Page 33 - Banking Finance March 2023

ARTICLE

favourable digital ecosystem for the development of digital The smart phone revolution
lending. India has pioneered in creating conducive ecosystem
Big data analytics, Artificial Intelligence (AI) and
for development of Fin-Techs and digital transactions.
Machine Learning (ML)
Enabling technological developments
The digital lending ecosystem has myriad levels of
complexity and is in a constant state of evolution. Digital Eco-system conducive for digital lenders and Fin-Tech
lending is the process of offering loans that are applied for, companies
disbursed, and managed through digital channels. In this
Increased digital uptake to overcome challenges posed
process, lenders use digitised data to make credit decisions
by COVID-19
and build intelligent customer engagement (Accion, 2018).
Digital Lending
Landscape
The Indian Digital Lending
landscape has undergone
a dramatic shift over the
past few years. The
legacy systems and
traditional practices that
were prominent in this
space are disappearing
and getting replaced
with digital processes that
are powered by data and
AI. This transformation
has been further
accelerated by COVID-19
(RBI Report 2021) and the social distancing norms put to counter it.

Digital lending has grown significantly as a result of digital India has been whetting its appetite for digital
ecosystem through various initiatives like Aadhar, Unified transformation in financial services, slowly but steadily.
Payment Interface (UPI), Bharat Bill Payment System and Digital lending is one of the most prominent off-shoots of
cashless economy push Goods. The Digital lending platforms Fin-Tech in India. The digital/ Fin-Tech lending has to be seen
have gained massive popularity among MSMEs post COVID in the overall context of the Fin-Tech eco system per se,
in India due to the quick Turnaround time (TAT) and on- stylised in the following diagram.
boarding, easy KYC, as well as disbursement within minutes.
Additionally, they offer solutions that are designed to suit a
particular target segment, such as flexible collateral
structures, and customised products tailored to working
capital cycles (Balakrishnan & Srinivasan, 2019). Digital
lenders are therefore able to cater to new-to-credit
customers who were previously unbanked or had thin credit
files, and bring them into the fold of formal finance (PwC,
2019). With the rapid adoption of digitization, the lending
landscape in India has changed substantially.

The following could be considered as the major factors for
growth of digital lending:

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