Digital Personal Loans: The Wave Of The Future - Lebenn    
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October 1, 2023

Digital Personal Loans: The Wave Of The Future

  • March 8, 2022
  • 5 min read
Digital Personal Loans: The Wave Of The Future

2020 sure was an unexpected year. Achieving what no CTO at any enterprise could’ve, 2020 brought everything – from official meetings to special occasion celebrations  – to our laptop or smartphone as they became our window to the rest of the world. The unexpected outbreak of Covid-19 and the unavoidable lockdown have transformed the world that had only patches of digital experiences into a world that is entirely digital. Finance is no different. Today you can access digital personal loans by simply downloading an instant loan app.

What are Digital Personal Loans?

The expansion of the personal loan segment can be attributed to several factors. The most important factor is people’s evolving preferences. Consumers are more enthusiastic than ever before about taking out personal loans for a variety of purposes, including the purchase of goods, vacations, paying bills and upgrading their homes. It is no surprise that India is expected to be the world’s third-largest consumer market by 2025, with over USD 4 trillion in consumption expenditure. Although digital banking had been gaining traction, particularly among younger Indians, consumers of all ages have now joined the bandwagon.

Digital lending is the new-age practice of applying for and receiving loans or credit from financial services via an entirely online or digital platform journey. Factors such as increasing smartphone usage, internet penetration, credit range flexibility and the convenience and efficiency that going digital brings can all be attributed to the growing popularity of digital lending.

Platforms have jumped on the digitisation bandwagon which has been instrumental in driving change in the personal loan segment. Because of the convenience that digital platforms provide there has been a massive increase in their adoption. Lending platforms are already leveraging technology and increased internet penetration to develop fast, secure and user-friendly applications and infrastructure thereby digitising the entire loan application and approval process. 

The digital lending market is expected to grow from USD 100 billion in 2019 to well over USD 350 billion by 2023. In addition as of 2021 India had the highest FinTech adoption rate of 87%. For people who are new to credit or cannot afford to access the financial system digital lending has emerged as an effective alternative to them.

Customer onboarding on an instant loan app has been digitised differently depending on whether it is a personal loan or an SME loan. The prioritisation of CX (customer experience) and UX (user experience) has made applying for an urgent personal loan seamless.

Benefits of Digital Personal Loans

The digitisation of the lending process provides banks with numerous powerful benefits, including better decisions, improved customer experience and significant cost savings. 

Anyone can get access to digital personal loans easily

Digital lending has the potential to reach entire nation-sized markets. To open a current or savings account, get a business or urgent personal loan, and perform all other banking services quickly, all you require is a smartphone with an instant loan app or a computer and an internet connection. It eliminates the need for physical visits to a bank branch – which itself is a clincher for many borrowers.

– Enhances India’s FinTech infrastructure

The ability of digital banking to reach all over the country means that banks, fintech operators and IT companies will be sufficiently motivated to improve India’s FinTech infrastructure so that everyone has access to credit online. This helps to increase employment which benefits the Indian economy.

Drive innovation in the banking industry

Digital lenders can derive insights from vast amounts of customer data and analytic tools, allowing them to significantly improve their business processes and drive industry innovation. Thanks to continuous innovation, an instant loan app like EarlySalary can process an urgent personal loan in a few minutes by factoring in credit scores and other parameters, and distributing digital personal loans upto ₹5 lacs.

– With quick approval, businesses can make more daring moves.

The most significant advantage of digital personal loans is quicker approval. The turnaround time with digital lending on an instant loan app is far lower than on traditional loan processes which typically take weeks for approval. 

– Cost reduction in the banking sector

Cost reduction is one of the most important factors driving interest in this market. Digital lending relies on innovative technologies to achieve this. Tech has reduced the cost of customer acquisition, creditworthiness assessment, and disbursal. As a result, businesses are more agile and accessible to borrowers. All you need is an instant loan app like EarlySalary and an active internet connection.

Lower-income individuals can now build a credit history with small loan amounts without falling into a debt trap thanks to the availability of unique products such as micro and short-term loans.

Partnerships between banks and financial technology services are already taking shape allowing traditional players to take bold steps into uncharted territory. However, even as newer products and processes in the FinTech sector emerge, the key priority will always be to keep a close eye on core indicators such as yields, net margins, etc. in order to establish the long-term viability of these solutions and gauge healthy return in the digital personal loan sector.