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Digital Lending Software: How Technology is changing the Lending environment?

Digital Lending Software: How Technology is changing the Lending environment Digital Lending Software

Microfinance features a significant role in bridging the gap between the formal financial institutions and therefore the rural poor and the microfinance software is strong that helps to automate all business activities. Microfinance Software provides you a wise banking functionality and enables to manage you to specialise in other areas of business. The Microfinance Institutions (Microfinance institution) access to financial resources to a large selection of unbanked population which has no prior credit history.

Over the past few years, microfinance software institutions have shown impressive growth and are instrumental within the cause of financial inclusion. These institutions are one factor equipped to resolve the prevailing cash crunch among low-income individuals situated within the suburban and rural areas.

Today the effect of digitalisation is vast across almost all charcterstics of our daily life. It has become a tool for conversion in the way we carry out and conduct our business. One such important feature of our life where digitalisation and AI has conduct about radical changes is lending/borrowing by FinTechs and banks. In order to focus on creating a innovative products and providing to low income, semi-urban and rural customers in unorganised sectors, Digital lenders are accepting business and operational models fuelled by cutting-edge technologies such as big data, open Application Programming Interface (API) and Artificial Intelligence (AI) that facilitate the design, launch, implementation and execution of products and services in a seamless manner.

With the arrival of digital lending software, we are looking at paperless, affordable and tailored solution to consume the time, cumbersome and lengthy loan approval process, which also offers close monitoring of borrowers along with benefit for saving the cost and satisfaction of the customers

So, what is exactly Digital Lending?

Digital Lending is simply the process of automation of lending- right from the point of loan application to its disbursement through web platforms or different kind of mobile applications by making use of modern technology. Lenders use the data which is held in digital form to make credit decisions and build engagement of the customer. Digital credit would cover all kinds of credit facilities which is offered by online lending platforms that are not handled by commercial banks.

The key points of digital lending models in India
  • P2P lending:
  • Digital marketplaces connects the borrowers that is both individuals and organisations with lenders, given quick access to low-cost loans.

  • Invoice for financing:
  • Based on their unpaid customer invoices, short-term working capital credit to MSMEs, to meet MSMEs’ short-term liquidity requirements.

  • Crowdfunding:
  • Digital platforms that allows the investors to raise external credit from a large group of investors, by allowing investees to reveal their business cases, requirement of funds and potential of market.

  • Pay later loans:
  • Lenders distrubute instant, small sized loans with the ‘buy now and pay later’ options for meeting purchases of the customers.

  • Mobile lending:
  • Lenders provides mobile loans to customers by evaluvating their credit worthiness by holding mobile phone data such as call patterns and usage of mobile e-money app.

  • Digital mortgage:
  • Lenders give mortgage purchases through end-to-end digitization of the process of a traditional mortgage loan, from the stage of application to disbursement, through digital channels in order to reduce the high turnaround times normal in the existing traditional model.

  • PoS lending:
  • A partnership model with Financial Service lenders where these players finance online shoppers’ purchases by making use of both ordinary data like bank statements and unusual data like the history of online transactions.

  • Supply chain financing:
  • Marketplaces bind with direct lending NBFCs to target merchants who sell their goods and services online, by accessing a large amount of merchant data that is available on these online channels.

The Process of Digital Lending

It can be divided into five steps:

1. Acquisition of Customer – In order to gain customers, Financial Institutions use different kind of digital marketing tools such as social media campaign, SMS blasts, search engine optimization, Secure Quick Response (SQR) codes, etc. Lenders rely on aggregators such as Amazon, Flipkart, etc and accessed Direct Selling Agents (DSA) like BankBazaar between others to source borrowers.

2. Approval Analytics – With access to digital data, now the lenders can develop their own data bank which in turn facilitates their underwriting decisions. As these underwriting decisions are automated, they are error-free and way quicker than the ones obtained simply from standard methods. Advanced algorithms and Analytics are used to take quick and remote credit decisions.

3. Disbursement and Repayment – Distribution of loans and collection of repayments is working out remotely and digitally by the lenders by making the use of channels digitally such as bank accounts, e-commerce accounts, or mobile wallets that are integrated with Third-Party Integration. Such channels provide increased operational efficiency and also reduce the experience of fraud.

4. Collections – Algorithms and digital data are leveraged to support the process of the collection. Delinquency scorecards are used to track the behaviour of the customer and propose strategies for customized recovery. Delinquent customers thus identified are blacklisted and lose authorization to future credits.

5. Customer Engagement – Customer engagement is very important at every stage of the process of lending. Large sums are invested by the lenders to learn about the behaviour of customers, choices, and preferences. For customers, timely inbound and outbound and customised communications are made.

Advantages of using Digital Lending Platform
  • One of the most distinctive uses of digital lending is speedier credit approval. With digital lending software, lenders can now easily simplify and automate the process of decision making. A single, integrated digital lending platform not just make sure that the lenders can quickly process the background verification but also that customers can easily get a quick response after applying.
  • Characteristics of digital lending platforms are user friendly and require minimum manual intervention. They streamline the whole lending process, making it fit for first-time borrowers who are mostly millennial and comfortable with automation. Applications are processed without any risk of an error made by human or bias, making the user experience systematic and enjoyable.
  • To understand the trends in the market, the behaviour of the customer is tracked with the help of analytics. These analytics also provides vital information about the scope of improvements in the process. With the help of such data, lenders can obtained a fair understanding of the inputs that drive strategies of the market.
  • Digital lending platforms have been known to reducing costs by approximately 30-50%. The advantages of digital processing are far too great to be ignored. By using the digital footprint as an exchange for physical document verification, it provides significantly lower operational costs.
  • With human judgment being exchanged by auto decision rules in digital lending software, the possibility of an error made by humans is removed and stability in processing is managed throughout. Every applicant is estimated uniformly as per the acceptable risk limits.
  • To optimize returns, lenders must need well-organized underwriting and optimized decision-making capabilities. With digital lending software, a combination of machine learning and artificial intelligence make sure that underwriting expertise provided by it is better than judgment made by the human.
  • The Way Forward/-

    Digital lending has brought about some serious disruption across various departments like customer engagement, the credit assessment, underwriting, governance, compliance among others. It has changed the way lenders do the business and customers procure loans, forever. It is expected to bring the data and analytics-driven expansion into new consumer segments and business models in the upcoming future. A code of conduct that outlines principles of integrity, transparency, and customer protection that needs to be strictly followed to keeps away from misuse of such processes for unfair and criminal activities.

    We, at Intelligrow, are committed to our attempt of being able to reorganize the lending space in our country. With advanced technology comes growth and we are committed to bringing about positive changes in the business ecosystems. Intelligrow Bancsoft digital lending software is relevant for the purpose of reducing lending times while makes sure that the due diligence is not compromised. With products that are Bank Statement Analyzer, Data Aggregation, GSTR & ITR Analysis, and Credit Monitoring, among others, we form a single point of contact to make sure a seamless and smooth process of documentation, albeit digitally.

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