Sanket Takalkar
November 15, 2017

Fintech and Lending

India provides a unique opportunity for FinTechs to innovate and grow because of specialized needs of economically diverse groups. Fintechs in India have seen a  lot of investment from venture capitalists, private equities and also have been well supported by various government initiatives. Today they operate in virtually every space which are core to any traditional Bank.

Lending has been one of the prominent functions in which Fintechs have shown tremendous momentum and potential. Few of these have been able to change the way traditional lending used to operate, and while doing so, they are efficiently serving the masses which were inadequately served by the traditional FI’s.

FinTech’s Growth Drivers in India

By leveraging cutting-edge technology, FinTech startups have served the under served customers and their specific needs, which the traditional FIs and banks couldn’t meet over the years. The incapability of the traditional FI’s had created a void in the market, which these FinTech’s have been able to fill. Traditional FI’s had few inherent weaknesses:

1. Inadequate distribution – Under served customers

The bank-branch penetration statistics are alarming, where there are on an average 13 branches per lakh Indians. The rural and semi urban figures go down to 8 branches per lakh Indians.

2. Inadequate lending – Under served customer credit needs

India is one of the most under penetrated market for lending where the credit to GDP ratio remains low as compared to many developed nations across the world.  This can also be attributed to the inability of traditional FI’s to meet the growing and changing consumer needs

3. Not coping with the market demands across specific customer segments

The inability of the traditional lending function to meet the specific demands of SMEs and MSMEs has been a key concern, can be attributed to few basic reasons:

  • High transaction/origination cost for banks
  • High risk with virtually no credit ratings
  • Lack of conventional credit data to check worthiness

FinTechs have been able to fill this void in the market space. Use of alternative ways of lending, coupled with excellent use of advance technology has fueled the FinTech’s growth.

Alternative Methods of Credit Appraisal

Today’s credit underwriters are increasingly following one mantra, all data is CREDIT Data no matter how unrelated the data is.

  • Social Media Credit Scoring
  • Banking Transaction Data
  • Psychometric Scoring
  • Behavioral Data
  • Transaction data on e-commerce site and digital valets

Cloud Computing

With the advent of Cloud computing, the businesses have increasingly shifted to a new, less capital intensive, model of Software As A Service (SaaS) or Pay Per Use model. This model is extensively used by new age FinTech’s to bring down the per transaction costs. Cloud computing has also been leveraged to make the data available anytime-anywhere.

Use of India Stack

  • eKYC – Aadhar based biometric authentication
  • Digital Documents – Verified Digital Document Vault
  • e-Sign – Consent


Changing regulatory landscape, data and cyber security risk and consumer protection are a few challenges that fintechs in India are facing.  To overcome these challenges, FinTech’s are collaborating with traditional FIs and Banks, which are operating on a strong foundation of India’s robust banking framework. The future definitely lies in strength of this collaboration – we shall call this entity as BanFinTechs. Hopefully with such strong traction the industry will tide over all these challenges.

Indus Lending Suite

The Indus suite of products have the necessary scalabilitystability and at the same time the agility to support the future Bank and FinTech partnerships and to enable them to serve customers seamlessly. Indus offers an iMobility Suite for customer acquisition, customer servicing and loan collections which helps banks to have a customer centric approach to serve a variety of segments and at the same time having the agility to remain viable in an ever changing competitive market.

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Sanket Takalkar
Sanket Takalkar
Sanket is a Sr. Functional Consultant with Indus Software Technologies. Sanket has over 10 years of work experience, providing and implementing solutions for banking and finance clients.