How digital lending platforms can help in improving credit lending system in tier-2 cities?

Updated : March 25, 2021 02:15:53 IST

With phones becoming smarter and data getting cheaper, the Indian subcontinent has whole-heartedly welcomed the era of digitization.

Online payment apps and wallets have dramatically mushroomed because of their convenience and ease.

With phones becoming smarter and data getting cheaper, the Indian subcontinent has whole-heartedly welcomed the era of digitization. The presence of dynamic apps and platforms has brought convenience and ease to millions. The transition from brick and mortar to online systems began with Tier 1 cities being the path makers.

However, a recent report by EY suggests that apart from the eight classified metros, there is a new set of 42 cities in Tier 2 and 3 categories, which are emerging as aspirational and consumerist. EY has called these areas India’s “new wave” consumer hubs.

Be it uploading a selfie, voicing their opinion, shopping, or making any other monetary transaction, consumers in these cities are beginning to rely on technology to carry out their day-to-day operations.

Let us focus on a part of this evolution, i.e. digital lending.

The concept of faceless financial transactions has made users realize the benefits of such options over actually visiting a branch of their respective banks. E-platforms have even changed the face of lending systems in the country. Initially, if a customer in a Tier 2 city wished to attain a quick loan, he/she would visit a pawn shop as going to a bank and dealing with the paperwork seemed tedious and time-consuming. However, the new-age fintech companies have brought with them an array of disruptive lending options, simultaneously making the credit environment simple, secure, and transparent.

Here is how digital lending platforms are improving the credit lending systems in Tier 2 cities:

Adoption of Apps and wallets

Online payment apps and wallets have dramatically mushroomed because of their convenience and ease. These options enable users to transfer money, pay bills, or purchase products with a mere click of a few buttons on their phones. One is no longer bound to the availability of cash or the timings of their banks.

Additionally, the presence of services such as buy-now-pay-later or instant sachet-sized and small duration loans has further encouraged buyers to shift to online shopping portals. For instance, if a customer wishes to buy a high-end phone, they need not make the entire payment at once. Several fintech startups have tied-up with e-commerce giants, allowing an individual to avail immediate credit via an EMI-based system.

Eradicate language barriers

There has always been a gap between the consumers in Tier 1 and 2 cities. The emergence of numerous fintech organisations with modern technology and flexible operations has played a significant role in bridging this gap. The most striking change these firms brought was the breaking of language barriers.

By offering the options to customise the language setting from English/Hindi to the vernacular, these platforms have made the loan process increasingly comfortable. They are also curbing the need to produce multiple documents for availing credit facilities. They have adopted a minimalistic approach and provide avenues such as eAadhaar OTP-based verification and digital signature.

Improved credit rails for SMEs

In the past, several entrepreneurs shied away from turning their business idea into a reality or working towards the expansion of their current establishment. The sole reason behind this was the unavailability of hassle-free funds with flexible repayment channels. However, digital fintech platforms have helped build new credit rails and systems that leverage the GST filing and POS transactions details of SMEs to ascertain their eligibility instantly.

With this newfound financial freedom, the graph of India’s small-scale industries has increased exponentially. By promoting instant credit facilities, digital lending platforms are not only facilitating new business owners but are also helping towards the consequent growth of the nation’s GDP.

Building trust

Digital lending platforms are working towards creating an environment that reverberates with trust and transparency. In this pursuit, they are focusing on the core needs of their users in Tier 2 cities, like shopping offline, voucher financing, salary advance, mobile recharges among others.

They have kept user-interface designs minimalistic and encourage users to share their data by assuring them that all crucial information is saved by the platform in an air-tight manner. To further gain the trust of their customers, they have simplified the loan application and attainment process. With everything being online, transparency is a given.

The increasing purchasing power of residents in Tier 2 cities has driven home the need for digital lending platforms that offer instant and reliable services. It is safe to say that fintech startups will soon have a consumer base in Tier 2 and Tier 3 cities, that is as extensive as Tier 1 areas.

The author, Ranvir Singh, is MD at Kissht. The views expressed are personal

Published : March 25, 2021 02:15 PM IST

How digital lending platforms can help in improving credit lending system in tier-2 cities?

You May Also Like

Panasonic to buy US supply-chain software firm Blue Yonder for $7.1 billion

Ind Ra revises down India's FY22 GDP growth forecast to 10.1%

Australia urges AstraZeneca to send 1 million COVID-19 vaccine doses to PNG after EU clearance

Trending on CNBC-TV18

recommended for you