Will Fintech Lending Dominate Traditional Business?

While traditional banks remain the backbone of India’s banking and financial sector, digital financing offers significant advantages for businesses. The use of digital platforms for lending has grown rapidly in recent years. Technology, functional efficiency, usability, and accessibility are all contributing to fintech lending expansion.

Learn About How Fintech Revolution Will Replace Conventional Financing

Multiple online lenders are helping to usher in a new era of convenience and speed in the financial services sector. This transition, made possible by technical developments, is gaining a lot of support, especially in the low-price range. The Reserve Bank of India (RBI) issued Digital Lending Guidelines to oversee this emerging industry. These rules emphasized that regulated organizations must guarantee that borrowers’ payments and servicing are made directly to their bank accounts.

Experian’s “Digital Lending: Coming of Age” paper focuses on the possibility of fintech radically changing digital lending in India, with the goal of exceeding traditional lending routes by the year 2030. According to the study, the turnaround time for credit applications has decreased thanks to the rise of digital lending. As an additional benefit, fintech has helped level the playing field in terms of access to credit across regions. According to the research, fintech will make major inroads in the unprotected small-ticket size and protected collateral-based high-ticket size markets. Co-lending, which uses open data to provide a fair playing field between fintech and traditional lenders, is predicted to become the dominant business model by 2023.

Fintech needs to penetrate traditionally underserved markets for asset-backed products if they want to increase their share of the digital lending market. The digitization of assets can aid the process. Concerns about collection strategies and legality have been brought to the attention of the Indian government, which has led to an increasing examination of the digital lending industry. Programs like Pradhan Mantri Gramin Digital Saksharta Abhiyaan and Jan Dhan have been launched to encourage people to switch to digital communication and storage methods.

Fintech has the ability to disrupt the business and accelerate past conventional lending methods with sustained innovation and alterations to regulatory frameworks. In response to new threats, online loan companies have perfected automated credit decisions and streamlined the application procedure. However, fintech companies will face additional challenges in the next stage of expansion.

Three Major Reasons Why Companies Favour Fintech Lending Online

Some of the advantages of digital lending over traditional banking are as follows for businesses:


In order to apply for a business loan at a bank, you would have to physically go to the location, fill out a lengthy application form, and bring in a number of supporting papers. The loan application procedure requires multiple trips to the bank, even if you fill out the form online (which is a possibility at some banks). You can do the whole thing in one sitting at your computer.


A mountain of documentation is required when applying for a bank loan for a business. Forms must be filled out, documents must be attested, photocopies must be submitted, references must be shown, etc. This causes unnecessary difficulties because it is a very tedious and lengthy procedure. Digital lending drastically reduces the need for paperwork. You only need to submit digital copies of some essential papers, such as identification and proof of address.

Duration of processing and distribution

Another key distinction between traditional and digital lending is the processing and disbursement time. The time it takes for a bank to clear and process a business loan application can seem interminable. It takes a bank to approve a loan application and transfer the necessary cash in several weeks to months. However, loan applications submitted to online lenders are processed in a matter of hours, and the money is sent into your bank account in as little as two to four business days. This is a fantastic option for those needing immediate capital, including many entrepreneurs and small business owners.

Other Key Factors Driving Companies to Choose Fintech Lending Online

Other reasons to choose digital lending over traditional banking are as follows for businesses:


Bank loan approval depends on several variables, including employment record, assets, current income, collateral, housing, and, most importantly, credit score. To establish your trustworthiness, online lenders look at your income and credit history, your social media authorization, level of education, professional history, and projected future earnings.


The credit lines made available through digital lending platforms are customizable, often ranging from INR 250,000 to INR 10,000,000. Online lending providers view these as tiny dollar amounts. In addition, you can return the loan over 2–36 months with inexpensive and adaptable EMIs. However, banks view loans of less than one lakh as high-risk.


You can get the best loan terms and conditions without leaving your house with digital SME lending fintech processes that are absolutely streamlined. In contrast, the traditional approach to borrowing money requires numerous trips to different institutions to collect the necessary data.

Also Read: Navigating Short-Term Business Loans: A Guide for MSMEs


Most banks have trouble delivering products and services due to their reliance on antiquated technology. Outdated systems and machinery make traditional lending cumbersome. Low-quality customer tech help for questions and a cumbersome user interface (UI) weigh down banking operations. Every encounter with a customer in digital lending is optimized thanks to the use of technology at every point in the customer journey. The interfaces are smooth, user-friendly, and packed with features.

The bottomline

When compared to conventional banking, digital financing has many advantages. New borrowers, such as sole proprietors and founders of small businesses, can benefit greatly from the convenience and accessibility of digital lending. Thus, from the above article, we would have understood that online lenders have made major advances in the commercial lending market in recent years.

MSMEBlog advises MSMEs on how to obtain proper financing and provides information on available funding sources. Find out more about MSME financing at

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