Digital Lending refers to digitization of all processes involved in lending, starting from sourcing of loan application to loan recovery. The following are the various steps that are involved in the high-level lending process:
– Sourcing Loan Applications
– Verifying and Validating each loan application
– Performing the KYC checks to determine loan eligibility of every applicant
– Sanctioning of Loan if all due diligence criteria are met and fixing a repayment schedule
– Disbursing the loan depending on the loanee’s requirements
– Collecting monthly repayment instalments and recovering any unpaid dues
A digital lending business is one which automates all of the above steps through technology. This enables the business to reach out to those market segments that are hitherto untouched, reduce costs and human effort involved in the lending process, enable convenient credit disbursal and recovery of loans with minimal manual intervention, and reduce credit default.
Thus, the business is heavily dependent on seamless process automation which eliminates the need for human involvement. Therefore, the lender must deploy such enterprise architecture which:
– Fits the process well
– Integrates well with the rest of the systems
– Scales elastically
– Accommodates new process flows and validations easily and functions efficiently
– Is easy to customize
The following are areas where digital lending business has scope for streamlining:
i) While digital lenders source loan applications through digital market outreach and disburse micro-credits quite swiftly, obtaining financial information of the applicant for KYC is still not entirely automated. This is because the ability to source financial information in a standardized digital format from the authorized entity (which in most cases is the applicant’s bank) through necessary consent of the applicant and automated analysis of such financial information is not established yet. However, such a possibility is now enabled through Account Aggregator approach which is fast catching up.
ii) The ability to set up collection mandates and collecting payments is an area where a scalable and adaptable system can greatly improve efficiency for digital lenders. The ability to setup collection mandates instantly with authentication by the customer from anywhere through any device improves speed and accuracy of mandate setup. By eliminating failures in mandate setup, lenders can save up to Rs 50 per each failed setup. The cumulative effect of this savings is significant to the bottom-line of the lender.
iii) Bankers usually expect the lender to initiate the collection request on the date the loan repayment is due. However, having a system which tracks all payment mandates, proactively initiates collection request on the due date, reattempts collection on failed payments, and reports status of successful and failed payments would go a long way in enabling the lender to minimize operational cost.
iv) The ability to analyze past data, predict collection failures, taking proactive measures to maximize collections has a direct impact on the cashflow and financial health of the digital lender.
In order to help digital lenders to achieve process and system improvements on the basis of the above four points, Evolvus offers a highly scalable and proven technology with deep functional capability which can be customized to suit every lender’s business requirements. The technology enables the lender to setup payment mandates instantly and also engages with the customer anywhere through any device. Thus, it helps automate the entire process of initiating payment requests, reattempting failed payments, updating payment statuses both electronically through APIs as well as through file reports.
Evolvus also engages with account aggregators to automate the workflow of aggregating financial data of the applicant so that the digital lender can analyze the financial information electronically and arrive at rapid decisions on financing the applicant. Moreover, we also work with partners to support prediction of default so that the digital lender can take proactive measures to maximize successful collection of payments.