2020-21 has been a spell of mammoth changes in industries. While some flourished, others didn’t, depending on the nature, domain and distribution of these industries. The Fintech Industry – particularly the lending sector – saw significant changes in the way it operates.
While fintech has been digitizing and adopting more innovative methods to reach the target audience, last year has seen the companies scale up and down. Following are the few major trends that we saw in the lending industry in specific.
5 Fintech trends that scaled up the Fintech industry during lockdown
- Doubling down on Technology spends: With offline lending coming to a standstill, it was imperative for companies to invest heavily on technology and tech infrastructure. Several Fintech brands offer personal loans to individuals irrespective of their physical location through its app. With no paper-work and digitized process, the approval is quicker than all traditional lenders.
- Ease on fee structure: The lockdowns are tough on all of us and to help those who needed financial assistance in form of loans as low as Rs. 1000, the Fintech sector opened to easy loans omitting any late or rollover fee along with no requirements for collateral for loans as high as Rs. 50,000. This helped a lot of individuals to start small work from home businesses online which paved for their better future. The loans are provided by such Fintech companies based on the borrower’s loan repayment history and credit score.
- Rise of Micro Loans – Unsecured loans pose a higher risk for lenders. However, the overall demand of loans of less than Rs.10,000 saw a sharp rise. This is partly due to increase in overall demand and the hesitance of traditional lenders to provide loans during the uncertain time. The newer fintech apps have been helpful in ensuring that they lend during this period and keep the credit lines open.
- Application of Artificial Intelligence and Machine Learning to get in-depth customer insight- With lockdown in the picture, face-to-face interactions were minimized, which also ruled out the prospect of acquiring loans through manual meet-ups and processes. This made it difficult for lending companies to assess the repaying capacity of the borrower. However, with the application of AI and ML in these Fintech platforms, the companies were now able to evaluate the borrower’s spending patterns, repayment capacity, and much more that helped in catering to a large number of people. The usage of alternate data like phone data has been particularly beneficial in assessing the creditworthiness of the user.
- Focus on Millennials: Millennials have been the main target for the fintech brands across the country, owing to their rising needs and good repayment track records. This will continue even in the post-covid era.
As we can see, the two main factors that will foster the success of the Fintech space in 2021 and ahead, will be the easy procurement process and the complete online process, which helps people to procure loans at the ease of their homes. Further digital revolutions in the space are yet to open many more opportunities for everyone, helping them to grow with a little financial aid in the form of easy loans with very affordable EMIs.
By Sucheta Mahapatra, MD – India, Branch Personal Finance App