The introduction and implementation of open architecture layers such as Bharat Bill Payment Systems, UPI, Aadhaar and payments like GSTN, TReDS and GeM has enabled India to leapfrog many advanced economies. According to Boston Consulting Group’s report on digital lending, digital retail lending is gaining momentum not only in India but all over the globe. As per the report, digital lending is expected to present a USD $1 trillion opportunity for digital lenders in India in the coming 5 years, with the annual digital disbursements reaching 5 times the current level.
Below is the list of 10 predictions for digital lending by BCG:
1. New innovations will be continuously made by the FinTech companies
FinTech companies will be coming up with new innovations in their operating models and will continue to cater to the demands of the users by offering agile and cutting-edge products.
2. Non-traditional companies will be a challenge for incumbents
The entry of non-traditional companies with a strong and trusted brand name, large customer base and a wide distribution network in the lending sector is expected to multiply in the near future. These companies will become a challenge for the incumbents because of their innovative digital models.
3. User experience will be greatly enhanced with the development and innovation in the technology
The fast changing digital world is shaping the consumer behavior and how borrowers approach for loans. The digital experience will be key in this regard. New innovations will fuel the proliferation and consumption of these loans. These advancements are expected to enhance the overall experience of the user by making the whole process more seamless, intuitive and convenient.
4. Full-scale digitization of the lending operations is also expected to be witnessed with the new age technological advancements
Present technologies such as biometrics enabled authentication, e-signatures, AI, the block chain, e-mandates, and machine learning are expected to enable ‘zero human touch’ lending and monitoring. Not only this, many of the back office and mid-office roles too will become redundant in the coming years.
5. Industry platforms will soon be a reality
Combining data from multiple resources and operating of the same from a consent architecture is soon going to be a reality for the digital lenders and customers.
6. Lending value chain will be disrupted by data and analytics
With the digitization of the databases and records, there has been a tremendous increase in the digital availability of the data of the corporations and individuals. Data proliferation and democratization is being expected to be witnessed with the triggering of consent layer of India Stack.
7. New Digital Lenders will be funded/ spawned by the incumbents
The skills possessed by the incumbents at the present are not sufficient to take the complete advantage of the digital lending in the coming years. To make maximum out of the digital culture, the traditional lenders need to breed the right culture and therefore, will fund/ spawn the new digital lenders.
8. Automation of the data related to data explosion is expected to revolutionize the underwriting, making it possible to offer credit to everybody in the country
Data explosion is expected to create decision-making big-data driven algorithmic lending models. These models will be highly advanced with self-learning capabilities and payment systems. These algorithms will make it possible for the lending companies to provide credits to the deprived segments of the society.
9. Technology and data will emerge as the new power centers in the organization
The increasing digitization and automation of all the processes and underwritings within the lending organizations is affecting the overall operations within the companies. The importance of power centers like operations and credit will see a decline. Technology and data will overpower these operations and will become the new power centers in the near future.
10. Lenders will be forging partnerships and collaborations with third parties to reach out the maximum population
To expand the scope of credits and to enhance the customer journey of lending, the lenders will be collaborating with FinTech companies, credit bureaus, technology companies and third-party processors.
Though, the exact shape and form of disruption will be unveiled with the passage of time only. In another section of this report BCG enlists a 10 point agenda based on the above predictions which can prepare lenders to address these disruptions and lay the roadmap for successfully seizing the forecasted $1 trillion opportunity . Here’s an infographic which outlines how LendFoundry perfectly aligns to this 10 point agenda for digital lenders.
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