Digital Lending

Know how Digital lending services affecting the growth of startup business.

A great step in further strengthening the digitalized economy of a nation after eliminating the various complexities involved in the process of accepting payments from merchants. This is now has been solved by the major payment brands such as Razorpay, Pay u India etc. These companies are now making their way in “lending business” these brands are ready to lend small amount of money in startup business

For example: Lending money to small business such as Tiffin box service, tutors and so on.

Payments brands like Instamojo and Razor pay has started separate lending services to support the growth of startup business in India such as “Mojo capital”. This is a lending product easily accessible by those merchants who are using Instamojo as their payment platform.

Similarly, Alternate payment startup has been started by Razor pay known as “Razor pay capital” which will quickly grant credit to merchants for supporting them in growth of their business based on their past transaction record.

These instant credits like a short term loans which is need to be returned within a short span of time. A risk involved in granting of these types of loan has been reduced and a system of credit behavior has been developed.

In the race of this Lending business Internet companies like Ola and cars24 are also not lacking behind Payment companies. Cab service brand Ola providing loaned taxi ride services. Whereas firms like Cars24 ensuring loan services on the used/second hand vehicles.

The main purpose of the Lending business is to ensure that consumer can easily expand their business if their business get high growth, then their income will increased and increased income ultimately make them to buy higher value products ultimately increasing their purchasing power.  

But the other side of the coin is that success of the lending services from the brands like Razorpay, Ola are facing tough completion from the startups like Money tap, Qbera etc.  Who are already is providing lending services to the consumers.

Apart from this there are several other factors which are going to impact Lending business in coming times and decide their course.

  • KYC:

The business of digitalized lending/credit is majorly affected by Supreme Court decision on KYC (Know your client) process. Firms like NBFC & Banks has created the environment by investing in the innovative technology based on Aadhaar card and digital lenders has developed powerful algorithms to make the lending services accessible to the consumers.

But the Supreme Court decision that there is no need for linking Aadhaar to the bank accounts and mobile numbers has worsened the situation for these companies. Now paper procedure is made essential for authorizing the KYC services for consumers.

  • RBI has made some recommendations:

A year ago in 2018 RBI (Reserve bank of INDIA) has introduce some guidelines/recommendations.  According to which now NBFC (Non-banking financial company) and banks can collectively lend together. Introduction these guidelines allow the bank to increase their loan book at much lower Operating expense.

This regulation is like a relief to the digitalized payment platforms/services now RBI has granted authorization to digital lenders of becoming a medium via which money can be easily directed to borrowers.  

Conclusion

By understanding above mentioned points we can say that Supreme Court decision on KYC has only made the banking process lengthy. It consumes much more time. There was no need for paper procedure for authorizing the KYC feature. We understand that Supreme Court has made this decision to ensure consumer security and transparency. But this decision has almost like a barrier in making India digitalized economy. Some other alternative’s which enhances internet security can be created.

Bhanu Pratap

Bhanu is Local Marketing Team Member at Fortifive. His areas of expertise are online marketing, mobile marketing, and Local marketing. Bhanu is experienced with the online marketing process.