Lending apps solving financial inclusiveness and risk management challenges

Encompassing financial transactions through online platforms or mobile apps, with the help of digital technology in authentication and credit reporting, financial lending apps have revolutionized the way banking and transactions are modern. Technology applications in areas such as cloud computing, artificial intelligence and blockchain and the deep penetration of internet connectivity have further fueled the digital transformation of finance. Digital lending platforms and fintech players providing the services saw a major boost during and after the pandemic when physical movement restrictions forced people to apply for emergency loans from online sources rather than from online sources. conventional banks.

In recent years, mainly propelled by rapid technological innovations, there has been a massive boom in the use of fin-tech digital lending applications. With approximately 1100 fintech lending applications in the country, the Indian digital lending market in the country is expected to grow exponentially from $9 billion in 2012 to $350 billion in 2023. Leveraging a mix of business models with Advanced technological innovations, digital lending applications have been instrumental in solving infrastructure, inclusivity and risk management challenges.

The rise of digital loan apps in India can mainly be attributed to the need for urgent loans of small notes, which can be obtained by simply downloading the app and without long processing times, numerous approvals and multi-way checks. There has been a growing credit gap in India mainly due to banks and conventional financial institutions neglecting the loan application of small borrowers with little or no credit history. Digital lending apps have revolutionized the lending process, which is now accessible to everyone; thus enabling global financial inclusion.

Considering the huge potential of digital lending apps, the government has also made policy changes and reforms to encourage market players. In order to increase financial inclusion and digitalization, several favorable policies have been introduced in recent years such as Jan Dhan Yojana, Aadhaar Enrollment, Digital India, India Stack, Digi Locker and Unified Payments Interface (UPI). Additionally, other facilities such as e-KYC and e-signs have further facilitated the process of authenticating users, assessing their creditworthiness, accelerating loan disbursement, and ensuring security and transparency.

To bring more transparency to digital lending transactions, the Reserve Bank of India (RBI) recently issued stricter guidelines limiting financial institutions to safeguard confidential borrower data. The RBI directive clearly states that digital lending applications cannot access mobile phone resources such as files and media, contact lists, call logs, phone features, etc. This should help fintech organizations gain more trust from customers. The regulations also encourage customers to avail loans only from Regulated Entities (RE). Thus, people will be less inclined to take out a loan from illegal loan apps that might have ambiguous terms and conditions.



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