(FinTech Egypt – Economic Times)
Today, people with no bank accounts are still to conduct digital transactions in most parts of the world, through QR-code enabled solutions and non-account-centric payment apps.
As FinTech blooms and disrupts traditional finance across the world, perhaps one of its most significant impact points is on the MSME (Micro, Small & Medium Enterprises) lending arena. Access to credit has always been an ongoing issue for startups or SMEs in general, and the trending emergence of innovative lending platforms that empower young companies is granting them this much-needed access. The use & fast development of futuristic tools like artificial intelligence (AI), machine learning (ML) and sophisticated data analytics is supporting FinTech entities to provide and extend customized working capital solutions to MSMEs as they require.
Expected to evolve and take off in India, this specific aspect of FinTech is a frontrunner when it comes to financial inclusion expectations across the country in 2020. Below are some factors that should accelerate this evolution.
Combining technology and data for unprecedented benefits
In the age of technology, data is the new gold. Better access to definitive high-quality data from several credible sources establishes new drivers for change in the MSME lending arena. Newer FinTech lending models need to verify and validate their data so as to bring up their efficiency and coverage for their customers. Lending initiatives that greatly benefit from rich data include as flow-based lending, vertical-based lending, and ecosystem-based lending. The current state of this symbiotic relationship between data and tech indicates that data-centric business transformations are under way and are expected sooner than later in the 2020 MSME sector.
There is also an identified shift in FinTech, where the data focus is shifting from volume to relevance. Companies will be focusing more on richer data as opposed to just quantity, helping them generate sustainable competitive advantages and delivering better customer satisfaction. This shift ultimately leaves room for even more innovation in lending models while granting a growth point to existing models.
NBFCs and relevant digital services
NBFC-AA (Non-Banking Financial Company account aggregators) and E-mandate services are being introduced to act as new MSME lending growth factors. E-mandate services will enable FinTech entities to ‘digify’ post-approval documentation, an aspect of the lending value chain that has yet to be tech-transformed. Depending on physical documentation slows down processes and adds unnecessary costs that can be easily avoided with digitization. Any process that is not digitized automatically impacts the rest of the digitized processes, resulting in slower capital disbursal and therefore lost time for the company trying to get a loan. Leading FinTech companies are currently implementing digital signatures to critical documentation, allowing borrowers & lenders to save time and effort.
Overall, there are many complementary NBFC-AAs that enrich FinTech products & services, such as managing the process of financial data extraction through API integrations and similar efforts, resulting in creating a streamlined experience to make the online lending process quicker for borrowers while simultaneously allowing FinTech lending platforms to enjoy more cost-effective operations and higher efficiency.
MSMEs, MSME lending, SMEs, India, QR code, AI, artificial intelligence, ML, machine learning, E-mandate, NBFC, NBFC-AA