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Credit links: Quick-fix credit for an enduring digital lending legacy

Chitwan Kaur   /    Content Specialist    /    2022-09-01

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In FinTech, innovation has largely been about breaking new ground by building something radical, king-sized, disruptive. Whether it’s buy-now, pay-later, the use of artificial intelligence, automation or machine learning, most innovation is aimed at a complete overhaul of financial services and lending.

However, when you look at it practically, not all problems can be solved with grand solutions. Sometimes, they require simple, quick, and micro solutions. This holds especially true in India where the financial services revolution is only just gathering steam and digital offtake among financial institutions remains highly uneven. The pressure to compete, on the other hand, is enormous.

Banks and NBFCs are completely outpaced by FinTechs when it comes to transforming their product offerings with technology. How do they make up for lost ground? They also throw their hat in the ring and start offering the same services. But it’s not easy.

Challenges of building in-house

A lot goes into creating a monolithic in-house financial offering. Lenders utilize various channels to extend credit such as their own website, direct selling agents (DSAs) and platforms. With distribution channels in place, there are many implementation and business challenges to building a self-sufficient, state-of-the-art digital credit arm. 

Rigidity

Rigid legacy core systems have long been the bane of traditional banks. And although they are due a revamp, rebuilding will take time. But as competition mounts, they are required to act now, or risk losing out. 

Moreover, a single financial services unit hinders scalability and agility. For instance, it may keep lenders from creating customized journeys across various channels, devices and operating systems. Personalizing for each partner with a rigid stack turns out to be resource-intensive. In fact, lenders also find it difficult to scale up without making serious and frequent changes to the core system. 

Long time to market

Building from scratch, simply by virtue of being so time-consuming, can delay the time to market. In the race to digitize, this leads to a massive opportunity forgone. 

Complex maintenance

The job doesn’t end with just creating a credit stack. Maintaining it means lenders must earmark money, talent and other resources. It’s not only expensive, but also highly time consuming. An in-house distribution network requires manual coordination, tracking the loan lifecycle, and loan reconciliation. From an operations perspective, large systems also demand significant effort and man hours for maintenance activities such as debugging.

Lenders find themselves caught between the devil and the deep sea. While building a credit arm by themselves is expensive, time consuming and resource intensive, the cost of failing to keep up with the competition is simply too high. 

Lenders can get on board with two raging FinTech trends to resolve this conundrum – microservices and partnerships. Instead of building a bulky, end-to-end credit stack themselves, lenders can collaborate with a third party FinTech to access a lean, niche product that helps them foray into digital lending. 

Case in point, credit links. These links can be shared with a customer to redirect them to the lending journey where they can share their details for onboarding, complete their KYC requirements, share their bank statements and other underwriting prerequisites. Here’s why credit links are ideal for creating effective digital lending journeys with fewer resources:

Omnichannel delivery

Customers no longer have to jump through hoops to access credit. Point of sale financing and embedded finance have gained significant traction. It’s not just traditional lenders who are disbursing credit anymore. Customers are being courted by everyone to take a loan – from their travel ticketing platform to their mobile service provider. They needn’t visit a bank branch or download a banking app to apply for a loan. 

Credit links allow lenders to bring credit to the customer just like their competitors – only better. Instead of restricting credit access to the confines of an orchestrated journey within a banking app, lenders can reach out to customers on WhatsApp, e-mail or via SMS.

Custom journeys

Credit links allow lenders to create customized journeys for each customer. The prequalification engine kicks in once the customer completes onboarding. Based on a preliminary sweep of their alternative data, the customer is shown the type of financing, loan amount and repayment options they are eligible for. 

Once they apply for a loan, each customer is funneled through a personalized journey. As part of this, additional information is sought to underwrite the customer until they meet a desirable confidence score. Each platform can customize the confidence score cut off based on their own risk appetite.

Run the show with hassle-free integration

With FinBox credit links, lenders can get their digital arms up and running in no time, thanks to our no-code integration. They can simply drag-and-drop to create links through our lending dashboard, enter the customer details and share the link with their customers through their favored channel. This eliminates the need for integrating APIs and DSKs – often a time-consuming process.

Here's what it looks like:

Once the customer clicks on the link, they are directed to a branded application journey complete with the logos and color palette of the lender. We even take care of risk assessment, disbursals and the complete lending lifecycle. But once a loan is sanctioned, the lender is given access to a dashboard that helps them track each application.

Conclusion

FinTech has been all about unbundling traditional financial services and reinventing every separate part. Each piece should be complete in itself while also adding value to a larger structure. 

Credit links function precisely in this sweet spot. They can be scaled up and down based on the nature of the business; they are quick to deploy; and they come without any maintenance hangups. 

The future of FinTech rests on products that cater to all sizes of businesses – think of UPI or QR codes in payments. Credit links can bring about a similar change in B2B borrowing.