Digitisation in home loans
Shopping for groceries, hunting for gifts, getting repairs done at home, booking tickets for the next weekend getaway, or visiting your banker—almost every aspect of life has now been revolutionised by the advent of the digital age. The lending space, too, is rapidly progressing on the digitised route. There has come a realisation that the processes that have remained long and tedious over the years, have to change, become more flexible and convenient. Imagine returning home after a long day at work, not having got the time to drop by to the mortgage branch and excruciatingly delaying the process to get your home loan by another day. Today, one can from the comfort of their home, sit back, conveniently avail and get a home loan approved, all within a morning and afternoon.
Lenders, be it banks or non-bank finance companies (NBFCs), understand the market dynamics—that while data indicates the rising demand for housing, there is also an increase in demand for convenience, and speed. There is also a visible shift in demand from the more affluent, younger, convenience-seeking consumer. The expectation is that in nearly 24 months, the bulk of home loan applications would be online.
If we go back, say, even by a decade or so, home loan seekers would have to make multiple trips to the lenders’ offices, starting from the initiation of the loan, and through the duration of loan management. Just the approval would take anything between 20 days and a month. While things got better over the years with timelines being reduced to a between a week and 20 days where applications for the loans would be online, along with facilities of doorstep service and fulfilment, and one branch visit, manual entry of data, and physical documentation was still fairly inconvenient, and at times erroneous.
With the move towards conducting the entire process digitally, the industry as a whole can benefit greatly, including mortgage financers and customers.
As the industry catches up to the pace of the world and starts pre-empting the needs of its customers, everything from the loan application, to the submission of documents, to the know-your-customer (KYC) process, to loan disbursal to the seller, or builder, can take place online. Companies have realised that there is an opportunity wherein a tremendous amount of paperwork can be avoided. Document management systems, which help store documents automatically and allow central access to everyone in credit teams, reduce the credit appraisal process and add to the effectiveness of housing finance companies. Looking at the lack of time that prospective customers have and the greater emphasis on convenience, many companies are exploring the possibilities of an entirely end-to-end process that is not only paperless but is vastly shorter.
As the housing finance industry adopts greater digital support, information is more easily available. Customers who would earlier have limited access to information, or would not be able to review key clauses and the overall loan process; are now privy to the entire system since every step can be brought online. More so, almost all housing finance companies have introduced mobile applications that keep customers updated with not just what stage their loan application is at, but also making the entire loan management more fluid. In essence, digitisation of the process holds the potential to make things completely transparent.
To make this paradigm shift a reality, serious efforts from both the government and lenders, have been taken and will need further commitment. Technological advancements, be it the help from National Securities Depository Ltd (NSDL) for real-time permanent account number (PAN) verification and eKYC that has helped in faster authentications, or Unique Identification Authority of India (UIDAI) and the Centre for Development through Advanced Computing (C-DAC) for e-signing facility, and authentication using one-time password (OTP) has helped in cutting down paper and time.
However, consumers from the older generation, who are weary of the online interface due to frauds and lack of technology awareness, possibly need more education on how the processes work. And even for those who are existing digital consumers, there is much to be desired when it comes to internet speeds. But with increasing internet penetration, there is a definite step up.
While digital loans are productive for customers in numerous ways, lenders can also benefit as they would be able to maintain a leaner organisational structure, which would bring down the cost of loans for them. The computerised data collection would also help in analysing the customer better, and turn cross-selling services to customers. E-sign, which is considered by the government to be part of the Sarfaesi Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act), will make sure that loan recovery is possible in case of non-performing assets.
However, this is not all. Moving ahead, convenience for the consumer is likely to move to the next level. Companies and consumers would be able to interact not just through traditional modes of customer care, and emails, but through chat bots and video conferencing.
Ashwini Kumar Hooda is deputy managing director, Indiabulls Housing Finance.