needs and expectations, and adapt to the fluctuating market will be able to survive in this competitive market.
While digital lending is making the whole loan process a lot more convenient for all individuals and businesses, it is also one where a lot of malicious activities can take place if the concerned parties do not take the necessary precautions. Therefore, it becomes really important that the digital lending platform be chosen with care, keeping all the security points in mind.
Trustt is a banking platform that helps in launching the banking products of all their clients in a matter of a few weeks or months. This is irrespective of whether the client is a bank of any scale, an MFI, or a FinTech company. Offering a large number of platforms and four products of Trustt GPT, Digital Lending, Digital Identity, and Digital Distribution, Trustt is one of the most trusted banking solution providers.