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Owing to the Digital Literacy campaign initiated by the Government of India, Digital Lending has been booming in India. With a majority of users on-boarding digital platforms, there has been a rise in businesses supporting digital lending. Bringing credit facilities right where the users are, fin-tech digital lending startups are flourishing in India, solving the colossal credit access and delivery conundrum. In effect, the alternate lending sector in India is the third largest across the globe, next only to the USA and China. 

With a push towards a more digital India by the Indian government, backed by initiatives like India Stack, Aadhaar mandate, NACH, demonetization, GST, and so forth, technology companies are not just surviving, but are actually thriving in the current ecosystem. The huge digital footprint created by those initiatives has benefitted multiple industries, particularly the financial services space. This has enabled fintech companies to leverage big data technologies and AI algorithms to generate a new wave of lending in the retail and SME space. 

As per the survey recently conducted by CIMA (Chartered Institute of Management Accounts,) India is ranked amongst the top three leading countries across the globe that is implementing robotic automation. The same study further cited that of all professional sectors, those in the finance sector make up 64% of the driving change. Adoption of technology and AI has built strong roots for widespread disruption in the overall finance space, making processes more seamless, transparent and hassle free for customers on one side and better assessment and bookkeeping for the lenders on the other side. 

Empowered with easy access to data and smart AI-driven algorithms automating the majority of processes, Fintech startups are changing the landscape of digital lending in India. 

Revamping Traditional Lending with Digitalization and AI 

The traditional process of lending has its own pitfalls. For long, the process had an entry barrier, restricting access to large-sized firms or individuals in the prime of their financial health. Primarily driven by paper documentation and bureau score, the process was not democratic enough to encompass the burgeoning number of MSMEs, new to credit customers and the unbanked population. 

However, with the digitization of financial services, today we have easy access to several data sources. While credit history may be unavailable, digital lenders and fin-tech startups can better judge the payback potential, owing to a wide range of data collected from e-KYC, Internet Banking and NACH. Furthermore, the implementation of GST – now covering a lot of more MSMEs than the previous tax structure, is also going to drive availability of data points for decisioning. 

In fact, owing to the wave of digitalization sweeping across the nation, one would find it easy to create a data-rich profile of users. However, computing various data sets against business logic to make important business decisions would warrant huge investments, in terms of the effort, time, money, resources etc. This is where Artificial Intelligence steps into the picture. 

By better use of RPA and other AI methodologies, general compliance and workflow can also be automated, streamlined and fast-tracked. Furthermore, AI can help companies streamline credit scoring. With proper algorithms, Fin-Tech players are discerning the credit worthiness of the loan applicants. 

Along with checking the credit worthiness against the prescribed criteria, AI algorithms are also assisting companies in detecting any fraudulent or risky behavior. It is safe to say that AI is at the cusp of not just enabling, but driving the entire industry. With an increasing adoption of technology, internet and social media, huge data is available for predictive analytics. Thus, AI can decipher customer sentiments based on their social media interactions and thus promote market readiness for building products that meet the needs of the customers. 

In addition, since 2016, there has been a striking increase in the utilization of AI for providing personal assistance, via chatbots. Owing to the significant developments in the field of natural language processing, chatbots can be deployed to act as personal financial advisors to credit seekers. A growing wing of fintech enterprises are deploying AI chat applications to monitor the personal finances of their clients. While communication is automated and personalized, the same can also be used for debt collection, reminders and notification. 

With all the buzz around data and power of AI, the fact is we have just scratched the surface. With the increasing adoption and success in the field of AI, there has been sustained interest to drive innovation through technology. The need of the hour, as a nation, is to not only understand and appreciate the strategic edge provided by Artificial Intelligence, but also be fully devoted in making the technology an integral part of our everyday operations. 

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