How the personal loan space is attracting Millennials with digital first solutions

By Manav Jeet, MD & CEO, Rubique

Lending to Millennials is compelling financial institutions to disrupt lending. What created this major shift in their relationship to debt has been major economic and societal events in the past years; creating unique lifestyle preferences for travel and living are shaping their asks from financial service providers.

With Millennials seeking quick interactions and less human intervention, a market has been created for services offered through technology; integrated into the providers’ back-end services.

Manav Jeet, MD & CEO, Rubique

Lenders are quickly realizing and rethinking their approach to work with the largest demographic segment in India, the Millennials. Nine out of ten (92 per cent) of the segment own smartphones and form 47 per cent of the working age population in India. This creates a substantial segment of the population with a high disposable income that largely wants to invest incremental income on majorly entertainment, apparel and accessories, electronics, and other lifestyle products.

In order to fulfil these needs, Millennials are choosing to opt for personal loans and comfortably resorting to online financial matchmaking platforms in order to seek credit facilitation. These quick services avoid the loss of time, the negative experiences that come to play with human interaction and the vested interests of financial advisors. The generation, even with the option of ride-sharing and similar services, prefers ownership.

This environment has crafted several growth opportunities for banks to create new variations to offerings and services in the personal loan space and, with the integration of FinTech, to attract and retain customers in a scenario of cut-throat competition. In addition, banks are increasingly able to provide these variations with the low-cost and quick-service model demanded by the Millennials. FinTech is also enabling this end-to-end facilitation for the personal loan process with high transaction volumes at low operating costs for a variety of tasks.

This digital lending structure is using asset-light models to automate the lending process and create nearly zero transactions costs for its users; the perks of less human intervention. This further reduces the pressure on the banks to physically scale (in terms of hiring people and building physical infrastructure) to reach more customers or improve banking experiences.

In this scenario, a symbiotic FinTech collaboration comes in to reduce the high customer acquisition cost and create tech-enabled services to transform the status quo of the financial sector. The collaboration has some compelling benefits such as cost optimization, agile innovation and builds better customer experiences. In addition, it helps banks ensure regulatory compliance. Regulators to a certain extent now expect the banks to use regulatory technology or RegTech as part of their systems.

In addition to smoothening regulatory procedures, integration of other disruptive technologies such as robotics, machine learning and artificial intelligence are bringing agility to the core banking system. This integration enables financial institutions to optimize RoI. Now, banks are increasingly integrating FinTech across the value chain from artificial intelligence to provide customer service and increase productivity to surveillance software to check on employee activities that create organizational risk. The agility in adopting technology to streamline various tasks makes FinTech a strong option to create leaner systems in the banking system.

Today, joint investment opportunities for banks and FinTech have opened up investments in technology, innovation and accelerator programs for mutual benefit and growth of both segments and the future of the banking sector in the country. It’s not business as usual with the digitally-enabled generation and banks are increasingly incorporating FinTech services as part of their key strategy to redefine banking in this new digital and competitive time.

Making these crucial integrations and collaborations with FinTech is enabling the sector to tap into the mindset and market created by the digital generation.