We are in an era of innovation where motivated minds put in all the hard work to bring their ideas to fruition and create value for society. But is this a new phenomenon?
Not really! There hasn’t ever been a death of innovation. In fact, the environment is conducive for startups more than ever now. And why?
Enter fintech lenders!
Securing funding isn’t as complex anymore. There is now a lot less to figure out when it comes to capital for turning ideas into reality. Startup funding has been greatly simplified by the influx of capital from fintech lenders. Let’s read how!
The rise of fintech lending
Startup funding had been complex and slow because of the long lists of requirements when venture capitalists and banks were the only gatekeepers. The unending paperwork combined with snail-paced verifications and approvals hampered the spirit of many entrepreneurs.
However, fintech lending brought in the winds of change and helped the space transform with unprecedented speed, efficiency, and innovation. These firms found their primary strength in data processing abilities and became a much-needed ray of hope for early-stage startups.
As of now, there are more than 2000+ fintech companies operating in India, of which 17% are in the consumer lending segment.
Want to know how fintechs are achieving the near impossible? Read further.
How is fintech lending breaking startup funding stereotypes?
The never-ending demand for all kinds of credits, right from business loans to other consumer loans, finally have found an easy answer in the form of fintech lending. So, what are these fintechs doing right?
The fintech lending platforms have transformed the process of extensive paperwork and verification during loan application from a manual chore to a seamless online experience. By perfectly leveraging the power of technology, they have made the switch feel like the transition from horse-drawn carriages to luxury cars!
Data-driven decision making
Data is the new gold in the world of fintech. By harnessing data analytics, lenders can create personalised funding options and transition from a one-size-fits-all approach to a tailored plan for each startup. This also gives them better confidence in funding innovators on record of their trustworthiness and repayment ability.
Faster credit assessments
Fintech lenders are revolutionising credit assessments by using non-stereotypical ways of evaluation. Unlike traditional banks, these lenders assess unconventional aspects of a business, such as social media activity, online behaviour, transaction patterns, and even customer feedback. This way, they get a better idea about a company’s future and creditworthiness. Now, this is a paradigm shift in lending which provides a more adaptable and inclusive approach that can accommodate the dynamism of modern businesses.
The larger impact on society and market trends
The fintech impact is not limited to startups. About 190 million people in India do not have access to banking services. Fintech is thus emerging as a light at the end of the tunnel and promoting financial inclusion. Microfinance is projected to grow at a rate of 11.3%, and this points to a larger trend.
Here is another interesting stat on why fintech lending is the need of the hour – Funding for startups decreased from $12 billion in Q1 2022 to $3 billion in Q1 2023. This reduction in capital points to an urgent need for innovative solutions and shows that collaboration and partnerships within the fintech sector can be vital for nurturing and growing new ideas.
Fintech lending isn’t merely challenging established norms but revolutionising the space. The tailored and innovative approach makes loans more accessible, flexible and responsive to the requirements of startups. With the consistent evolution of business, fintech isn’t a passing trend. It is a true picture of the future of startup financing in India. With its impact on society and undeniable influence on market trends, fintech has transitioned from being on the fringe to taking centre stage and shaping an era characterised by financial empowerment and inclusion.