A little bit of data can go a long way!
Imagine there being minimal record of your existence – your credit history and identification papers being almost non-existent. Unfortunately, this is not a movie plot but a reality that millions across the world have to grapple with. Both developing and under-developed economies have their fair share of people who have no formal credit footprint. These are people who have never borrowed from or interacted with formal banking channels in their lives. This lack of interaction with banking channels is one of the primary reasons that these people do not possess sufficient format documentation, a primary requirement of banks. The repercussion of this is that there is minimum information available about their credit history and when they do approach a lender for capital; more often than not they are deemed ineligible and are turned away.
Over the last few years, digital lending platforms have emerged as viable sources of credit for such borrowers. They have succeeded in creating ripples in the financial lending space by helping borrowers secure funding at a time when demand for credit far outstrips supply. Where conventional lending platforms like banks demand collaterals that the financially underserved or unserved are ill-equipped to produce, these digital platforms have helped fund these individuals and proprietors with short term loans in times of need.
This is further facilitated by the rapid increase in the usage of smartphones, upsurge in access to and speed of internet services leaving digital footprints of borrowers for new-age lenders to leverage. By 2022, over 70% of India’s population is expected to own a smart phone. With a current smart phone user base of 300 million, smart phone penetration in rural India is growing at a much faster pace as compared to the urban India. This means that each one of us is generating reams of digital data giving online lenders a glimpse into our habits and preferences.
Technology is helping digital lenders access a plethora of data including social media presence and big data analytics is enabling them to decipher that data to derive deep insights into the customer’s behaviour and preferences. This allows borrowers, who are either underbanked or do not possess necessary documents to get credit from traditional lenders, to avail credit from new-age lenders. Big Data is also facilitating real time analysis of data to offer tailor-made products and solutions to customers at the decision-making phase to ensure higher levels of onboarding. At the heart of these interactions between digital lenders and borrowers lies Big Data, Advanced analytics and machine learning.
Big Data analytics has been emerging as a key disruptor in multiple industries, ranging from transport to e-commerce to finance and even education, where technologically enabled platforms access enormous amounts of data to build better products and services, provide quicker solutions and troubleshoot issues efficiently. In digital lending space, big data analytics is disrupting the market by making the loan process more convenient than ever.
