Technology has changed the way we read books, listen to music, watch movies, reserve flight and train tickets. The next to change could quite possibly be the way we apply for loans in banks and the way our applications are processed.
Though most industries have been transformed radically by technological innovations, the banking sector is largely untouched, feels Snehal Fulzele, who has co-founded Cloud Lending Solutions, that provides backroom infrastructure to fintech (financial technology) companies.
Fintech firms are non-banking companies that use technology to make financial transactions easy and transparent, for both the lender and the consumer. They are all startups challenging the way established banks operate.
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Co-founded by Mr Fulzele and Darpan Saini in 2013, Cloud Lending Solutions is incorporated in Silicon Valley, and has offices in London and Bengaluru. After bootstrapping with family money, they raised over $10 million in venture capital. The company, which has 70 customers in 22 countries, has clocked a 300 per cent growth in one year both in revenue and customers.
What changes will technology bring in? Mr Fulzele says with this new technology, the customer has to fill in minimum details, the system will fetch the rest from other system, resulting in a better borrowing experience.
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Says Mr Fulzele, “After you apply for a loan, banks ask for a set of documents to establish your creditworthiness. But we have automated the whole process in the loan cycle from origination, underwriting, servicing, collection, accounting and reporting. In the case of big-ticket lending, there will be some manual intervention.”
He said fintech companies would use non-traditional data sources to determine the creditworthiness of the borrower. “For example, in the case of a small or medium enterprise, we might go to Zomato to check the reviews. We are so connected nowadays. There are multiple methods to check the credentials of a person.”
He says in banks, the customer data could be lying in different system and it is difficult to pull them all out and integrate. On the contrary, in the case of fintech companies, it’s just one suit of financial applications.
He says the technology provided by established IT firms to banks have many limitations, like they are on-premise, inflexible and are not cloud-based. “We have built the technology from bottom up,” he says.
Millennials likely to make the difference
Companies like Cloud Lending Solutions see a huge opportunity in the way the next-gen would like to bank. That’s a generation that has grown up finding solutions on their mobile phones in real time.
According to the Millennial Disruption Index, a survey done among millennials (born between 1980 and 2000) in the US, banking industry is at the highest risk of disruption by new technology. A huge majority among those surveyed expressed dissatisfaction with the way banks functioned and they expected the industry to change drastically with the advent of technology.
Says Mr Fulzele, “The millennials want easier ways to borrow money, like via the phone and get funded in real time. The fintech companies are aiming to do that. This is like a gold rush and we are just the shovel makers. We are enabling the disrupters in fintech.”
Has the new technology caught on? It’s early days with just a handful of players in India. But clearly there is a very high hope that before long banks could face stiff competition from these startups.