Here’s how the growing options of electronic payment methods have made our lives more convenient
Fintech companies have led one of the biggest disruptions in the BFSI industry in recent years. In India, this was widely visible with the introduction of the unified payment interface which enabled the adoption of digital payment methods among various sections of society. Ten years ago, it would have been hard to imagine the number of people making digital payments through their mobile phones.
However, the adoption of the Internet crossing the 500 million mark in the country has paved the way for optimal transmission of other financial services as well as digital payments. The figure is expected to cross the 900 mark by 2023, according to a Cisco report. To put it specifically, fintech solutions have increased accessibility and convenience while improving risk management and efficiency. Advanced technology has removed the constraints of the banking sector.
The problem of lending to “new to credit” customers, expanding the market and promoting financial inclusion has been solved with the solutions offered by digital banking platforms.
Simplify the application process
One of the many ways that technology has changed the lending space in terms of granting credit is by completely simplifying the loan application process. The entire loan application process has gone from a face-to-face meeting and document submission and (OSV – Original Seen and Verified) to a full digital journey from filling out the application form to submitting submission of KYC documents to obtaining a NOC (no objection certificate) for the loan.
In addition, the most recent development in technology improving the customer service experience is KYC document verification. In 2020, the RBI regulation made it possible for REs (Regulated Entities) to easily verify a client’s KYC documents by video call. It used to be a very tedious task as it required the physical presence and visit of the client or agent, but with KYC online it is a win-win solution for both parties. The convenience of getting approved documents online has proven to be a boon amid the pandemic when it was impossible for customers to visit financial institutions or vice versa amid a foreclosure to contain the spread of the virus.
Role of AI and machine learning
One has to wonder what other ways this highly human-dependent loan approval process is transforming with technology. Importantly, artificial intelligence and machine learning-based credit risk algorithms with multiple data points provide a holistic view of customer credit health and help financial institutions decide on approval. of the loan.
How does this work? Well, traditionally lenders only looked at a few metrics like FICO score and proof of income. However, with AI, businesses can look at an individual’s entire lifecycle and even their vast digital footprint to determine if they are creditworthy without a traditional credit history. This new approach is called “alternative data” which helps in understanding potential borrowers. Businesses are using AI and machine learning to determine the same.
Learn more about what’s new to credit customers
In this context, fintech players are looking for alternative data points such as SMS analysis, device information, social media rating, geolocation, fraud risk controls, etc. With advancements like this, fintech companies are helping “new to credit,” also known as NTC or unserved customers, get loans. They bridge the gap that has not been bridged by traditional financial institutions. By providing easy credit, fintech platforms help establish the formal credit rating of clients.
These are the different ways that fintech solutions have made credit easily accessible to everyone in society without greater risk. As for the future, technological transformations will continue to revolutionize the financial industry. The next wave of changes is expected from the AA (Account Aggregation) model where customers will have full transparency and authority / control over data sharing / revocation and on the other hand financial institutions will have easy access to customer data with the full consent of the customer. .
The future of BFSI looks very bright and we will see major collaborations between credit institutions, insurance players, mutual fund companies, etc. to help understand the customer lifecycle and spending patterns. This will help these institutions to deliver personalized offers to customers and cross-sell products that are more relevant to customers, instead of a vanilla product sold to everyone.
This article was written by the product manager of PC Financial
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