India's Cashless Dream is Now Coming True By employing cutting-edge and fully automated underwriting process, new-age fintech platforms assess the creditworthiness of each borrower

'India is undergoing a fintech revolution' has become a ubiquitous chant. And like most things ubiquitous, their full depth is seldom understood. It's true that digital wallets, online payments, and instant fund transfer are the most apparent manifestations of India's fintech revolution.

Fintech Players Pushing the Boundaries

But the effects of the massive strides that the industry has taken are hardly limited to these transactions. Innovative fintech players are pushing the boundaries of what is achievable and are making the dream of a truly cashless India come closer with every passing minute.

An evolved set of fintech players are emerging in the consumer lending space. They leverage data from diverse sources, apply AI (Artificial Intelligence) and Machine Learning algorithms for credit scoring, and use innovative underwriting methodologies.

Paperless Consumer Loans on LaaS Platforms

These Lending-as-a-Service (LaaS) platforms are digitising the entire consumer loan lifecycle (Application-Assessment-Fulfilment-Repayment), making it not just quick, easy and cashless but also paperless.

Using cutting-edge technology and vast pools of non-financial data, leading startups have introduced a new segment to India's fintech space altogether — availing credit while making payments on an e-commerce platform in a couple of clicks. That too without having to have a credit card or a credit score. These players are ushering in an enhanced future of cashless digital lending in India and are also including millions of underserved individuals into the fold of credit.

The holy trifecta of borrower data, algorithms and automation is helping these fintech players bridge a major gap in the financial services market. Customers who have never availed a loan can now do so in a quick and convenient manner.Otherwise, they'd be running around at a bank or a Non-Banking Financial Company (NBFC) for weeks. For this and other such use cases, these digital lending startups are leveraging technology to create and deliver unique lending products for the Indian consumers.

"It has become a vicious circle with the lack of credit history hindering the opportunities of accessing credit, and leading to non-creation of an applicant's credit score."

Here's a glance at how these players are altering the paradigm of the access and reception of credit funds in India.

Employing Alternate Data Sources
As per the Reserve Bank of India, 6.5 million credit cards were added between September 2016 and September 2017; against 91.6 million debit cards being added in the same period. Based on the huge disparity in growth and penetration (number of debit cards lead credit cards by a factor of 25x), it is evident that Indian consumers remain credit-starved. It has become a vicious circle with the lack of credit history hindering the opportunities of accessing credit, and leading to non-creation of an applicant's credit score. Therefore, it is imperative to turn to other readily available data sources for credit assessment. Incorporation of rich data from everyday service usage such as telecom, along with social profile, work details, Email and SMS are now filling the gaps in a borrower's profile, especially for those who have no credit history.

Innovative Ways of Assessing Creditworthiness
By employing cutting-edge and fully automated underwriting process, the new-age fintech platforms assess the creditworthiness of each borrower based on non-financial data collected from different and unique sources. This ensures an instant and transparent credit approval process. Some digital lending players are in fact collaborating with industry giants in different realms such as telecom to provide instant decisioning on a customer's creditworthiness (take Airtel's Online Store for instance). Similar synergies are being worked upon in other sectors as well to get access to vast user data pools and varied use cases.

"By introducing technology, the new age digital lending start-ups are creating innovative models to overcome the evident inadequacies in the processes of the formal banking sector."

Completely Paperless and Digital Process
In traditional banks and NBFCs, processing loan applications is a cumbersome and time-consuming activity, which ultimately delays the disbursal of the loan. With digital lending platforms, however, human intervention is minimum–no executives to deal with;no mountains of paperwork to navigate through. Instead, the requisite documents like bank statements, PAN and Aadhaar can be uploaded online–directly on the platform. In addition, the borrower's credit report can also be fetched instantaneously, enabling the platform to approve and quickly disburse the unsecured personal loan without any physical interaction with the borrower.

Following the initiatives under Digital India Programme, India Stack, and last year's demonetisation drive; the espousal of cashless payment methods and other digital financial services has empowered both new and existing players in the fintech ecosystem. By introducing technology, the new age digital lending start-ups are creating innovative models to overcome the evident inadequacies in the processes of the formal banking sector. Digital lending has arrived and is here to stay. It is redefining the industry, one innovative technology at a time, and paving the way for a brighter, more optimistic future for our credit-starved economy.