Digital lending is expected to see a 4.75X boom in India. The digital lending market is projected to grow from $270 billion in 2022 to $ 1.3 trillion in 2030. By 2030, digital lending is also projected to make up 60% of the entire Indian fintech market. A key reason for this boom is lenders’ investment in digital infrastructure, enabling the lending process’s scalability. Lenders ranging from banks, NBFCs (Non-Banking Financial Companies), and fintechs are digitizing the entire loan application process, thus expediting the speed at which loans will be disbursed. As a result, underserved but crucial segments like MSMEs (micro, small and medium enterprises) will benefit, and the health of the whole economy will also improve. However, one key area that remains a concern for the digital lending industry is the inability to detect loan fraud effectively. Therefore, digital lenders must strengthen fraud detection capabilities to grow sustainably and scalable. In this blog, we outline the current challenges faced by lenders and how tech-enabled solutions, such as Precisa, powered by its advanced algorithms, help lenders mitigate potential loan fraud.
What Are Precisa’s Advanced Algorithms?
Precisa is an intuitive, cloud-based analytics solution powered by intelligent automation. It is designed to help lending decision-makers assess risk accurately.
Precisa’s Artificial Intelligence (AI)-driven bank statement analysis solution has capabilities to analyse financial statements with speed and accuracy, thus helping lenders serve customers, increase market share, and scale faster. By leveraging Precisa’s advanced algorithms, lenders can detect potential loan application fraud.
Precisa: Modernizing Fraud Detection with Acceleration and Ease
let’s explore how Precisa addresses some of the key challenges lenders face in this segment:
1. Failure to Recognize Irregular Financial Patterns
Lending decision-makers need to scan through massive amounts of financial statements to assess the risk associated with a potential borrower. A trained eye can spot specific patterns to some extent.
However, it gets more challenging as the number of documents and the number of loan applicants increase.
Patterns that are difficult to detect by humans
Here is a snapshot of patterns that can go undetected by the human eye:
- Irregularity in repayments on previous loans
- Incongruity in the balance sheet of a potential borrower business
- Inconsistent or negative cash flows in daily business operations
- A high number of fund withdrawals from bank accounts with no accountability
- Too many loans are being approved in a brief time frame from other lenders
- Excessive bounced cheques
2. Inability to Detect Fraudulent Paperwork
Loan fraud is one of the top categories of financial fraud. Typically, the genesis of loan fraud lies in the loan application process itself. It is becoming increasingly challenging for the human eye to detect fraudulent documentation, especially if it is the work of a professional.
As lending businesses attempt to scale, the inability to detect fraudulent paperwork will continue to be a growing concern.
3. Difficulty of Detecting Identity Fraud
Today, there are a growing number of cases of identity fraud in the area of lending. An individual may impersonate another individual to secure a loan. It becomes challenging for lenders to verify a borrower’s identity without the intervention of technology.
Why Should You Leverage Precisa?
The extensive number of sophisticated frauds can severely drain your organisation’s finances and cost you a substantial amount of money. Effective fraud detection requires an intuitive solution.
Precisa has been working to solve the multiple issues faced by lenders through the smart use of technologies like AI, Machine Learning (ML) and automation.
A Snapshot of How Precisa’s Bank Statement Analyser Works
- The software extracts data from the bank statement.
- It classifies and categorises transactions and then analyses the data.
- Based on the analysis, the software assigns a creditworthiness score called the Precisa Score.
- This process takes place within minutes, saving lending decision-makers a significant amount of time in the process.
The Precisa Edge: Key Benefits
Here is a snapshot of the major benefits that Precisa’s advanced algorithms bring to the table for lenders:
1. Reduced Risk of Doing Business
Precisa’s Bank Statement Analyser can analyse a large number of documents with speed and accuracy, converting the data into actionable insights for lending decision-makers.
The software can recognise irregular patterns, instantly flagging them in the analysis. The software runs authenticity checks to help ensure the originality of documents and verify the borrower’s identity.
With access to such detailed data insights, lenders can make informed decisions. They can elevate the quality of their loan portfolio while also scaling it up.
2. End-to-end Compliance
Lending regulators like the Reserve Bank of India (RBI) continually strengthen guidelines to help reduce loan fraud and control the growth of Non-Performing Assets (NPAs) growth.
The use of tools like Precisa’s bank statement analyser helps lending companies implement compliance guidelines seamlessly and without delays.
3. Reduced Costs
Precisa’s bank statement analyser automates several processes that are traditionally done manually. This approach brings efficiency, eliminating errors, duplication of data, risk factors, and compliance penalties.
This level of due diligence can potentially reduce the value of NPAs, reducing the overall cost of doing business.
Key Takeaway
Digital lending has established itself as a reliable method for accessing loans in a highly competitive scenario. The speed and streamlined user experience give it an edge over traditional processes. As more businesses and consumers seek to build a digital footprint, they will likely embrace the digital lending culture.
However, digital lenders need to strengthen their risk assessment capabilities to scale sustainably and profitably. Without closing this critical gap, lenders remain at risk of incurring financial losses due to loan fraud and the growth of NPAs. In the process, they also risk losing their reputation and potentially shutting down altogether.
Precisa’s advanced algorithms can help lenders seamlessly integrate risk assessment technology into their workflows and grow the business sustainably.
Presica’s comprehensive and seamless financial data analysis solution simplifies and speeds up the process through automation. The software provides actionable insights on a customisable dashboard, thus helping companies make informed business decisions.
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