Digital lending has been growing in the pink amongst Indian users for the past five years. India had played in major leagues when it came to digital payments, and the same energy is seen channelling into digital lending. The current size of the Indian digital lending market is $270 billion. But how exactly does the industry function? What is its status quo, and what does the future look like? Read the article below to know the nuts and bolts of the rising-star industry of India.
What is digital lending
Digital Lending is the process of lending funds to the borrower via web platforms and mobile phones. It uses cutting-edge technologies of Artificial Intelligence and Machine Learning to provide loans for credit evaluation. Digital lending is facilitated by LSPs(Lending Service Providers) in collaboration with NBFCs(Non-Banking Finance Companies) to disburse speedy loans at a low cost as compared to traditional lending methods. India currently has 22-25 million BNPL users, which are projected to reach 90-100 million users by 2026. In 2021-22, India advanced loans worth $2.2 billion. The numbers are not only inclusive of individual borrowers but also of startups that attracted foreign backers.
The outreach of the lending industry grew multifold when new-age technology was expedited in the process. Digital lending has an innovative approach to loan proceedings. Some of the features that distinguish it from traditional lending are:
Software used in digital lending ensures low-risk lending that has higher chances of repayment. By analyzing facts and figures, the tedious screening process can be automated. The software can do the task in less time and with maximum efficiency.
2. Fast procedure
Since digital lending is completely contactless, online procedures can be done rapidly. With the elimination of long queues and frequent bank visits, one can avail the loan in the comfort of their home. With features like e-signing and quick creditworthiness analysis, credit can be extended to more people. This results in happier customers, faster decision-making, and cost optimisation.
3. Customer experience
Digital lending is a win-win for both lenders and borrowers. Customers enjoy the advanced features of digital lending like BNPL, which wasn’t an option in the days of traditional lending. Businesses do not have to use a massive workforce, with innovative software carrying off the workload.
As per the ‘State of Indian Fintech Ecosystem Q3 2022’ report, the digital lending industry is projected to become a $1.3 trillion market. The industry will soon observe new alterations and innovations to make this model stronger and be