9/13/2016

DigitizingLending:BlueoceaninbankingsectorTheEconomicTimes

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DigitizingLending:Blueoceanin
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Sep03,2015,12.00PMIST

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ByManavjeetSingh
Banksandfinancialinstitutionshavegone
throughamajortransformationoverthelast
halfacentury.Withveryfewplayers,the
industrywasalenders'marketforavery
longtime.Borrowershadtoapproachthe
banktoseekfunding.Liberalization
resultedinIndia'scentralbankReserve
BankofIndia(RBI),allowingprivatesector
banksinthesectorwhichsawopeningof
manymorebranches.Thisledtoincreased
competition,withprivatesectorbanksvying
forhighergrowth.

LiberalizationresultedinIndiascentralbankReserveBankof
India(RBI),allowingprivatesectorbanksinthesectorwhich
sawopeningofmanymorebranches.Thisledtoincreased
competition,withprivatesectorbanksvyingforhighergrowth

Customeracquisitionstrategiestoenableenhancedaccessledbankstocreatenew
distributionchannels.Directsalesagents(DSAs)ofbankstosellHomeLoans,Car
Loans,etcwerepartofthesamestrategy.Thiswasaproductledapproach,wherein
bankspursuedthestrategyofgrowthinloanbook,basedonproducts.Eachproducthad
adifferentdistributionnetworkorchannel.Thoughthisyieldedthedesiredresulttoa
greatextent,theproductledstrategyledtocreationofseparatesilos.
TheImpactofInternet
Adventofinternethadchangedmanythings.Bankshaverealizedthisandhavestarted
relyingontheinternettodistributeitsloanproducts.Todayacustomercanalsoaccess
informationaboutvariousloanproductsthroughdifferentonline,loancomparison
websites.Suchwebsitesforwardleadstobanks.Bankstakeoverthecustomerthereon,
andclosethetransaction.Howeverthisdoesnotguaranteethatthecustomergetsthe
desiredloanfacility,asuperiorserviceandsatisfaction.Currently,thereisagapinthe
marketnotofferedbyanysuchwebsites,whichishandholdingthecustomerfromproduct
searchtosigningofagreementsandultimatelygettingtheloanfromthedesiredBanks/
NBFCs.Thiswholeprocessofhandholdingthecustomerfromproductsearchtosigning
ofagreementscanbedonethroughanintegratedendtoendonlinefinancialproduct
marketplace.Suchintegratedendtoendonlinefinancialproductmarketplaceisalsothe
needofthehour.
TheIdeaAnonlinemarketplace
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SPOTLIGHT
RailwaysStandsGround

RecentlyRBIGovernorDr.RaghuramRajantabledtheideaofaggregatorNBFCswhich
couldplaycrucialroleinhelpingbanks&customers.AggregatorNBFCsshallfunctionas
anaccountaggregatortoenablethecommonmanseeallhisaccountsacrossfinancial
institutionsinacommonformat.TheideaofsuchaNBFChademanatedfromthe
FinancialStabilityandDevelopmentCouncil(FSDC)Report.AggregatorNBFCsarelikely
tohelpbanks,otherfinancialsectorserviceprovidersandintegratedsolutionoriented
TaxImpact
intermediariestomonitoroverallexposureofborroweracrossallfinancialassetsand

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DigitizingLending:BlueoceaninbankingsectorTheEconomicTimes

liabilities.
ThestartofDisruption
Inthisdigitalage,digitallendingcanhelpresolvetheissueofbanksoperatinginsilosof
productverticalshelpcreatecustomercentrictechnologybasedplatformsandenable
bankstargetnewercustomercategories.Itisnotjustrestrictedtocreateamonitoringand
reportingsystem.Suchacustomercentricanddigitalapproachhasthepotentialtobring
significantefficienciesinthefinancialsectorleadingtoenhancedbenefittooverall

Prabhuwon'tgobackonsurge Changingjobs?Here'showto
economy.Incaseofintegratedendtoendonlinefinancialproductmarketplaces,thiswill
pricingplan,mayextendit
minimisetaximpact
TheRailwayBoardhasclaimedthat

callforarobustandequallyflexibletechnologicalplatformthatcancollaboratewithcore
FromcorrectdeductionofTDStopayment

despitesurgepricing,whichhasbeen
cappedat1.5timesofthebasefare,there

banking,midoffice,andbackofficesoftwareofBanks/NBFCs.Thisisrequiredtohelp
ofadvancetax,hereshowtodealwith
varioustaxationissuesthatmayarise
integrateendtoendonlinefinancialproductmarketplaces,tofeeditsclients'dataand

hasbeennofallinnumberoftickets

whenyouswitchjobs.
informationintothebanks'systemandgetfeedbackonwhetherbankswouldlendtothe

booked.

clientandonwhatterms.Similarly,PaymentBankscansynergisewithintegratedendto

WhatSureshPrabhuhasprobablynot
toldyouabouthissurgepricingplanfor
Railways
Railsurgepricingisabuseofmonopoly

endonlinefinancialproductmarketplacestoprovidebusinessbankingserviceslikecredit
andnonfundbasedservicestotheirMSMEcustomers.
TheChallenges
Thismodusoperandiofdigitallendingisveryeasyincaseofstandardizedloanproducts
likepersonalloan,creditcardandcarloans.Butincaseofloanstosmallbusinesses,
manycomplicationsandchallengesneedtobeaddressedandresolved.
Itiscommonknowledgethatloanstosmallbusinessesarenothomogenousacrossthe
variousproducttypesandborrowercategory.Workingcapitalneedsofsmallbusinesses
differacrosssectors.Sameisthecasewithtermloansorprojectfinanceasitdiffers
acrosssectors.

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SunilMunjal,HarshMariwalaleadRs82crore
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StartupIdeaChakkiraisesfundsfromRatanTata

HoweversomeoftheloanproductstosmallbusinessescanbeparameterisedbyBanks/
NBFCsandoffereddigitally.Itmaybepossibletotakeaparameterbasedor
standardizationapproachforunsecuredbusinessloanandsmallloanticketsize,working
capitalloanproductsandofferthemdigitallytargetingthenewageentrepreneurs.
Similarly,collateralfreeloanstoMSMEsunderCreditGuaranteeFundTrustforMicroand
SmallEnterprises(CGTMSE)Schemecanbeconsideredfordigitization.Althoughthis
approachmayhavecertainchallenges,acustomercentricapproachcanalsohelpin
identifyingvariousenablingfactorssuchastheexistingrelationshipstatuswiththe
incumbentBankorNBFC.
Nothingisimpossible
Thisdoesnotmeanitistotallyimpossibletodigitiselendingoperationsforcomplexloans.
However,tobeginwith,industrycanstartwithbabystepsindigitaltransformationin
sectorswhereitiseasytolend,bydigitisingandintegratinglendingoperationsofbanks
intodigitalplatformofintegratedendtoendonlinefinancialproductmarketplaces.

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NottobeMissed
NepalAirlinesMakes
EmergencyLandingAtDelhi
Airport

KirenRijijuhitsoutat
Congressondonationto
RGCTbyZakirNaik'sNGO

WestronglybelievethatDigitalLendingistoday'sBlueOceanforBankingSectorand
FinancialTechnologyCompanies.Therisingpenetrationofinternetandmobileinternet
accessedthroughsmartphonesandfabletswillcreateandopenupnewermarketsfor
thebankingsector.Thiswillalsoforcebanksandfinancialinstitutionstodobusiness
differentlyusingDigitalLending.Itwillalsohelpbanksandfinancialinstitutionstogrow
fasterandachieveloanbookgrowth.WeenvisagethatthisrevolutionofDigitalLending
willdefinitelyresultinMSMEsandentrepreneursfindingthemselvesinasweetspot,as
theyborrowattheclickofthemousewithconvenienceandease.
ManavjeetSinghisMD&CEO,bestdealfinance.com
Helpusunderstandyourexperiencewitheconomictimes.com.Shareyourfeedbackhere.

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