Digital Micro Lending: The future of the financial industry

by | Nov 10, 2021 | Digitization, Financial Services

Digital micro lending

Technology continues to act as an enabler for innovation and risk mitigation as it becomes a key priority for businesses involved in digital lending. The COVID-19 pandemic has opened a plethora of opportunities for innovation and new learnings, thereby accelerating digital transformation at a significant speed. Businesses are now investing in new technologies that are opening the way for a revolution in payments and provision of financial services.

In today’s world, consumers have become more mindful of large spending, and digital micro lending will thus gain momentum by transforming traditional lenders into intelligent digital lending enterprises as opposed to using legacy systems.

Among the many sectors affected directly or indirectly by the pandemic, digital ecosystems have experienced a significant boost during the ongoing crisis. This is because the spread and severity of Covid-19 has forced people to follow various safety measures like ‘social distancing’ and made them more cognizant of transmission through handling and exchanging cash in person or contracting the virus from their surroundings by visiting Banks or places of interest. Organisations that are more reliant on digital processes for complete loan processing have seen a faster response rate in their business operations. Further, with the increasing availability of API (Application Programming Interface) solutions for user onboarding (eKYC authentication) and loan disbursal, more traditional financial institutions are looking to digitize parts of their loan origination/collection processes.

There a lot of challenges faced by digital lenders: working capital limitations, ever increasing non-performing loans, lean resources and limited time, regulatory compliance pressure, outdated risk assessment and credit decisioning processes to name a few. However, leveraging technologies such as AI, ML and Big Data Analytics, automated loan offerings and contactless lending services act as enablers for timely digital payments ensuring the entire loan lifecycle from application to disbursement into the customer’s account happens in a seamless manner. This provides an end-to-end intelligent solution for credit scoring and lending while operating through a secure and robust architecture. As consumers endeavor to maintain their lifestyles, a surge in micro-credit is inevitable. Microfinance lenders must therefore be equipped to address significant credit requirements, all while offering affordable and convenient repayment solutions to ease the impact of the crisis. With the economy facing a slump and the incidence of credit slated to rise post-COVID-19, it will become more difficult for small merchants and consumers to garner loans. However, digital lending platforms which have firmly integrated the principles of financial inclusivity and affordability will emerge as saviours of the financial crisis.
Digital Micro Lending

In conclusion

The world of digital lending is continuously evolving. Here at Bridge Advisory and Consulting, we are on a mission to support the evolving technological needs of society and industries alike, delivering world class digitized solutions to support Sri Lanka on its digital transformation journey.

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