Financial inclusion has always been a vital goal of the economic policies of the Government of India. Quick access to sufficient credit is an important requirement for financial inclusion for micro-borrowers who are otherwise unlikely to obtain it from structured lending networks. Digital lenders have a major role to play in this socio-economic reality, by developing alternative financing platforms for the historically under served population and championing the cause of financial inclusion.
NTC or ‘New to Credit’ customers are increasingly in demand for trouble-free credit access. While salaried individuals can easily claim and receive loans due to a lack of credit history, NTC customers often do not qualify for even small-ticket loans, as most banks and traditional NBFCs rely on credit scores to approve underwriting. However, several Tier 2, Tier 3 cities as well as villages are facing an acute shortage of bank branches and other banking facilities leading to their exclusion from critical banking services.
Technology is the main gamechanger –Digital platforms enable lenders to provide a significant segment of the population with convenient access to affordable credit. These lenders can create a financial ecosystem by leveraging new-age technologies, where they can serve underserved markets and improve their borrowing capabilities while securing their interests. Digital lenders will motivate NTC borrowers and eventually help them migrate into India’s formal credit system such that banks and conventional lenders will be qualified to borrow. The Loan application is processed through digital platforms that help borrowers apply for loans remotely-a very important necessity in a post-pandemic world. FinTech companies can not only help boost customer experience and ensure faster credit issuance by providing a user-friendly, efficient, and safe digital platform but can also minimize their operational costs and extend their services across various locations and consumer segments.
Through embracing various technologies such as Artificial Intelligence (AI), Machine Learning (ML), and Big Data Analytics, fintech lenders leverage the true data potential and ensure a more robust and reliable credit risk profiling process. By incorporating initiatives such as video KYC, Aadhar-based KYC, account aggregators, borrowers can easily access, with their consent, customer data, and ensure better due diligence. Consumer credit data obtained from various non-traditional sources and digital customer footprints allow borrowers to identify potential credit risks and make quick credit decisions, even if traditional credit history is missing.
Digital lenders can identify parameters and pseudo-indicators with technology, which will help them understand borrowers’ intent and repayment capabilities in the current situation. With banks relying primarily on traditional metrics such as wages, credit ratings, etc., fintech lenders may take a more flexible and inventive approach and search for more alternative data points.
