The banking, financial services, and insurance (BFSI) industries have seen a recent uptick in popularity, and a large part of the credit for this may be attributed to fintech developments that have fundamentally changed how loans are obtained and delivered. Digital lending is one of the most intriguing advances in this area. MSMEs have grown to prefer this kind of lending as they value the convenience, quickness, and flexibility it provides.
Digital lending has grown tremendously in recent years thanks to the widespread use of smartphones and the expanding selection of loan options. According to research by the Fintech Association for Consumer Empowerment, the total amount of loans given through digital lending increased by 129% year over year to Rs 92,848 crore in FY 23.
As the market is booming in India, the digital lending FIs (Financial Institutions) are looking forward to getting the most from the technological solutions that could cater to the credit needs of the customers, improve their loan disbursal services, and gain a competitive advantage. In this regard, low-code and no-code platforms are becoming an ideal way to aid FIs in creating exceptional loan origination solutions.
No-code platforms: revolutionising digital lending
Lending firms tend to face several challenges owing to time-consuming manual handling, which includes a tedious pen and paper process. It poses specific issues in the loan origination process that apparently impact cash-starved MSMEs who do not get loans on time and suffer loss of revenue. In order to negate these challenges and reduce the grunt work, no-code platforms can help in creating significant loan origination solutions that have been proven to cut down time in the loan disbursal process. The no-code tools aid in quick and easy app development, help in integrating with multiple platforms, and present mobile and cloud readiness, which significantly improves the customer experience, streamlines operations, and makes the disbursal process smoother. As a result, this considerably reduces hassle in the application processing, credit risk assessment, and underwriting processes.
Streamlined application processing
The main challenge for MSMEs is that many lenders grant approval a matter of days, if not hours. This is because processing loan applications is a time-consuming process that necessitates form filling and the delivery of tangible documents. Therefore, finding a way to match this speed has been one of the main problems for lenders. In this regard, no-code platforms can provide ready-to-use, customizable mobile applications that can assist FIs with seamless data collection, document verification, and even credit data extraction in real time with the push of a button. The processing of loan applications is significantly sped up as a result of the reduction of errors and the elimination of pointless paper work. With successful deployment, the lenders can ensure their application process is streamlined and that the MSMEs get loans on time.
Error-free credit risk assessment
The core of the loan origination process, which is generated from the credit research process, is the borrower’s creditworthiness. Lenders take into account potential non-performance losses, such as missed payments and potential bad debt, when considering credit disbursal. Lenders balance the expenses associated with such risks against the potential rewards, such as the risk-adjusted return on capital (RAROC). In essence, no-code platforms can offer a fully automated method for credit decisioning and risk evaluation. The method can assist lenders in gathering pertinent financial data on a potential borrower from a variety of sources. This gives the analyst plenty of time to examine credit risk, correctly interpret data, run sophisticated models for scenario analysis, and receive automated suggestions on crucial metrics like probability of default (PD) and loss given default (LGD), among others. The lenders can make better decisions, lower potential risks, and boost ROI as a result of reduced inaccuracy.
Faster underwriting and document processing
In order to complete the loan processing cycle, a number of documents belonging to the borrower must be scanned, checked, and processed. Additionally, manually generating and sending initial loan disclosures, processing, stacking, and indexing loan papers, and document verification and fulfilment all take time and effort. Due to the hierarchy levels, the underwriting process takes longer to evaluate and approve loans since it adds another layer of complexity. The no-code platform provides an end-to-end document underwriting provision. It has programmable hierarchies that facilitate better decision-making and automate the escalation process. This not only expedites the processing of documents but also improves the underwriting process, hastening the disbursement of loans to MSMEs.
The future of digital lending
According to a report titled “State of the Indian Fintech Ecosystem,” the expansion of digital lending is estimated to account for 60% of the country’s overall fintech business, which is projected to increase 4.75X to $1.3 trillion in 2030. This rise will mostly be attributable to Fintechs, which are continuously working to increase MSMEs’ access to finance in India and close the credit gap.
With the advent of technology, they now have access to no-code platforms, which allow FIs to combine already-proven functions and features to create new applications. These applications can streamline loan application processing, reduce the probability of errors in credit risk assessment, and reduce hassle in documentation and underwriting processes. Collectively, it provides the lenders with a faster loan origination procedure, which effectively increases customer satisfaction, improves the decision-making process, and improves their risk assessment abilities, making no-code platforms the future of building digital lending applications.
Contributed by Mr. Lalit Mehta, Co-Founder and CEO, Decimal Technologies
