Page 34 - Banking Finance March 2023

ARTICLE

Digital loan disbursal count
was at 12 times due to the
diverse influence of fintech
players and digital lending
models by the end of 2020.
Both private banks and
NBFCS 2020, took lead in
the lending ecosystem and
almost fifty-five per cent to
thirty per cent of loans
found disbursal through
digital platforms.

Integration of
new-age techno-

logies
While banks have been
increasingly adopting innovative approaches in digital
Digital Lending vis-à-vis Physical Lending
processes, NBFCs have been at the forefront of partnered
Based on data received by RBI from a representative sample
digital lending.
of banks and NBFCs (representing 75 per cent and 10 per
cent of total assets of banks and NBFCs respectively as on
Technology has been a game-changer for the lending
March 31, 2020), it is observed that lending through digital
industry by addressing key challenges that stand in the way
mode relative to physical mode is still at a nascent stage in
of credit accessibility. Digital lending players are leveraging
case of banks (?1.12 lakh crore via digital mode vis-à-vis
new age technologies and algorithms to streamline and
?53.08 lakh crore via physical mode) whereas for NBFCs,
automate the entire lending process that provides a smooth
higher proportion of lending (?0.23 lakh crore via digital
and efficient experience to borrowers that help in fostering
mode vis-à-vis ?1.93 lakh crore via physical mode) is
relationships. Fintech companies analyze digital payments
happening through digital mode (RBI report, 2021).
data to underwrite in almost real-time fashion efficiently.
This leads to all real-time transactions happening
over the internet being replaced by fintech's credit-
based payment products, such as Buy Now Pay Later
(BNPL) or Convert to EMI Products.

These companies utilize their customer's financial
and transactional data to underwrite digital loans
over an Application Programming Interface (API) -
driven approach, thereby substantially lowering the
time required to gain personal or pay day loans.
New-age tech like artificial intelligence and machine
learning optimise the process through predictive
analysis enabling lenders to improve customer
engagement. It also enables seamless customer on-
boarding through personalised solutions and helps
lenders with fraud detection at the beginning of the
process.

30 | 2023 | MARCH | BANKING FINANCE