27 March 2020
Thanks to the innovations in the fintech sector, borrowing money has never been easier. Among the by-products of the amalgamation of finance and technology are digital lending platforms or instant loan apps that allow people to borrow money in a faster and hasslefree way. Due to their instantaneous lending process and other advantages, digital lending is becoming popular with every passing day, especially in India.
Before we dive deeper, we need to understand what is digital lending. As the name itself implies, digital lending is a process of lending money over the internet. This means that each step in the entire lending process is done online. Digital lending platforms such as instant loan apps incorporate a greater degree of automation to make the overall borrowing process a seamless experience for borrowers. This way people can apply for instant loan online and get their required load with minimum to no paperwork.
It is a well-known fact that financial inclusion has been a major issue in India. For many years, banks are considered the go-to place by Indians in case of a loan requirement. They have long been a dominating player in the Indian credit market, be it a personal loan, home loan, car loan or any other type of credit. However, taking a loan from banks typically requires a tedious amount of paperwork and effort on borrowers’ part. Satisfying all qualifications needed for loan approval is not feasible for everyone. As a result, a credit gap has naturally been created in India.
Now, we live in a digital age where digitisation has become the new norm of doing things, and India’s finance sector hasn’t been untouched from this digital revolution. In recent years, rising penetration of the Internet in India has opened up new doors to many new possibilities in the country’s credit market. Digital lenders were quick to siege vast opportunities presented by the advent of fintech in India and are providing instant funds to those in need.
Making the lending process borrower-friendly is where instant loan apps have truly outdone their traditional counterparts. Banks generally follow rigid lending policies and procedures that have little to no regard to borrowers – especially those who need small loans. Whereas, digital lending platforms are effectively bridging this credit gap through their user-oriented policies designed to cater to the needs of individual borrowers.
Minimum paperwork is one of the biggest advantages of instant loan platforms. Since the entire process takes place over the Internet, loans are approved and sanctioned much quicker as compared to banks. Furthermore, the introduction of the e-KYC has made it even more convenient for individuals to have their identity and demographic details verified and get their loan approved. For instance, digital lending platform EarlySalary only requires an individual’s PAN card and one of the ID proofs (Aadhaar, Voter ID, Driving License or Passport).
Digital lending has been truly able to capitalize on the growing penetration of the Internet and smartphones in India. Instant loan apps or platforms generally operate through a web portal or as smartphone apps. This allows people to access credit funds easily without needing them to visit banks multiple times for their loan. Take EarlySalary for example – the instant loan app is able to disburse funds within hours of a borrower’s profile getting approved. This is also beneficial for lenders since they do need to bear the cost of establishing and operating a point-of-service.
Traditional lending platforms require the evaluation of multiple factors that affect the loan application of a borrower, such as tax returns, credit profile, past loans and repayments, statement of bank accounts etc. This entire evaluation can take weeks or months, depending on the individual’s profile. However, digitisation has been a game-changer in this aspect. EarlySalary factors in a broader range of factors – such as your ‘Social Worth’ score, to quickly evaluate the data and ascertain the credit profile of a borrower.
Instant loan apps have proven to be instrumental in filling our widening credit gap. However, to truly become and remain relevant to the people, these apps will need to continuously innovate and deploy new technologies. Furthermore, with increasing adoption, digital lending platforms are going to need a flexible approach to building and satisfy the needs of their users.