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Peer to Peer Lending - Future of Digital Loan Market in India

Peer to peer lending is the process of getting a loan online with minimum paperwork wherein the entire process of submission of the loan application to the final disbursement of the fund is done over the Internet. The revolution is led by innovative fintech companies and has re-defined the rules of borrowing and lending in India.

The Indian Peer to Peer lending sector currently has some highly promising players that will propel growth in the industry on the basis of their well-researched credit analytical tools, a strong back-end system, collection and recovery mechanism and robust processes. The year 2019-2020 is expected to be the year of alternative lending and investment products like peer to peer lending which is all set to revolutionise fintech in India.

The advancement in technology and the online lending platforms have enabled the exponential growth in the peer to peer lending space by enabling e-KYC wherein a user can upload the required documents online on the platform at their own convenience and verify their demographic details and other relevant information, needed to fulfil regulatory requirements, while applying for a loan. These positive developments have made it possible for fintech to rapidly onboard customers / borrowers online with minimum paperwork and to evaluate individual credit risk through well researched credit analytical tools. Once the customer is on-boarded, his/her creditworthiness can be evaluated objectively thereby making the decision of approving or disapproving the loan seamless, easy and hassle-free.

Traditionally, banks and non-banking financial companies (NBFCs) have rigid guidelines that sometimes work against individuals and small businessmen, who are in need of small loans. Peer to peer lenders do not need a physical branch network, as all operational functions are done over the internet and therefore they are able to keep their fixed administrative and operation overhead costs lower, the benefits of which when passed on to both, the lenders and borrowers makes peer to peer lending attractive. In addition to allowing individuals' access to personal loans, players in peer to peer lending have also expanded their customer base and their loan portfolios. Peer to peer lenders are now aggressively attending to the credit needs of the Small Business/MSME's and the informal sector.

The future of the peer to peer lending platforms is bright, there is a huge untapped market for lending in the range of 20 lakh crores. Being technology based, these lending platforms have huge scope of providing innovative offerings and also a disruptive technology for borrowing and lending market. Today's generation is much more intelligent, and tech-savvy and they believe in spending to gain different experiences in life. As the habit of consumerisation is increasing, such platforms which provide instant approval, paperless loans, with minimal time and personal interaction are expected to grow significantly by providing opportunity of financial inclusions to the masses and at the same time generating higher return to the lenders to encourage them to lend on such platform.

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