Digital Lending – Fintech & Bank Synergy Means Customer is the Winner

Lending without powerful tech is going to be like running a business without a website.

Indian lending market is growing fast and is expected to further pick pace. Consumption fueled by rapid economic development is a key driver of this growth. The consumer credit market is expected to double in the next 5 years. Think about it – one whole new India will be added in just the next 5 years! The enablers to service this market well and to fill the unserviced gaps are technology & mobile internet. Technology has the potential to disrupt the way credit is structured, delivered and consumed in India.

We give an exposure here of how we have leveraged technology to deliver a great experience to the customer. Ultimately, the biggest differentiator for a company is the differentiation that their customers experience and enjoy.

In this article, we focus on one of the most important pillars of lending automation – the fund transfer infrastructure.

Digital Lending Infrastructure

Before we go into the details, here are some issues that are faced by most lenders / fintechs today:

  1. Friction and delay in disbursal of funds due to manual involvement, banking holidays, operational errors etc.
  2. Friction and delay in auto-debit management
  3. Difficulties in real-time reconciliation of repayments from multiple channels
  4. Paperwork and risks involved in handling cheques, loan agreements etc.

A truly digital lender should have powerful technology systems that can transfer funds in real-time, reconcile repayments from multiple channels, have fully automated auto debit management and do away with outdated instruments like cheques (RBI has recommended doing away with cheques long time back) and wet signatures. Here is what infrastructure of a digital lender may look like:

Indian Digital Lending

Credy Approach – Customer Focused Automation

Our approach at Credy has been to build automation that directly benefits the end customer. We are happy to have a strong technology-driven banker in Yes Bank. Banking products of Yes Bank are innovative, robust and work well at scale.

Here are some places where we have used technology to improve customer experience:

  • No cheques – Cheques are avoidable and inherently risky instruments, susceptible to fraud that can cause huge loss to the customer. Cases of cheque fraud in lending are not uncommon.
  • Real-time fund transfer – You would be surprised at how many of the large NBFCs and banks still use NEFT for disbursing funds, even if they are below the IMPS limit. Our in-house loan management system moves funds in real-time backed by strong authentication.
  • Multi-channel repayments – Customers should have flexibility in choosing the mode of repayments. All major payment modes like auto-debit, payment gateway, wallets, UPI etc should be allowed.
  • Real-time reconciliation – It is a bad experience when the customer has to follow-up to get a receipt for their payment. We have real-time reconciliation of repayments via different payment channels. Yes Bank provides virtual accounts where even IMPS transfers can be reconciled in real time without having to manually attribute the transaction to a customer.
  • Auto debit management – Majority of the customers have funds on EMI dates. For this large chunk of customers, paying the EMI should be as simple as, well, doing nothing! Our auto-debit (NACH) system is fully automated – from signing mandates via eNACH to placing auto debits when needed to reconciling the repayments onto our loan engine in real-time.

These are just some of the examples of how a powerful technology infrastructure can deliver superior customer experience at scale as well as bring down risk, costs and turnaround times.

Role of Banks, Regulators & Government

Banks continue to play a critical role in enhancing the technological backbone of our financial system. Players like Yes Bank, RBL etc. actively work with Fintech startups in a synergetic manner. This helps Fintechs develop innovative solutions on top of APIs provided by the banks. All this ultimately helps the end customer.

It is also encouraging to see support from RBI, government, related bodies like UIDAI, NPCI etc in powering our financial system with the necessary technological infrastructure to serve another India that is going to be added in next 5 years.

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