Historically, lending has been a transaction in which the lender gives money to the borrower in return for a return (interest) on the money. Although there are a variety of complex lending and financing instruments, lending always centers on one thing: the ability to get the money back.

Traditionally, this sector was very disorganized. It has evolved over time from pawnbrokers lending money against collateral to a more structured procedure involving banks and/or financial institutions. Rapid advances in cloud computing, artificial intelligence and blockchain, as well as faster and more affordable internet connectivity, have fueled the rise of FinTech start-ups, and lending has also transformed and is become “digital”.


Digital lending involves lending through web platforms or mobile apps, using technology for authentication and credit reporting. Lending is always about trying to gain a strategic advantage. How can fraud be detected more easily, underwriting decisions made more accurately, or the universe of targets grow faster than competitors? India still has the second highest number of people without bank accounts.

More than 190 million Indian adults do not have any type of bank account, which represents a huge opportunity. Over the years, the digital lending market in India has grown tremendously. The value of digital loans grew from $33 billion in FY15 to $150 billion in FY20 and is expected to reach $350 billion by FY23.

Over the past few years, machine learning has transformed conventional lending. The operations of credit institutions are governed by government financial regulators, which provide various regulatory guidelines and compliance is a must.


Using the power of machine learning, financial institutions can now make faster and more accurate decisions by moving from analyzing people to analyzing patterns and trends. The global digital lending platform market is expected to reach $20 billion by 2026, representing a compound annual growth rate of 19.6% over the previous seven years.

Due to the benefits of a transformed lending process, such as better decision making, happier customers, cost optimization, etc., machine learning provides lenders with a variety of ancillary leverage points, such that -Improved operational efficiency, improved accuracy, simplified compliance, and efficient analysis of large volumes of data.

From speeding up the underwriting process to improving portfolio composition and optimization, to robo-advisory, model validation and alternative credit reports, machine learning is helping the lending industry by automating processes that previously required lots of paperwork.

It does this by analyzing unprocessed data sets and extracting meaningful insights to provide accurate decisions. The system then uses this information to solve complex, data-rich problems that are critical to the banking and finance industry.


The industry has been alerted by Covid-19 to the tremendous potential of digital transformation. As customer demand for contactless transactions increases, more lenders will embrace technology to provide borrowers with maximum convenience. Even traditional banks and non-bank financial companies (NBFCs) are realizing the need to digitize processes such as customer onboarding, risk assessment, loan underwriting, disbursement and repayment to reduce operational costs and improve the customer experience.

With services like video KYC, Aadhaar-based KYC, and websites and apps with advanced features, loan application procedures will become more efficient and less cumbersome. In addition, the traditional procedure for underwriting credit will undergo a radical transformation. Lenders will increasingly use advanced technologies such as AI, ML and big data analytics to collect and assess data from multiple sources to assess an applicant’s creditworthiness faster and more effectively. With technology that enables alternative credit scoring, lenders can extend credit to more people, advancing the cause of financial inclusion.

In the years to come, technology will continue to disrupt the digital lending ecosystem, with a renewed focus on improving the end-to-end customer experience.

(The author is Zeus Dhanbhoora, Co-Founder and CEO, BridgeUp)

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