Fintech lending (or digital lending as it is commonly known) is the process of providing credit to consumers (individuals and small to medium sized businesses) in a digital form - paperless, personless, and frictionless. Digital lending services are offered through web-based and mobile applications with user interfaces. Regulator defines digital loaning as a remote and automated lending process, largely by use of seamless digital technologies for customer acquisition, credit assessment, loan approval, disbursement, recovery, and associated customer service.
Fintech, or digital, lending stands out for its technology-enabled consumer-centric approach. To provide customised financial solutions, it uses non-traditional data from consumers to evaluate risk and creditworthiness. Coupled with a comprehensive digital interface with users, it streamlines the entire credit process. Thus, numerous product and distribution channel collaborations and creative approaches to risk assessment are at the core of fintech lending. Indian fintech startups began with the same promise and concept as their international counterparts.
Focus on consumer needs, preferences, and convenience. Offer, often collateral-free, personalised loans to fit the needs of individuals and businesses.
Priority to unserved and underserved market and product segments.
Use of alternative data to underwrite individuals and businesses.
Collaboration between regulated entities and fintech to innovate new models, products and market segments.
Technology to give seamless digital experience to consumers. Operationally, the model works on the paper-less, person-less, friction-less process facilitated through the India stack and built around consumers’ information and transactions shared, processed, and verified digitally.
The fintech lending industry in India is growing rapidly. It is seizing opportunities offered by digital public infrastructure, conducive policy and regulatory environment, availability of capital and technology and insatiable credit demand. In less than a decade, digital lending has taken strides, becoming the preferred choice for consumers (especially for young people in urban areas and small-mid size firms) in personal, consumer and small business loans. Other products, including secured loans, are becoming increasingly digital.
A diverse supply of Banks, NBFCs and fintech entities are collaborating and competing to offer a wide range of credit to a vast consumer base – retail and small-medium firms (i.e. MSMEs).