Tech It Easy: To Open Finance

24 May 2023

Over the past five years, the lending industry in India has witnessed a remarkable transformation, such as:

  • Retail loans > commercial loans.
  • Credit bureau maturity
  • Digital Public Infrastructure (DPI)
  • Rise of NBFCs

The banking and finance industry has always been rife with complex technological systems. Open finance has garnered momentum due to these systemic changes and the rise of API-first, cloud-native solutions. What was once a time-consuming, paper-driven process has become instantaneous, digital, and technology-driven.

The shift from person-centric loan disbursement to technology-enabled assessment of creditworthiness has revolutionized the lending landscape. Lending solutions aimed at the initial stage of the consumption lifecycle is another interesting development currently in flux.  Read the blog for exciting insights on the impact of the Account Aggregator (AA) framework on the lending industry in India from the SamvAAd Knowledge Session delivered by Ankur Handa, Co-founder and CPO, Lentra.

Ecosystem Approach

To undertake transformational changes, an ecosystem approach is essential. API-led product development enables customer acquisition by integrating products across players and sectors. The digital experience layer on either side of the journey– customer portals and dealer portals- is crucial for a seamless ecosystem experience. Similarly, connectivity between participants and the complete ecosystem is essential. Here, AAs are pertinent in enabling data sharing across various entities.

Driving Financial Inclusion:

The Reserve Bank of India (RBI) recently reported a significant increase in India’s Financial Inclusion (FI) index, reaching 56.4 in March 2022 compared to 43.4 in March 2017. This rise quantifies the extent of financial inclusion, considering indicators like availability, ease of access, usage, financial literacy, and consumer protection. The proactive regulatory measures implemented by the RBI, combined with the efforts of banks, have played a pivotal role in leveraging technology, expanding credit products, and serving urban and rural India.

By embracing technology, collaborating with various stakeholders, and addressing customers’ evolving expectations, the lending industry has transformed into a more accessible and inclusive landscape, empowering individuals and businesses with easier access to credit and financial services.

Digital Disruption and Customer Engagement:

The lending ecosystem is poised for another wave of disruption fueled by collaboration between various stakeholders such as lending service providers (LSPs), marketplaces, banks, original equipment manufacturers (OEMs), e-commerce partners, point-of-sale (POS) platforms, and AA. This collaborative ecosystem can enhance credit flow and foster higher financial inclusion. These embedded journeys allow customers to identify and choose the channel for credit solutions. 

Similarly, leveraging technological solutions to predict customer behavior and engaging customers early in the buying process can give brands a first-mover advantage. The focus has shifted towards assisting in financial decision-making and fulfilling customer needs rather than executing lending contracts.

Lending Gateways- Reaching Customers at the Right Moment:

As consumers increasingly embrace digital channels for accessing loans, it becomes crucial to shift left, i.e., tapping the consumer’s right where they contemplate the options. To build effective digital lending solutions, it is vital to understand and cater to the loan requirements of various segments. Whether it’s a small shop owner (dukaandar), a salaried individual, an industrialist, an MSME vendor, or a vegetable vendor, tailoring product loan journeys to meet the specific needs of each segment is crucial. This approach ensures inclusivity and provides a personalized experience to borrowers.

The Rise of Instant Gratification: 

Millennials and Gen Z consumers are at the helm of driving the growth of the lending market. With their preference for instant gratification, they have challenged traditional norms and fueled the development and implementation of lending journeys that offer loan approvals within seconds instead of days. This paradigm shift has necessitated cutting-edge technology, data integration, and streamlined processes to meet the demands of these tech-savvy generations.

About Lentra

With over $28 Billion disbursed on its platform, Lentra has processed over $58 Million applications with a peak of 8 applications/sec. It has integrations with ready-to-consume data connectors, Account Aggregators, OEMs, Market Aggregators, E-Commerce, Banks, Bureaus, etc., to help the banks underwrite the loans better. These numbers will be growing significantly with the advent of Account Aggregators. 

Check out the complete session here: 

SamvAAd2023 – Tech it easy! to Open Finance by Lentra

Interested to know more about innovative use cases of AA? Look at all the AA solutions presented at SamvAAd 2023 under the Show-and-Tell Sessions here:

We would like to thank Jasmeet Chhabda for contributing to this blog.

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