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How Digital Transformation is transitioning consumer lending to a new era

The Covid-19 pandemic experience has changed the perception of many traditional lenders too and they are now convinced that digital lending is the way forward to grow fast.

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Today, digital transformation has significantly disrupted the nature of lending. A few years ago, a loan application could easily take anywhere between 1 to 8 weeks to get approved. This was despite guaranteeing the loan with a collateral and taking several days off to get the job done. Now, it merely takes a few touches and clicks on a smartphone screen and you’re approved for a loan within few minutes. Most of the lenders are encouraging the digital acquisition model to reduce their operational cost and enhance customer experience and convenience. Those who do not adopt digital acquisition and servicing in consumer lending may face a tough time in acquiring a good customer.

The old-school method of providing services to customers is becoming obsolete with every day that passes. Technology is driving trans-industry innovations that are streamlining traditional processes. As far as the digital transformation in the lending space is concerned, we’ve not even scratched the surface yet.With digitization in place, it is possible to bring in consistent efficiency, cost reduction and take customer service to a whole new level.

Let’s have a look how.

Analyticson data for smooth lending operation and positive output

By going digital, consumer data can be managed and optimized with relative ease. It is possible to devise collation of data at a central repository. It, in turn, enables lenders to assess and analyse relevant data pointsto make informed decisions based on consumer behaviour and current market trends. This is to say that consumer data is growing rapidly and leveraging the same will help lenders stay on top of the game.For instance, trended data (data based on historical payment information) can pave the way for making predictive performance. This is possible because trended data covers the directions and pitfalls in the consumer’s credit history. Also, alternative credit data sources such as property and bill payments bring about the possibility of a well-rounded view of an individual’s creditworthiness. Alternative data has already become an important source of assessing credit worthiness for new age lenders.

The capitalization of data goes a long way in helping lenders gain the upper hand, as the availability of trended data and alternative data sources enable them to look into the true creditworthiness of anapplicant. Now, lenders can get insights into consumer emotion and behaviour via data analytics. Furthermore, lenders can decipher what their customers truly want with a gamut of consumer-oriented services. Obviously, a clearer and holistic picture of consumer behaviour is the key to accurate risk management.

AI for transforming the core process of consumer lending

The integration of digital processes enables scope for revolutionary change such as the incorporation of Artificial Intelligence (AI). The lending sector is one where frauds can result in massive losses of profits and even capital. But this issue can be eliminated by using AI tools for fraud detection and elimination. The data-centric lending industry can scale new heights by integrating AI technology to upgrade and simplify administrative tasks and direct resources on productive tasks such as customer service.

With AI-driven operations, it is possible to facilitate seamless onboarding of customers and reduced turnaround times in terms of risk and compliance tasks. Such efficiency helps generate positive consumer experiences and increase customer loyalty and referrals.

RPA and APIs

In the present-day business landscape, speed and efficiency are no longer a luxury. They are the imperative need and a must-have in sectors such as finance. To that end, Robotic Process Automation (RPA) is one efficient tool for lending processes. It can drastically reduce the time bandwidth required to process loan initiation and verifications as well as other routine tasks, thereby leading to an improved customer experience (CX).

The combination of RPA and APIs signifies an empowering force. Lenders can instantly act on consumer queries and covert the same to business revenue. The advent of user-defined, interactive Application Programming Interfaces (APIs) has completely revolutionized the banking and lending industry, facilitating the transition of processes from traditional modus operandi to new-age models.

Transparency and increased consumer control

With digital transformation, the lending process can be a very interactive one and ensure maximum consumer participation. This approach builds an environment of trust at the very elementary level of customer engagement. Now, consumers can also access key financial data such as history, transaction, payments and so on. This transparency enables consumers to have a greater control of their financial activities and take a conscious effort to improve their creditworthiness, generating positive results for lenders in the process.


Digital transformation is the need of the hour. Without it, service providers in the lending sector are bound to fall behind the curve and miss out on industry trends and progresses. As things stand, consumers are not coming forward with the sole objective of acquiring loans; they are also on the lookout for more value and smooth borrowing experience. More than lending, they want responsible lending which includes transparency along the lines of processes; terms and conditions; fair treatment; consumer-friendly repayment options; and inclination towards consumers’ best interests.

To that end, lenders should brainstorm on new innovations in the direction of top-notch services and increased value for customers. In addition to handling loans, lenders must focus on initiatives to enhance overall customer experience. The modern consumer is discerning and demanding. Lenders can cater to the needs and meet the consumers’ requirements by leveraging innovative solutions. The Covid-19 pandemic experience has changed the perception of many traditional lenders too and they are now convinced that digital lending is the way forward to grow fast.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Digital Transformation

Zafar Imam

The author is CEO of Finshell

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