There is significant interest in Fintech (computer programmes and technology to support banking and financial services) globally, and its ongoing evolution—the word Fintech is now officially in the Oxford dictionary. The Fintech ecosystem in India has caught up fast with its global peers in terms of adoption and is expected to reach US$2.4 billion by 2020. Fintech firms are undoubtedly having a good time.
Fintech-driven alternative lending is the
second most-funded and one of the fastest-growing segments in the Indian
fintech space. There are about 20 digital alternative lending companies, each
with its version of the truth, and probably another twenty in the stealth mode.
One thing common with most new-age lending
companies is that they rightly understand that they have a better chance of
succeeding by collaborating with the existing lenders like banks and non
banking financial companies.
Banks and NBFCs have also reciprocated
these sentiments and are actively tying up with fintech lenders.
How are these partnerships faring?
Many traditional lenders are finding it
difficult to “let go” and adapt. They are still second-guessing, and, in spite
of various tech solutions, they want to “eyeball” physical documents. Fintech
lending is so much more than just another distribution channel, it is an
opportunity for banks to reimagine themselves digitally.
As an ex-banker and now a fintech founder,
I feel that banking and NBFC partners have to start by de-learning and adopt
fintech lending truly. Every single process needs to be challenged, if it is
not adding value the same must be dispensed. Open innovation is the core of
In their short journey, fintech in India
has made credit process simpler. It is cost-effective and offers better risk
assessment. However, while partnering with traditional lenders, they are often
expected to carry forward their archaic pre-credit and post approval processes.
There are some gaps that need to be filled:
lenders still expect physical business verifications, though there are
solutions like work email and domain validation
✤ Instead of
on-ground visits, use GPS tagging as an effective tool for residence
forms and pre-credit documents are often required in physical format, though
soft copies are available
✤ In spite of
eKYC facility, physical copies of KYC are required
✤ Most of the
existing lenders have not adopted e-agreements
✤ For traditional
lenders, fintech is an opportunity to innovate and do away with artificially
restrictive processes and documentation that have been embraced by their risk
departments. They must see themselves as a stakeholder in fintech success
lenders have an inherent advantage which fintech companies do not have.
Similarly, fintech companies have nimbleness and technology which acts as a
A MATCH MADE IN HEAVEN
Fintech lenders have a responsibility to
deliver on their promises. A quick look around and all you can hear is big data
and machine learning. Credit grows extremely fast in good times, but can also
contract suddenly and if not prepared, it may be overwhelming.
As an eternal optimist, I am sure
traditional lenders like banks and fintech firms get better at working
together. This is essential to reap the full benefits of innovation.
Hopefully, these are starting troubles and
this partnership will eventually thrive. All it needs is a real sense of
commitment to re-imagine the business model.
By Anand is founder and CEO of Shubh Loans (Datasigns Technologies).