DECEMBER 20189cutting-edge technologies to bolster their operations. They use proprietary underwriting algorithms, which take into account non-traditional data points such as social data to create more accurate and inclusive borrower profiles. Technology also helps them to better understand the specific requirements of individual borrowers, enabling them to offer highly-customised loan products catering to the end-user needs. Another major reason why digital lending is becoming increasingly popular is the seamlessness and transparency that it facilitates. Loans can be applied for in a few clicks by filling a simple form, with the minimal documentation required post-approval. Leading fintech platforms also deploy automated loan approval workflows to enable swifter disbursement. Through digital lending, loan disbursements are known to happen in as low as 24 hours of application. The entire process is extremely transparent and provides borrowers with full visibility of their loan application status. Digitisation also removes the physical barrier in the loan process, enabling loans to be availed even by the underserved borrowers in tier-2 and tier-3 markets.Digital processes optimise lending operations, as well as minimise the infrastructural and operational costs; the savings thus realised are then passed on to the end-user in the form of lower interest rates. It additionally helps in extending the ambit of credit to those who have been left unserved or underserved by traditional lending institutions, such as freelance professionals, SME business owners, and first-time borrowers.How Traditional Banks Can Benefit from Partnerships with Fintech FirmsWhile banks can develop their in-house digital lending platforms, the costs and time involved in such a massive undertaking can be extremely prohibitive. This is why many traditional banks are now exploring partnerships with leading fintech lending platforms for fulfilling the credit demand. Such partnerships can unlock a host of benefits for traditional banks. For instance, by leveraging the robust technological frameworks that fintech lenders have created, banks can fulfil the credit needs of creditworthy borrowers whom they would have otherwise missed out on. Digitisation of lending processes also allows traditional lenders to significantly improve productivity and loan closure rate. Moreover, through such technology partnerships, banks can optimise loan origination, automate approval, streamline documentation and data validation, and increase the accuracy of their underwriting processes. This can deliver a significant reduction in costs and NPAs for traditional lending institutions, which in turn can increase their revenue per loan and help them in delivering faster and cheaper loan services to their customers. All this can be done without making large-scale changes to how they operate; banks can customise their partner fintech platform to fit their lending practices, with unparalleled agility and at rapid scale. They can even outsource loan applications outside of their remit to their fintech partners through referrals, adding a new revenue stream by essentially converting what would otherwise have been a lost opportunity. With banks providing access to trusted relationships and low-cost funding and fintech players providing the technological support, such partnerships are a win-win scenario for all stakeholders across the entire lending value chain.The Survival of the Fittest ­ Darwin's Theory of Natural Selection holds true even in the global business landscape. Every successive technological revolution makes it essential for industries to overhaul their existing processes. When faced with such transformative change, organisations need to evolve their current business models or risk falling by the wayside. Having resisted the lure of a technological evolution for a long time, the banking sector is finally at an inflexion point where it must embrace this change. There is no other option. While banks can develop their in-house digital lending platforms, the costs and time involved in such a massive undertaking can be extremely prohibitiveAlok Mittal
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