Digital lending has become popular worldwide, including in India, due to its easy and convenient online transactions. In India alone, over 1000 FinTech companies are operating in the lending sector, and they have introduced digital models that can potentially disrupt the traditional lending market.
Even banks are partnering with these FinTech companies to digitalize their lending processes. Consumer demand has led to the rapid growth of digital lending globally. Before proceeding to this topic, let’s understand online loans.
What is digital lending?
Digital lending is when loans are given to people using electronic methods. It makes getting a loan easier, cleaner, and faster. It uses online technology to start and renew loans, which helps to make decisions quickly and with more information.
Is there a need for digital lending in today’s world?
The old way of borrowing money took a lot of time and caused stress to people. It involved a lengthy process, paperwork, and limited choice for borrowers. And this led to the need for a simpler and faster way of getting loans.
A new way of digital lending was introduced to solve this problem. It reduces costs, speeds up the process, and provides more options for borrowers. With digital lending, people don’t have to wait for long hours or deal with a lot of paperwork to get instant loan. It makes borrowing money easier and more convenient for everyone involved.
Factors that present to the success of online lending:
In recent years, studies have shown that successful business models focus on empowering customers. Technology has played an important role in this empowerment by providing tools that can perform various tasks like verifying documents, conducting background checks, and disbursing loans. It eliminates the need for approval from authorities and puts customers in control of the entire process.
- Security factor:
When you borrow money for personal loan or any other type, you usually need to provide personal information like your bank account details and identification to the lender. It can worry you because there are risks of identity theft and money theft.
But with online lending, you don’t have to worry about it. Advanced security software is used to protect your information from hackers. This software keeps your personal information safe and secure. That means people can apply for personal loans without any worries.
- Time for disbursement:
With digital lending, the time it takes to receive the loan money has significantly decreased. It could take several days to get the loan disbursed in the past, but now it can happen in just a few days. This speedy process has made many people choose digital lending over traditional methods. Its quickness has attracted more people to it.
- Significant cost reduction:
When it comes to online lending, there is a significant cost reduction. It is because there are fewer people involved in the process. Technology does most of the work, and there is no need for physical paperwork.
In a nutshell:
Using online lending platforms has benefited many small and medium-sized (SMEs) and startups. In the past, SMEs faced difficulties and obstacles when dealing with traditional lenders. But the growth of online lending has brought positive changes. It helped SMEs thrive and has provided opportunities for other startups.