Financial inclusion implies that financial products and services are accessible and affordable to all sections of society fairly and transparently. Unfortunately, even in a growing economy like India, we are still far from the ideal of complete financial inclusion.
Many small businesses and MSMEs who need funding are not still serviced within the ambit of formal lenders. For example, a report by an Expert Committee on Micro, Small and Medium Enterprises, headed by UK Sinha, pointed out that the overall credit gap in the MSME sector is estimated to be ₹20 – 25 trillion. This widening gap illustrates the extent to which this sector is underserved.
However, without burdening the P&L with increased overheads.
Internet is the Game Changer
Internet penetration into urban and rural areas has acted as an equaliser in the last decade. A McKinsey report states that India is one of the largest and fastest-growing markets for digital consumers, second only to China. Currently, just over 40 per cent of the populace have an internet subscription. It is estimated to increase 40 per cent more, somewhere between 750 million and 800 million, with double the number of smartphones to between 650 million and 700 million by 2023.
India is digitising at a breakneck pace, and here are a few ways technology is coming to the rescue in boosting financial inclusion:
One of the benefits of leveraging technology is that the traditional branch-based interactions are reduced or eliminated. Geographical boundaries are no longer an inhibitive factor.
For example, Tata Capital uses a user-friendly interface augmented with chatbots, voice assistants and WhatsApp messaging to interact with customers. Borrowers can access service requests such as statements, loan applications and overdue payments via WhatsApp. These features make the user experience more seamless while reducing the turnaround time for customers.
Using technology, companies can now reach out to customer segments that were earlier inaccessible through offline channels.
But it’s more than just taking offline products online.
Along with making more offline products digital, today, there are new products innovated exclusively for the digital medium.
For example, Tata Capital has exclusive digital offerings especially targeting millennials, who may not have visited a bank branch but are adept at technology and are looking for contactless hassle-free financing. The Money app is a digital wealth management platform. Another example is Tata Capital’s online Home Store, a one-stop-shop for searching for the right home and the right home loan. Customers get an end-to-end home buying experience starting from browsing through properties, accessing property-related information right up to obtaining a home loan approval online.
Additional Read: Data transforming SME lending
Within the realm of digital communication, it is also essential to keep in mind the customer’s channel preference. By harnessing the power of AI, an omnichannel experience could be more inclusive since different potential customers will be able to communicate and transact with the lender by using the channel of their preference and convenience. Multichannel access to lenders could include mobile applications, digital interfaces, and messaging apps such as WhatsApp.
Offering customised solutions
One of the features of a financially inclusive system is that it offers customised product structures to the borrower at the best rate. By using machine learning algorithms and data analytics, lenders can customise product offerings suited to meet diverse client needs. This approach helps include more borrowers within the traditional financing ambit, encouraging them to avail themselves of credit opportunities that best serve their needs.
Time and efficiency are necessities of financing today. The application process for any such loan application used to be long and cumbersome. However, this has changed. With customers wanting to move faster in today’s dynamic world, speed is of crucial importance.
Tata Capital implements initiatives like Straight Through Processing which shorten the duration of every step throughout the entire loan application process. As a result, it reduces the turnaround time drastically. Technology can be employed effectively to eliminate tedious paperwork and long processing times, leading to prompt access to capital. This can incentivise more businesses to opt for formal credit channels.
Credit assessment algorithms
Highly sophisticated algorithms use machine learning to analyse digital, social, financial and alternate data. As a result, technology makes a real-time assessment of the borrower’s loan application possible.
For example, the Tata Capital myLoan app is powered by multiple scorecards at the back-end, each suited to the needs of different target audiences and loan products. This capability makes the screening and application process more accessible, eliminating the challenges in servicing small ticket size borrowers and aiding financial inclusion.
Additional Read: Digitally Empowering SMEs in India
Technology is paving the way for a new customer base outside the purview of conventional financing while offering a seamless and intuitive experience to existing customers.
Reach out to representatives at Tata Capital to know more about our digital loans.