By Anuj Kacker
The push by both the government and customers in the new digital age has been to build a robust cashless and digital economy, leading to major transformations in the way consumers access various banking services today. The process of lending, for one, has evolved considerably to facilitate the easier discovery of loans as well as to make the process of applying for loans and other financial products such as credit cards online much simpler.
The launch of India Stack by the Indian government, a set of open application programming interfaces (APIs) such as the eKYC which allows financial companies to perform the KYC verification process digitally using biometrics or mobile OTP, as well as eSign which enables applicants to digitally sign and submit documents, has lent a considerable edge to the alternative lending segment. As a result, digital marketplaces which connect credit-seekers and lenders are constantly enhancing the efficiency of the lending process by making it quick, seamless, and more importantly, paperless for consumers.
Advantages of paperless personal loans
Digital personal loans and paperless transactions are the future of banking, augmented further by the latest cutting-edge technologies and a relaxed regulatory environment. With digital loans and alternative lending platforms, borrowers can apply for loans anywhere and at any time.
In addition, the absence of intermediaries in the process makes online and paperless loans a much more dynamic and convenient option for borrowers who may have urgent financial requirements, as they can avoid the hassle of undergoing the slow, and almost bureaucratic processes. Additionally, digitisation of the processes eliminates the chances of human error, as the processing of applications as well as credit underwriting is overseen with the help of technology.
How do paperless loans work?
With access to modern digital tools and efficient technological solutions such as India Stack and open APIs, digital lending platforms are partnering with leading banks and non-banking financial companies (NBFCs) to create effective lending solutions for borrowers. In order to ensure greater accuracy in customising loan products for consumers, these platforms employ Artifical Intelligence (AI) and data analytics algorithms to perform a comprehensive analysis of the various loan products offered by lenders and correlating them to the specific requirements of borrowers to zero down on the most optimum products.
Anyone with access to the internet and a computer or smartphone, and relevant government-approved identification like PAN card, Aadhaar, voter ID can apply for a loan online. Digital lending platforms have an online application process wherein borrowers can directly fill in their details and upload documents on the portal. Borrowers simply need to scan and upload their personal documents such as residential proof, identity proof, bank statements, and salary information online. This is a one-time process wherein lending platforms store the borrower’s information in a secure manner in a centralised database, which they can access when customers want to avail additional credit or other lending services. At the same time, automation and deep analytics have made the verification of borrowers’ details as well as assessing their creditworthiness simpler, faster and more accurate.
Furthermore, as the digital signature feature allows applicants to e-sign the documents, the entire transaction is completely paperless, thus saving them the trouble of downloading and filling a physical application and then forwarding it to the lender. Moreover, with paperless digital loans, borrowers also do not need to visit the bank since the entire process, as from applying for credit to disbursal of loans everything is conducted through digital channels.
So, while it previously took weeks, or even months, for borrowers to have their personal loan applications approved through banks, instant loan approvals are finally a reality for credit-seekers who can receive the funds in their bank accounts in as little as 24 hours. More importantly, the evolution of digital lending and paperless personal loans has been a boon for a large number of salaried and self-employed individuals in the country who were denied credit due to poor CIBIL scores or the lack of an adequate transaction history with banks and financial institutions.
Anuj Kacker is the co-founder and Chief Operations Officer (COO) of MoneyTap
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