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Factors that led to digital lending boom in India

  The FinTech ecosystem has skyrocketed in popularity in recent years, especially after the outbreak of the pandemic. The banking, financial services, and insurance (BFSI) sector, particularly, soared with digital lending services transforming loan process and disbursement methods. As the term implies, digital lending is the new-age practise of applying for and giving out loan or credit to borrowers by financial services through the completely online or digital platform journey. The growing popularity can be ascribed to factors such as growing smartphone usage, internet penetration, credit range flexibility, and the convenience and efficiency that digital brings. GROWTH OF DIGITAL MARKET According to media reports, the digital lending market is projected to grow from USD 100 billion in 2019 to well over USD 350 billion in 2023. Also, India had the highest FinTech adoption rate of 87 per cent as of 2020. Digital lending has emerged as an effective alternative to traditional lending (by financial institutions) for people who are new to credit or are underserved by the financial system. ENABLING FINANCIAL INCLUSION With the Internet reaching India’s remotest areas, now is the opportunity for people across geographies and demographics to access financial services digitally. Innovative products offered by fintech companies (lending apps in particular) have overcome traditional limitations, reduced transaction costs and are enhancing customer experience. There is an upsurge in the contactless process from diverse customers, which has resulted in a huge variety of digital lending models, each dealing with financial inclusion in unique ways. As per latest government data, the popular and safest digital payment mode of UPI has seen monthly transaction volumes rise from 115 crore in 2019 to over 400 crore in 2021, a whopping 3.5 times. Consumers are actively becoming digital savvy and knowledgeable in the realm of technology. With everyone moving towards e-everything, including digital payments, the digital transformation has on boarded reluctant or first-time digital payment users and has pushed the banking industry to adopt & embrace new-age digital banking. Consumers have embraced the idea of digital financial services or new-age banking by moving away from physical touch and access to cashless and online financial journey.
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