SME Digital Lending Proposition: Loan Approval in minutes !

What is Digital Lending ?

Now that almost every aspect of life is transforming into digital experience that is you can call for the service or the product from your screen and get it delivered at your doorstep…why not banking…why is it that you still have to do several follow up calls to get a loan or to even open your bank account !

 While several strides have been made in the consumer lending space wherein personal loans or loan on credit card, etc are approved seamless, however, for SME Loans or Corporate Loans that are the driving force of the economy, the entrepreneur who takes the utmost risk to run his business has very limited support system and the banks have to be extremely vigilant while dealing with the SMEs since the success ratio of SMEs is almost 50:50 !

SMEs Survival Rate [As per study in Canada]

So what are the latest trends in digital lending globally?

Key Factors driving Digital Lending:

·      Customer demands for a seamless user experience.

·      Technological innovations

·      Regulatory Support

The biggest risks to seamless automation are compromise in security risks, compliance risks and other privacy issues.

Latest Technological Solutions that can be used for improved processing time are:

Video KYC : Wherein the borrower can establish their original document authenticity through a video clip and then you match the documents shown in the video with submitted documents

OCR Technology : It is a Optical Character Recognition tech wherein the documents be it bank statements / audited financials can be converted into sensible numbers and arrive at a faster decision time.

NLP : Neuro Linguistic programming tech which can be used to make sense of the submitted data and a credit assessment paper can be generated wherein an approximate decision can be made. That leaves for 80% of credit decisioning automation and manual intervention would be required for only 20%

Block-Chain :This technology has limited use case as of now in credit lending though it is used extensively in crypto currencies. But obviously we are moving in the direction wherein supply chain finance can be made seamless without documentation  using block chain.

Digital Signatures on Documents: This is made possible by a lot of softwares that we are aware of like DocuSign wherein the borrower does not need to visit the bank physically and can sign the documents at the click of a button. The signature is encrypted and secured thereby mitigating security risks.

And the best part is all these technologies are available on cloud so you don’t need an on-premise infrastructure server and can provide scalability in case of increase in volumes.

So what is the conclusion?

Well as they say, life is all about balance. Hence a complete manual solution or a complete digital solution are recipe to disaster. The financial institutions need to find the right balance and ingredient for their offering and come up with innovative solutions that can delight the borrower and can still achieve the dream of seamless loan approvals.