Digital Lending: Why it’s Time for Banks to Embrace Digital Transformation


Digital lending has been in existence for a while now, but recent times have seen an increase in its traction. One of the major developments in the finance sector has been the efficient blend of finance and technology, commonly referred to as FinTech. It has drastically increased the efficiency of financial services by relying heavily on technology to make the process of applying for personal loans a lot easier.

While traditional banks have been successful in achieving many milestones, they haven’t been able to provide high-technology personal loan offerings to people, leaving an untapped potential market for other financial institutions to explore. Digital lending platforms have sprung into action to fill the voids in this lucrative market and provide personal loan solutions to the cash-starved people, who are in need of personal loan and personal line of credit to take care of emergencies, such as travel, health, wedding, home improvement, etc. 

What is Digital Lending?

The ever increasing need for instant cash has brought about a revolution in the FinTech world. Digital lending platforms have emerged to meet the demands of cash-strapped salaried individuals. So, what’s digital lending? It is a platform through which individuals can lend their money to borrowers who are looking for a loan.

What’s in it for lenders and borrowers?

Well, the lenders get to earn attractive returns on the money they lend while the borrowers get the funds they need.

How does it work?

Whether the borrower is credit worthy or not is first evaluated based on his/her current financials. The analysis is then sent to a large pool of personal loan lenders, who then transfer the personal loan amount directly to the borrower’s account. The borrower then sets up repayment schedule to pay off the lender.

Benefits of Digital Lending

1. Convenient for both lenders and borrowers

Digital lending is synonym to convenience and accessibility. It has made personal loans more convenient for lenders to lend directly to the borrowers and it has made it accessible to people who need them.

2. Easy and simple processes

Thanks to digital lending platforms, personal loan can now be processed with minimum documentation, thus saving a lot of time and efforts. The loan application process can be done easily using internet-enabled smartphone or computer. It takes only a few minutes to complete the process.

3. Flexibility in borrowing, repayment and usage

Digital lending platforms offer flexible financial services. The flexibility in borrowing, repayment and usage eliminates rigid contracts bringing a whole new group of borrowers to the table.

4. Collateral-free loans

Traditional banks need collateral to ensure a swift loan approval, while its unavailability prevents credit worthy applicant’s access to funds at the time of need. With digital lending, collateral-free loans are approved after evaluating the credit worthiness of the applicant.

5. Online and quick approval

The personal loan application is processed within 24 hrs. That’s a quick turnaround, especially when you are in dire need of funds.

Why Banks Need To Accelerate Investments in Digital Lending

Retail banks are gradually digitalizing their activities. However, they are doing it at a sluggish pace and that leaves them behind in the competitive lending arena. Some banks have responded well to the digital wake-up call and are on the right track in terms of their offerings.  But most of the banks are lagging behind and urgently need to accelerate investments in digital lending if they want to stay ahead of the game and boost digital sales.

Digital lending can bridge the gap between what banks offer and what customers actually need. By embracing digital lending, banks would be in a better position to address digital trends and acquire the ability to compete. Personal loan apps or digital lending platforms have the potential to empower banks to improve their digital personal loan offerings and streamline their processes through automation, thereby increasing the efficiency of their financial services.


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