The demonetisation has left a defining impression on the banking and financial services sector. The high-decibel pitch for digitisation of financial systems and reducing cash transactions has accelerated consumer’s shift towards digital alternatives in financial deals.

Though the use of technology in lending has been in existence for some time now, having used it to perform credit evaluation and authentication, the introduction of more automation, artificial intelligence, data analytics and enhanced security have certainly increased the operational efficiency of digital lending platforms.

It has left lending and leasing institutions grappling with the twin objectives of capturing the growing pie of lending through digital platforms while remaining the preferred lender for traditional borrowers like medium and large businesses in the offline or branch banking system. Let’s look at the role of both transactional modes from a utility perspective.

 Online platforms have grown rapidly in popularity mainly due to the lower turnaround time and the convenience factor. Cust­o­mers can now check their eligibility and apply for a loan from anywhere – all by simply filling out a form. Faster and easier documentation is the clincher as one can upload all relevant documents with the application itself. Online option suits startups and companies that may need smaller, but faster loans, personal loans and individual emergency health needs or temporary financial arrangements.

The biggest advantage of the online mode is its easier access to a wider world of lenders – thanks to the seamless world of Web. If conventional lenders can be choosy and demand more paperwork, online loan services work towards completing applications and disbursing funds rather quickly, provided you have the right credit score. Some of them even source inputs from social media profiles to create a credit history for `thin file clients’ or those with no known credit history.

Online platforms ensure privacy in applying for a loan since you don’t have to discuss your financial matters with any loan executive face to face. Lenders are striving to make online transactions safer as personal information and passwords are encrypted to avoid identity theft and fraud. Given the high growth in online transactions, especially in the last few years, financial companies have deployed significant resources to encryption and identity checks besides securing transactions.

It is relatively easier to compare various aspects of loan like loan pricing, fees and rates – online. Generally most online loan requests are for unsecured debt where you don’t have to provide any collateral security.

While new processes and technological advancement do make online lending simpler, the wide acceptance of Aadhaar based KYC and greater availability of credit score are adding pace for approvals. Lenders insist on prudent practices as mandated by the regulator as well as their own internal standards. So even when a customer applies online for convenience, lenders would ensure that authentication does take place on the ground, especially when risk profiles are higher or as in the case mortgage and home loans where physical verification of the mortgaged property is a prerequisite.

From websites to Facebook messenger chatbots (the AI-driven tools that mirror an online environment that customers are accustomed to), lenders are getting closer to customers than ever before. The real-time engagement allows companies to cross-sell or shows case far more products without the travails of a human salesman. Besides, customers are given almost all benefits available for offline loans including the ‘cooling off’ periods, during which they can even cancel the loan.

How does it work? Since offline and branch banking are familiar to most of us, digital lending platforms should not be much difficult either. Most of these follow few simple steps and need one or two documents. Starting point is the input for the purpose of your loan, the amount you need and the tenure. Then you should provide eligibility as an employee or a businessman with company information.

Some insist on social media profiles such as Facebook and LinkedIn, which must be consistent with your inputs. Few personal details such as the date of birth and PAN are mandatory while your bank statement for the last six months must complete your basic financial eligibility requirement.

Given the growing popularity of online platforms, banks and finance companies are turning technology savvy (India offers the highest expected RoI on financial technologies at 29 per cent against a global average of 20 per cent, says PwC) to deliver a convenient and consistent service. The competition is intense in the digitised retail lending since the entry of technology oriented private lenders who now claim to offer a 10-second, real-time loan approval and disbursement (a customer needs to just click on his internet banking account). Not to lose out this growing opportunity, more traditional players are expected to join the bandwagon. For example, mortgage lenders who have always used on traditional systems and manual processes are turning to web-based loan solutions to speed up the process.

 Lending is heavily leaned to the offline mode wherein physical branches handle most of the activities regarding a credit application and disbursal. Branches are places where both finance companies and customers continue to build lasting relationships. Face to face, financiers could appreciate the depth of the project or finer nuances that would go on to make a project highly successful. Customers, on the other hand, could get a pragmatic hearing or a practical remedial course of action, if there is a crisis situation.

A large number of people seek a human interface to the process, helping them find answers to their questions in person. This is also because of their limited exposure and understanding of technology. Generally in rural areas, individuals find reassurance in physical branches of a lender that may have a presence across the country and well regulated with the backing of a stable institution.

Many customers create a reliable track record and a valuable association with a financial institution over a period of business dealings. This means more faith and lesser paperwork when it comes to requests for loans. Finance companies may grant lower rates, good repayment terms and added facilities to such customers who have an existing relationship with them.

For example, companies looking for project finance may tap financial institutions in the offline mode since the latter need an in-depth understanding to disburse the loan. A successful business with years of profitability or a businessman with large assets can get better terms from a familiar financier who can appreciate these legacies. Thus, it may be worthwhile to wait to get the best. Moreover, if a customer needs a revision or cancellation of a loan, it would be easier in an offline or a personal mode.

There is no one-size-fits-all solution for a borrower when it comes to choosing between online and offline lending options. It is important for one to do proper research before opting for any lending choice. For some, a large loan with lower repayment terms would be ideal for growth. For others, a quick loan could be a stitch in time to solve a larger issue.

Even as technology continues to refine the entire loan availing process – using BOTs, web interfaces and even mobile apps, customer engagement comes from comfort, confidence and convenience – aspects that can be found both offline and online modes, depending on individual choices or needs.

 (The author is executive V-P and head – business, marketing and CSR –  Fullerton India Credit Company)