Digital lenders and personal loan apps have brought about welcoming innovation in India’s traditional consumer lending industry. Online loan applications, fast processes, and quick disbursement have contributed to the rising demand for personal loans.
The traditional personal loan industry offered a limited reach to underserved borrowers. Also, loan ticket sizes and loan tenures were not flexible previously. On the other hand, personal loan apps cater to an entirely new class of underserved consumers.
By bringing into work alternative means of underwriting and ascertaining the creditworthiness of the borrowers in novel ways, digital lenders are revolutionising lending. Both old and new borrowers look up to the new-age personal loan apps for their urgent financial needs.
How are personal loan apps staying ahead of the curve?
Personal loan app companies use a host of novel sources to gauge borrowers’ creditworthiness. For example, numerous data points like borrowers’ digital footprint, social affinity, spending behaviour, etc., are processed using data analytics tools by digital lenders.
Reliance on new-age technology against human judgement makes underwriting unbiased and automatic. The use of AI and ML algorithms makes loan approvals instant. What a bank could take weeks for, a digital lender collapses the entire loan application process from assessment to disbursal in under a day. The ease, speed, and convenience offered by digital lenders attract first-time borrowers as well as the old regulars.
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The challenges digital lenders face
Online lenders have made taking personal loans easy, creating a win-win scenario for both borrowers and lenders. However, personal loan apps face many challenges in reaching more borrowers.
Following are some of the significant challenges online lenders face:
- Lack of trust
Online lenders are easy and fast, but still, there is no human interaction, which can be seen as a disadvantage by many borrowers. To bring in more customers, lenders have to do more trust-building. Instant personal loan apps need to develop trust and comfort in the minds of customers towards their products and services.
One of the large customer bases for instant personal loan apps is first-time borrowers. And first-time borrowers may not be intensely familiar with the workings of credit score, personal loan interest rates, loan tenure best for them, etc. In such a scenario, an online lender must consider its relationship with its customer as more of an advisory relationship than transactional. Such a strategy can help loan apps build trust.
Personal loan apps such as PaySense strives to be borrowers’ advisor and give them the right advice, even when that means advising borrowers not to take a loan. In addition, things like transparency in repayment options, penalties, and personal loan interest rates are essential to make the borrowers trust online lenders.
- Customers’ personal inhibitions
Most Indians prefer having human intervention when doing any money transactions or executing any money-related process. People are sceptical of sharing their personal and financial information over a digital interface, especially with a new digital company.
Also, many borrowers find it difficult to obtain the required documents and share them with the lender to move through the process. Such hindrances can make borrowers change their minds even after considering taking on a loan.
Digital lenders need to alleviate borrowers’ concerns around late penalties, repayments, impact on credit scores, if any, to deter their inhibitions.
- Complex loan app interface
Personal loan app companies need to offer a smooth loan application process over the app and website. In addition, loan application, loan tracking, and loan management on the app must be convenient and intuitive.
The easy process, clear communication with the borrower, frequent communication at each point in the customer journey, and real-time assistance and updates on the loans could make the borrower feel safe and at ease.
Simplicity, transparency, and clarity must be the features of every loan app. Also, a dedicated customer support team is a must for long-term trust-building. PaySense provides such tenets with the PaySense personal loan app.
How to retain customers in the long run?
Along with attracting and catering to new customers, personal loan apps need to retain old customers in the long run to grow. This can happen with fantastic customer service and other features as follows:
- Understanding customer requirements: The personal loan apps need to understand the life stage of each customer and her unique requirements at that particular stage. This is important to understand the customer and offer her the desired flexibility. For example, a young student enrolling for a one-year classroom program would like a moratorium over regular EMI repayments. So, if the lender can know the customer’s unique needs, it can offer her the desired benefits.
- Unique experience: Online lenders must offer their customers a supreme loan experience and quick subsequent loan experiences to retain customers in the long run. A simple click of a button must be all that is needed to avail further loans for a customer with good repayment behaviour.
- Personalisation: Personalisations such as flexible repayment tenures and options can forge a way to retain customers. Loan apps can also bring about personalisation with technology and the use of high-quality algorithms and systems.
As the popularity of online personal loan apps grows and digital technologies start getting commoditised, things such as a convenient and quick process, and quality service will get even more critical for online lenders.
Lenders would have to evolve with time, offer helpful features, and strengthen their relationship with their customers by providing personalised services.
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