In the last ten years, there have been significant developments in the world of lending. Earlier, bank loans, angel investments, venture capital and equity were the established ways to secure finance for business.
Today, with advent of digital and finance technologies (fintechs), the financing models have evolved significantly. Backed by venture capital, fintechs have invested heavily in developing AI, Machine Learning, applications, platforms, cloud computing, distributed ledgers and data analytics. This is rampant largely because these companies have realized the profound impact and benefits of digital finance. Nowadays, all it takes is a mobile phone to perform financial transactions and engage with multiple institutions in the value chain, in real-time. This has enabled availability, access and affordability of finance.
Digital Financing – Paving the way for complete, financial inclusion
The digitalization of the financial industry has helped promote financial inclusion to a large extent. The ability to address financial need among unbanked and underbanked customer segments has been made possible by the tech advancement.
Since digital financing enables acquiring and processing huge amounts of information almost instantly and under low costs, the lending reach of any financial institution increases manifold without geographical limitations. Additionally, it has assisted in bridging the information gap between investors, lenders and borrowers, credit rating agencies and other intermediaries by addressing the shortcomings of conventional financial systems.
The regulatory component of digital financing is also open across all platforms as a result of new technologies like blockchain. This has made lending easy, especially for smaller institutions as they can collaborate with bigger institutions and be a part of the financial ecosystem. Ultimately, digital financing provides quicker, simpler, and more dependable access to financial services for the common man.
The Growing Use of Digital Financing by Small Businesses
Even while traditional banking remains a source of capital, small businesses may not fully benefit from it. According to research, the majority of micro, small, and medium-sized businesses (MSME) have significant funding shortfalls.
The majority of MSMEs do not meet the stringent eligibility requirements of traditional banking, which demand a strong credit history and repayment track record. This created the ideal environment for digital financing to flourish and address the funding gaps in the target segments.
Digital lending: a step towards effectiveness and sustainability
The hesitation to lend money to the unserved and underserved population, especially in rural and semi-urban markets, has mostly disappeared with the introduction of digital financing options. Financial services today, go beyond the conventional ones. As a result of technical advancements and prompt access to digital financial services, SMEs and MSMEs are creating ripples and contributing in larger proportion to the economy of the country.
The count of customers serviced by digital means is increasing daily as technology becomes an enabler for instant access to finance. The conventional approach of visiting a finance institution, requesting for a loan, and waiting for a decision et al is fading away thanks to the access to internet and instant decisioning. Eligibility and credit checks have become instant, making finances more accessible to long-tail customers, typically ignored by traditional financial institutions. This also lowers the operational costs of lending. Digital lending offers high efficiency for the end user at both ends of the financial spectrum by providing sustainability and financial stability.
Is digital the future of small business financing?
Cloud computing, big data analytics, artificial intelligence, and machine learning have all greatly expanded the horizons of digital finance. Digital finance is making steady progress towards its ultimate goal of changing the funding landscape in India.
Similarly, customers of digital financing platforms get to enjoy the convenience and ease of accessing funding and a wealth of financial intelligence, in addition to access to a larger supply chain and network offered by associating with the digital lenders.
To sum it all up
With the awareness of digital lending spreading across customer segments, the lending landscape is changing very rapidly. Many countries are successfully adopting digital to build robust ecosystem to include customers across income groups to enhance access to finance which in turn shall increase their contribution to the economy of the nation.
To know more about such developments and also to acquire financing using safe and convenient, digital means, write to us at email@example.com or get in touch on our toll-free number 1800 313 313 today.