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    How lending companies can go digital seamlessly

    How lending companies can go digital seamlessly

    How lending companies can go digital seamlessly
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    By CNBCTV18.COM IST (Published)

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    Digital tools are transforming legacy lending systems, making them more secure, safe and swift, benefitting both borrowers and loan providers.

    Since the new millennium, technology has revolutionized all industries worldwide, including financial services. In India, this trend has accelerated in the past few years after Demonetisation and the introduction of GST, as well as the Digital India mission.
    The rise of digital offerings has spawned a seminal shift in customer habits. As they moved from offline to online transactions, consumer expectations have soared. Given their enhanced expectations, lending entities are being nudged into offering better products and reliable services together with lower TAT (turnaround time) when providing loans.
    Digital vs Legacy Models
    Digital Lenders are also ensuring all their services – customer acquisition, underwriting, loan disbursement, repayment and collections – are aligned to digital systems. Despite the relative success of digital offerings, however, many lenders are deploying a hybrid model. Here, both digital and legacy systems are used to provide customers with the best products.
    Thanks to the introduction of digital tools, customers are enjoying personalized products and need-based services on the one hand while, on the other, lenders are benefitting from lower operational costs and relevant systemic efficiencies promoting lower TATs.
    For a digital lending platform to make the best use of digital, the technology should be scalable, secure and robust while supporting multiple channels. Solutions based on automation, artificial intelligence and a collaborative ambiance can lead to the most gratifying results for both lenders and loan seekers.
    But in banks and other lending institutions that still depend on legacy systems, regular delays, multiple errors and an overall lack of transparency end up in higher costs, lower margins and greater customer dissatisfaction. Closer scrutiny reveals that each step of the lending process is segregated from the others and handled by different teams using diverse systems. Moreover, any exchange of data among these team members is marked by high usage of hard copy documents, error-riddled soft copies and ad-hoc messages through landline phones and email.
    Today, customers prefer text messages, emails and communications via mobiles. Interactions through traditional means such as landlines, voice mail and written letters can result in abysmal response and customer conversion rates.
    Besides the hybrid model, some digital lenders are deploying an omnichannel approach. Here, the lending module connects various channels and platforms. In this manner, an omnichannel lender unifies all the platforms, enabling it to access a borrower’s information from any location. Additionally, as the interactions are targeted and meaningful, it generates more business opportunities. Significantly, customers are unlikely to abandon an application processed through an omnichannel approach.
    Also, the customer experience is improved via omnichannel lending because it permits one to select a preferred contact mode. Irrespective of a customer interacting with a lender through a call centre agent or via social media, all business reps of the lender are in the loop about the interaction.
    Lower Risks and Rates
    Apart from customer benefits, omnichannel lending provides lenders numerous advantages. Since multiple channels are consolidated, there is more detailed and thorough reporting. Furthermore, as all teams remain on the same page, there is more transparency across channels. It also highlights the channels performing better and the ones that lag and require more attention. In essence, an omnichannel lending model saves much time for sales representatives through more fluid communication. It also ascertains that the closure of deals happens much faster.
    Another key advantage of digital lending platforms is that customer due diligence is not dependent on legacy systems to garner information. Being linked to the online universe, a plethora of data points are available from varied sources and platforms. For example, scrutiny of mobile usage data can reveal purchase patterns while online filings can help with return patterns and suchlike. Consequently, while underwriting consumers, lenders can access such alternative data that help glean relevant insights that traditional systems cannot. Similarly, the advent of GST helps in better underwriting of SME loans via deeper and more relevant insights.
    What’s more, digital lenders store all customer data in a centralized and secure system. Such data can be accessed 24x7 by call centre executives, sales reps, field agents and other authorized stakeholders whenever necessary.
    Likewise, technology has transformed the crucial process of disbursements and repayments through immediate real-time credits and debits. Thereby, borrowers can access funds within minutes. This can be indispensable in emergencies where cash is needed at short notice.
    Conversely, real-time inputs help lenders in ascertaining the precise number of borrowers who have paid on time and those that have defaulted. Such real-time information helps lenders in driving swift response strategies for better collections. Backed by vibrant systems, lenders can be well-positioned in reducing defaults and bad loans by better borrower management practices.
    Digital lending solutions have also led to the practice of checking applicants’ credit scores before any application is processed. The credit scores of customers can be availed from entities that maintain credit scores such as CIBIL, Equifax, Experian and CRIF Highmark, among others. CRM (customer relationship management) software and LMS (lead management system) help lenders gather such information from these sources, which can minimize the risks involved in lending. Lower risks can then help lenders in offering loans at more competitive interest rates, benefitting all customers.
    Without a doubt, lenders and customers both stand to gain from the shift to digital lending that is more secure, speedy and seamless.
     The writer, Andy Sen, is Chief Technology Officer at mPokket. The views expressed are personal
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