Personal loans: How fintech has reformed instant lending ecosystem — 8 key changes | Mint

Fintech is transforming the instant loan sector by capitalising on technology and thereby making the lending process faster, more efficient and more accessible to a broader audience. Thanks to the growing prevalence of technology, there are a dime-a-dozen platforms which disburse personal loans to borrowers in as quick as 10 minutes.

The fintech sector has completely overhauled the way personal loans are applied for and disbursed. Overall, it has transformed the instant loan segment in the following eight ways.

Instant Loans: 8 changes that we witness

1. Smoother application process: Now, fintech companies offer online platforms and mobile apps for loan application processing, thus bringing down the need for paperwork and manual intervention. Additionally, approvals and disbursals are often completed within minutes, as compared to the several days it used to take in the case of traditional banks.

2. Improved accessibility: The contemporary fintech platforms serve individuals and small businesses in small and semi-urban areas, which are typically excluded by traditional banking systems. Additionally, many fintech lenders do not ask for a high credit score, a phenomenon that enables more people to access loans.

3. Bespoke loan offerings: Fintech companies provide small-ticket personal loans, payday loans, and business loans tailored to specific needs. The AI-driven pricing models offer competitive interest rates based on borrower profiles.

4. Credit assessment: Some new-age fintech firms even analyse non-traditional data sources such as utility payments, social media activity, and e-commerce behaviour to assess creditworthiness. Additionally, machine learning algorithms enable better risk assessment and personalisation of loan offers.

5. Regulatory compliance and data security: Instant digital identity verification through Aadhaar accelerates the process of bringing customers on board while ensuring compliance with regulatory requirements. Advanced encryption and secure payment gateways ensure customer data protection.

6. Collaboration with traditional banks: Several fintech companies have joined hands with traditional banks to offer instant loans as they leverage banks’ financial backing and fintechs’ agility.

Instant loans are offered directly through e-commerce platforms, travel portals, and other digital ecosystems.

7. Lower operational costs: Thanks to automated processes, overhead costs have been reduced considerably, thus allowing fintech firms to offer competitive interest rates and faster loan services as compared to traditional institutions.

8. Push to financial inclusion: The new-age fintech lenders are playing a vital role in spreading the net of financial inclusion by offering loans to gig workers, freelancers, and first-time borrowers.