Lending apps solving financial inclusivity and risk management challenges indiabusinessport.com

Encompassing financial transactions through online platforms or mobile applications, with the help of digital technology in authentication and credit valuation, financial lending apps have revolutionized the way of modern-day banking and transaction. Technological applications in domains like cloud computing, artificial intelligence, and blockchain and the deep penetration of internet connectivity have further fuelled the digital transformation of finances. The digital lending platforms and the fin-tech players providing the services witnessed a major boost during and post the pandemic when restrictions on physical movement compelled people to avail emergency loans from online sources rather than conventional banks.

In recent years, mostly propelled by fast-paced technological innovations, there has been a massive boom in the usage of fin-tech digital lending apps. With around 1100 fintech lending apps in the country, India’s digital lending market in the country is projected to witness an exponential growth from $ 9 billion in 2012 to $ 350 billion in 2023. Leveraging a blend of business models with advanced technological innovations, the digital lending apps have been instrumental in addressing the infrastructural, inclusivity and risk management challenges.

The rise of digital lending apps in India can mostly be attributed to the need for urgent small-ticket loans, which can be availed by simply downloading the app and without long processing times, numerous approvals and multidirectional verifications. There has been an increasing credit gap in India mostly due to the conventional banks and financial institutions overlooking the loan application of small borrowers with no or less credit history. Digital lending apps have revolutionized the process of lending, which now became accessible to all; thereby, enabling an overall financial inclusion.

In view of the massive potential of digital lending apps, the government has also been making policy changes and reforms to encourage market players. In order to increase financial inclusion and digitalization, several favourable policies have been introduced in recent years like Jan Dhan Yojana, Aadhaar Enrolment, Digital India, India Stack, Digi Locker and Unified Payments Interface (UPI). Also, other facilities such as e-KYC and e-signs have further eased up the process of authenticating users, assessing their credit worthiness, accelerating loan disbursal and ensuring safety and transparency.

To bring more transparency to digital lending transactions, the Reserve Bank of India (RBI) has recently issued stricter guidelines restricting financial institutions to save confidential data of the borrowers. The RBI guideline clearly states that digital lending apps cannot access mobile phone resources such as files and media, contact lists, call logs, telephone functions, etc.  This is expected to help fin-tech organizations gain more customer trust. The regulations also encourage the customers to avail loans only from Regulated Entities (REs). Thereby, people will be less drawn towards taking a loan from illegal lending apps which might have equivocal terms and conditions.



Views expressed above are the author’s own.


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