Alternative lending startups changing traditional lending in India

Startup companies are starting to rewrite traditional lending ideas in India. One such company, MoneyTap, uses a chatbot-based loan application system to give customers real-time loan processing and wire loan funds to customer accounts as quickly as possible, independent of time of day, weekends and holidays. Another company, Kissht, works to provide collateral-free loans to customers for retail purchases. Operating similar to the idea of a credit card, Kissht is used more as a payment instrument than as a revolving credit line (as is the case in the United States).

In total, there have been a dozen-odd such startups attracting investors in recent months in India. This is due to banks having enormous interest rates for personal loans, the huge unbanked population in the country and the availability of digital data. Most of these new startups leverage technology-based algorithms and software integrations to derive credit scores that use 500-800 points of data (as compared to around 30 used by credit bureaus). This enables these startups to not only provide better offers to customers and offer credit to a wider spectrum of people but also grant loans more quickly. In fact, at least 60% of the customers using these new startup services have been granted loans in 10 minutes or less.

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