As the world reopens and calibrates its suffering from the COVID-19 pandemic, a recent report published by the World Economic Forum, titled “The Global Risks Report 2021”, highlights the damages suffered by small businesses across the globe in light of the pandemic.

While the actual intensity of the economic loss is yet to be fully articulated, several peer-reviewed articles and journals have continued to highlight the risks small businesses stand to face amidst their journey to full recovery.

Among others, one of the most pertinent challenges continues to be a digital divide, and thus in today’s blog post, we will share with you everything you need to know about digitizing your small lending business and also 5 unique advantages you stand to gain from.

Without further ado, let’s get started.


Table of Contents

  1. The Rise of Small Business Digitization
  2. Advantages of Digitizing Your Lending Business
  3. Conclusion
  4. The Reference Shelf

The Rise of Small Business Digitization

Over the past couple of years have consumers from around the world have continued their transition to a hybrid ecosystem and SMEs have upped their efforts to digitize their offerings. Right from merchants and retailers across India starting to accept cashless payments all the way to businesses in Hong Kong opening their boutique websites, the transition has been slowly picking pace.

However, the onset of the global pandemic has played a major role in increasing the pace of this adaption.

As per the latest DBS Digital Readiness Survey 2021, more than 23% of small businesses across India transitioned to a completely or partially digital presence amidst the pandemic, which was only 18% in 2019. And this trend can be witnessed in other APAC nations as well, such as in Singapore, which reported an adoption rate of 73%, closely followed by Hong Kong and China at 47% and 44%, respectively.

loan management system
Source : Total number of digital payments across India from financial year 2018 to 2021 by Statista

However, although the trend of digitization has definitely picked up, yet there remains some challenges, with one of the most pertinent being a digital divide.

You see, in a market where consumers prefer a hybrid purchasing model, equally supported by both offline and online presence, being restricted to the former arrives with several challenges. Right from an unavoidable loss of revenue and reputation to facing the risk of extinction, the dangers of not digitizing your small business are galore.

But luckily, today, due to the advancements in technology, not only are there platforms available to readily transition your small lending business online but also manage it seamlessly and efficiently.

Take, for example, the Finflux Loan Management System.

Designed from the ground up to meet the needs of small and medium-sized lending institutions, the cloud-based lending management software helps you manage your entire loan portfolio at the tap of a button. Right from instant credit assessments and underwriting to 24X7 disbursements via banking APIs, the Finflux LMS helps you take your small lending business to the next level, and that is not all.

Advantages of Digitizing Your Lending Business

There are several other significant advantages of digitizing your small lending business, and they are as shared below.

loan management system
5 Advantages of Digitizing Your Small Lending Business
  1. Simplified Loan Process

One of the first and frankly the biggest advantage of digitizing your small lending business is leveraging a simplified lending process.

Gone are the days when your customers needed to wait in long queues to fill out manual application forms, resulting in your employees working extra hours to complete the entire loan process. Today, by leveraging cutting edge fintech technology, not only can you seamlessly manage your entire lending value chain but also increase your profitability and productivity in the process.

For instance, most small lending businesses rely on legacy credit assessments methods which contribute to longer processing times and inaccurate decisions. However, with the help of cloud-based loan management softwares, you can conduct a credit assessment on your borrower at the click of a button, instantly access their credit report from a bureau of your choice, and arrive at a decision in half the original time.

Not only does it make the entire lending process simpler but also more efficient.

2. Reduced Turnaround Time

As a legacy lending business, I am sure you are aware of the fact that the average turnaround time to deliver any lending instrument rests in a number of days. Since most of the processes involved in the operation depend on manual human interventions and offline checks, not only does your dependence on legacy systems increase your turnaround time, but also significantly contributes to a loss in leads.

On the other hand, by digitizing your lending value chain, you can not only expect a much faster turnaround but also a significant reduction in customer abandonment.

For instance, take the example of MoneyView. A leading lending institution based in Bengaluru, MoneyView guarantees an instant assessment of every loan application and a guaranteed disbursal of funds within 48 business hours post-approval. MoneyView leverages the Finflux lending suite to achieve this fast turnaround time and grant their borrowers access to funds, right when they need them.

3. Greater Savings

A common hamstring which binds together all small lending businesses is their increased dependence on human workforce and legacy methodologies. Since a significant portion of the lending value chain involves manual tasks and human interventions, small lending businesses end up hiring a large workforce, thereby leading to greater overhead costs.

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Source : Share of new credit borrowers in India in 2020, by lending type by Statitsa 

On the other hand, by digitizing your small lending business, you can not only leverage advanced cloud-based architectures but also automate manual and redundant tasks in your lending process to significantly increase your productivity while accumulating lesser overheads.

Since a majority of modern cloud-based lending solutions arrive at a subscription model and are equipped with artificial intelligence and machine learning to automate a majority of tasks, you can easily acquire greater savings in terms of reduced overheads while simultaneously increasing your productivity.

4. Customized Lending Solutions

The modern borrower thrives among customizations, and any business which fails to offer this will inevitably suffer, and your small lending business is no different. The times when borrowers applied for traditional lending instruments are slowly receding, and customized solutions such as credit lines and personal loans are emerging from the trenches; however, legacy lending solutions are not equipped to offer these.

By digitizing your small lending business, you can not only better service your borrowers by listening to their exact requirements followed by offering a customizing lending solution but also facilitate a faster market launch, ultimately contributing to a positive bottom line.

5. Holistic Compliance

Last but not least, with ever-changing national and international lending regulations, it has become more important than ever before to stay compliant in your operations. Right from the RBI cracking down on unlicensed lending institutions to consumers gaining an increased financial awareness, the need of the hour is to stay informed and act on incoming information to ensure compliance with all rules and regulations.

However, as a small business, keeping track of changing regulations is a challenge and thus by leveraging modern lending solutions which come equipped with CISA and BASIL III certifications ensures that you are always on the right side of the law.

Conclusion

The Global Risks Report 2021 estimates that a digital divide resulting from a decreased pace in digitization will not only contribute to billions of dollars in lost revenue but also put businesses on the path to worse fatalities.

As the borrowers of today continue their transition online, it is high time for you to bank on this opportunity and digitize your small lending business.

Thank you for reading, and I will see you in the next one.


The Reference Shelf

  1. Benefits of Digitizing your Small-Business Lending [Link]
  2. The Global Risks Report 2021 [Link]
  3. Pandemic accelerated digital adoption for corporates and small biz, finds survey [Link]
  4. Total number of digital payments across India from financial year 2018 to 2021 [Link]
  5. Share of new credit borrowers in India in 2020, by lending type [Link]