Technology has enabled institutions and individuals with faster and more secure ways for transactions, resulting in increased efficiency. Microfinance, in particular, benefitted from the integration of digital lending in the legacy systems.
Digital lending employs technology solutions for accelerating lending processes and enabling easy repayments. It not only helps in making the lending process easier for both the lender and the borrower but it also reduces the costs of operations significantly.
The innovative solutions in digital lending like mobility, multi-lingual user-interface, KYC, and UPI integration are making lending convenient for micro financers.
Here are a few ways in which it is reshaping the landscape of microfinance.
The use of smartphones and mobility solutions allow micro financers to adopt a customer-centric model and personalize services based on individual preferences and tastes. It helps in creating customer experiences that not only streamlines the whole process but also increases the engagement between lenders and borrowers.
When provided with convenience in service, Happy customers can collectively reach out to a wider spectrum, through means of many such networks creating awareness through word of mouth. Since microlending is based on trust, this can be an effective mode of marketing because people trust each other more than brand mascots.
Increased operational efficiency
In addition to making the lending process streamlined, digital solutions allow business correspondents to carry out onboarding of customers, lending processes, repayments, and other processes without a lot of paperwork. This reduces operational time and increases productivity.
Mobility also allows the borrowers to stay updated on the whole process, eliminating the need to address every query from each of the customers helping lenders save time and reducing the overhead work.
When integrated with solutions like offline mode and multi-lingual support, the scope of digital lending increases manifolds. Especially in countries like India where the diversity of languages and the lack of proper internet in remote areas can cause hindrance for the lenders.
The wider reach allows microlenders to ensure that the truly unbanked can be empowered with bigger opportunities to overcome challenges and get a chance at a better life.
Unified customer database
Digital lending allows microlenders to keep a database of all their customers that are linked with their Aadhar and KYC systems. This provides a background to the borrowers that can act as alternate data to calculate creditworthiness for those without credit history or credit score.
Since the data is connected to Aadhar, every individual would have a track record of their moneylending endeavors and repayment history. This enables the lenders to effectively check on each new customer and assess the risk of lending them money.
Digital lending, although leaping high, still has a lot to achieve. Solutions like Microsure and BizXtend are helping lenders carry out lending smoothly, conveniently, and efficiently eliminating a lot of challenges previously faced.
VolkSoft is a FinTech company that has developed intelligent loan management solutions for various microfinance institutions, private banks, and business correspondence. It has helped countless microlenders in bringing down the duration of a loan cycle using mobility solutions while allowing deeper penetration into wider markets by integrating regional languages and offline mode. Find out more about their solutions here.