In the past few years, Digital form of lending has been a growing global phenomenon. The global market size of the digital lending platforms may grow from 5.1 billion dollars to 12.1 billion dollars in the next few years. The increase in consumer demands and expectations have formed new markets for alternate ways of borrowing money and the businesses have wasted no time in understanding the importance of customer experience as a differentiating factor. They are now in continuous pursuit to drive efficiencies, cut down on costs, and expand.
What is Digital Lending?
Simply speaking, Digital lending is a process of quick loan disbursal through electronic medium. It is considered as the most effective, convenient, and faster way to disburse loans as compared to the traditional method. With the maturing of the digital ecosystem and enhanced use of analytics, automation, and blockchain the lending financial institutions rely more on algorithms and automated processes for loan approvals and disbursals.
Benefits of Digital lending
There has been a definite shift from the traditional mode of lendforall to digital lending in the recent past. It is attributable to the fact that the digital mode of lending offers many benefits that may not be found in traditional mode.
- Easier access to loan
One of the essential benefits of digitization is that you can have access to loans easily and without doing multiple rounds of the bank. You can apply for a loan anytime and at any place. It brings convenience to the borrower that’s why it has been widely accepted.
- Quick disbursement of loan
It is a process that possesses efficiency in its work that means it is swift in disbursing the loan to a borrower.
- Minimal Documentation
Another advantage of this mode of lending is that it requires less paperwork for grant of loans and people can apply for the loan without filing the bulk of forms as in the case of banks.
- Easier access to loans for first-time borrowers
Traditional lenders may be reluctant to grant loans to persons having no history of taking loans as they don’t have proof regarding their loan repayment habits but in case of digital mode of lending one can easily get a loan even if the borrower is borrowing for the first time.
Introduction of Innovative Digital lending business model
There has been a variety of business models that have been introduced to meet customer requirements and regulatory needs. It has led to tackling the challenges posed by the geography, higher transaction costs, and transparency.
- Online and Mobile lending platforms
In this case end to end, digitized lending products are offered through mobile or web-based platforms. The whole process of lending is digital from customer acquisition to loan distribution.
- Peer to Peer lending
Peer to peer lending also known as P2P lending is the method of lending money to borrowers or businesses via online services that match lenders with borrowers. It uses profiles and data to match borrowers with lenders. Peer to peer companies usually offer their services online and facilitate their services cheaply as compared to conventional financial institutions. Some of the examples include Faircent, i2ifunding etc.