While Traditional Bank’s and NBFC’s have dominated the credit lending market over the years. Increase in digital literacy and internet usage has presented an opportunity for new age start-ups. Digital lending has already captured a huge market share in small ticket loans. It is just a matter of time before it gains a significant share in large ticket transactions also. The substantial competitive advantage of Fintech’s is, Digital lending is faster, cheaper and more scalable across multiple financial products.

Fintech’s like Lentra, ZestMoney, and many other start-ups are providing solutions to digitize end to end. Traditional bank’s and NBFC’s have understood the threat and implications. They have started collaborating with these Fintech’s to facilitate credit needs within the economy. While this initiative present an opportunity of inclusive growth within economy through digitized and faster lending. It also presents a challenge of increased credit risk.

It is important for regulators, banks, NBFC’s and Fintech’s to find a balance between credit risk and inclusive growth. It can only be handled through more refined data, better credit assessment and recovery mechanisms. Government is already working with PMAY, OCEN and account aggregator. In this initiatives support from banks, NBFC’s and Fintech’s will be crucial.

We can see that there is still huge demand for credit within Indian economy. New product like POS financing, customized digital lending will make credit more accessible and cheaper. We are about to see many more innovations in digital lending with AI and business rule engine’s.

What are your thoughts on digitized credit lending and the risk it posses? 
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