DECEMBER 20188ver since its advent in the mid-14th Century Europe, the modern banking system has remained largely unchanged. Few minor alterations aside, the processes followed across banks today, are still similar to the ones were formulated more than six centuries ago. To understand the true scope of this sector-wide rigidity, it is important to note that, since the modern-day banking first came about some significant developments, have completely altered the way the world functions. Here's a snapshot:· Three different industrial revolutions (with a fourth currently underway) · Humankind has made its foray into space· Air travel has become commonplace· Non-human super intelligence has become a tangible realitySo why has the banking sector resisted an in-depth technological evolution for so long?Evolve or Die: Why the Banking Domain is Ripe for Disruption?One of the main reasons why the banking sector has remained impervious to large-scale changes is because it has faced no pressing demand to evolve its processes. It is still heavily dependent on human involvement and manual documentation across all levels. This approach is rapidly becoming outdated, particularly for critical functions such as lending, because of the speed of business today. Financial transactions now largely take place at the touch of a digital button across the globe. In the age of near-instant fulfilment, the traditional lending approach does not stand up to scrutiny at all.To begin with, the turnaround time between loan application and approval is unnecessarily extended by excessive documentation and procedural delays that the traditional lending methodologies are prone to. Underwriting mechanisms still use conventional parameters to analyse loan applications, often eliminating potentially creditworthy borrowers from the credit system. The rising NPAs amongst public and private sector banks in India and abroad are further proof of the inefficacy of this approach. The post-approval disbursal can also take weeks and months, which makes traditional lending even more unappealing to the end-consumer; by the time the amount is disbursed, an SME applicant may have already missed the business opportunity that it sought the loan for. Traditional lending channels are also limited by their physical presence and miss out on the credit demand from geographies where they don't have a branch. Many borrowers also hesitate to approach traditional institutions due to a lack of transparency in the loan application process.These challenges clearly indicate that traditional lending is not very well-equipped to deal with the changing realities of today's world. This is exactly where digital lending steps into the picture.Riding the Digital Wave: Factors Driving the Unstoppable Rise of Fintech Lending The ideal lending objective is rather straightforward: to shorten the customer's loan journey by providing creditworthy borrowers with seamless access to credit. Digital lending platforms accomplish this by deploying A successful first generation entrepreneur, Alok is passionate about creating value through startups and foster entreneurship development. At Indifi, he aims to expand access to debt financing for Indian SMEs. BANKING ON EVOLUTION: THE URGENT NEED FOR BETTER BUSINESS MODELS AND THE RISE OF DIGITAL LENDING IN THE BANKING SECTORBy Alok Mittal, Co-Founder & CEO, IndifiIN MY OPINIONE
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