By Monish Anand

In India, a significant portion of the population lives in semi-urban and rural areas and is digitally excluded. Mainly due to illiteracy, low income, economic activity being concentrated in urban areas and lack of access to funds to run small and medium enterprises. This is why financial inclusion of the underbanked population is important to create double-digit income growth and sustainable jobs. This is made possible by the accessibility of credit, which relies heavily on technology.

Although we live in the digital world, many people still lack access to basic financial services, such as obtaining a loan in real time. FinTechs were born as a result of technological innovation, which presented a platform for changemakers. People of all ages can now access a variety of financial services and are much more knowledgeable about financial products, thanks to fintech companies. The emergence of digital applications and platforms, as well as the outbreak of the COVID-19 pandemic, have contributed to this transformation of bridging the digital divide.

The population of new borrowers has evolved into active borrowers based on the use of the Internet in financial services. As they seek out formal lending institutions to meet their financial demands, the entry of digital lending companies into the market has contributed to the timely extension of credit to this demographic, which also includes Gen Z and Generation Y. FinTechs offer a variety of services such as personal loans, home loans and insurance to customers nationwide with attractive interest rates and low prices. Customers have several choices when it comes to the types of credit available to them. Thanks to this, Tier 2 and Tier 3 cities are now included in the digital financial market. This trend has been fueled by the rise of digital apps and platforms.

Technology and touch
It is essential for digital lenders to create a simple user experience, provide a secure platform and provide information in plain languages. Using modular technology and data-driven credit models, fintechs can now offer personalized customer experiences and products such as personal loans, access to earned wages, short-term loans, integrated financing, buy-it-now, pay-later options, etc.

Digital loan is becoming secure day by day
Workers in all sectors, including manufacturing, self-employment, and services, can now easily access financial services, including Tier 2 and Tier 3 cities, thanks to the advent of digital finance. FinTechs can scale up their operations and reach wider segments in need of development through the acceptance of digitalization in rural areas. We see smartphones in the hands of local retailers and even street vendors who are semi-financial savvy these days. Customer security is ensured by legitimate digital lenders using sufficient verification mechanisms (e.g. profile based OTP
update).

Credit risk assessment and fraud prevention
Early on, digital lenders developed a simple lending model for lending with readily available desktop data. Over time, digital lenders have leveraged alternative data sources such as employment history, telecom payments, e-commerce payment history, and other spending patterns to create loan models sophisticated. The use of machine learning and data science is particularly relevant for digital lenders in the design and development of these lending models. The models help with loan recovery, early warning systems, loan fraud risk prevention and, most importantly, financial inclusion. As the cycle progresses, involving more people in the formal lending system helps lenders analyze creditor creditworthiness, even before the process begins.

With the proliferation of smartphones, more and more people in Tier 2 and Tier 3 cities leave a digital footprint and are traceable through a powerful KYC verification process (e.g. Aadhaar linked cell phone numbers) . Lenders who adhere to strict compliance and procedures win in the long run because they can detect fraud early and at the same time provide the borrower with a credible experience.

Data analysis and inferences
FinTechs are responsible for updating themselves in response to new trends to serve customers and provide the right choices. This can be achieved by adapting to trends and creating personalized products. Staying at the forefront of changes, understanding customer preferences, and aligning them with policies that can help deliver contextual lending and other financial services to different customer segments is key to advancing data science. New era technologies such as artificial intelligence and machine learning are becoming add-ons, providing lenders with positive analytics to improve customer retention. Improved customer satisfaction leads to increased integration, and compliance-based technology helps fight fraud early in the process.

Client experience
FinTech is responsible for not only keeping up with trends but also providing efficient customer service to satisfy available products and services. Leverage a variety of AI-accessible channels to deliver point-to-point services to customers through chatbots, IVR, app notifications, SMS, and WhatsApp campaigns. By supporting our products every step of the way, we provide support until the product is available and keep people happy. This also leads to the creation of a relationship of trust with the customers.

The path to follow
Digital lenders have started a movement. They are set to revolutionize digital finance. FinTech, in partnership with channel delivery partners, takes care of credit delivery in Tier 2 and Tier 3 cities, with the help of new technologies and connectivity. Digital lending has proven to be the answer to credit inquiries around various target segments.

(The author is CEO and Founder of MyShubhLife. Opinions expressed are personal)