How has Technology Redefined MSME Lending?

Differentiated underwriting, customized offering, flexibility, and fewer criteria for MSME loan eligibility are but a few reasons that make NBFCs a better choice for small organizations. Findings revealed that NBFCs demonstrated the lowest turnaround time for MSME loans which fell from 24 days in 2014 to 18 in 2018. (Stats from Economic Times)

As the most dynamic and promising sector today, MSMEs need easy, quick access to credit. With over 60 million MSMEs in India and a lending potential of 100bn that banks are unable to meet, they are forced to turn to informal sources of credit to finance their needs. There’s a wide gap between the demand and supply of credit in the MSME sector and NBFCs are well on their way to bridging it.

Technology and its uses have seeped into every industry across the board, each to different extents. The NBFC sector is no exception. Whether it’s the digitalization of documentation for paper-free processes or harvesting intelligence to deliver an exceptional, seamless experiences. The time has come for the leaders of change to adopt and implement technology to improve efficiency, accuracy, and speed and deliver value to their customers.

Against all odds, public deposits in NBFCs increased from $293.78 Mn in FY09 to $4.95 Bn (INR 319.05 Bn) in FY18.(sourced from Inc42, link mentioned) And, it might just have been the new financial technologies being leveraged that are responsible for this growth. Many NBFCs are strategically targeting this underserved market and leveraging technology to meet their needs. Let’s find out how tech is changing the MSME lending landscape:

Risk assessment

In the past, NBFCs depended on collateral and physical documentation to assess the creditworthiness of a small business. The birth of the internet and the domination of technology today has facilitated access to a wide range of formal and informal sources of data. It draws a clearer picture of the small business’ financial standing and allows financial institutions to assess their eligibility and take a call on whether the application should be approved or denied. This gives small businesses, with little to no formal proof of profit, the chance to become credible borrowers.

Documentation has gone digital, and processes online. While the migration of data to the cloud helps improve accuracy and speed of response, it inadvertently opens the organization up to a number of cyber threats. NBFCs must take the security measures necessary to safeguard their customer data, while they optimize the use of tech to simplify risk assessments and other operations.

Loan application process

Gone are the days when MSMEs needed to fill out a multi-page loan application or be present at a fixed location. Financial services technology has simplified the process to the extent of a few clicks. Additionally, it has the capacity to identify potential shortcomings related to the repayment of the debt and takes a call on whether to approve or deny the loan, almost instantly. The repayment process has also been simplified through the usage of UPI payment gateways that lets you pay both the principal and interest online.

Earlier the options available to MSMEs were limited by location, collateral, time, interest, etc. Technology gives customers access to lenders that were once out of their geographical reach and vice versa. NBFCs can now reach rural markets and provide services to the financially weaker and unserved markets like never before.

Challenges Faced

Technology is no longer the way of the future, but the way forward today. NBFCs that fail to recognize this critical shift, run the risk of extinction. Transformation is not possible overnight, it takes years of planning, implementation and course correction. There are a number of challenges faced by NBFC on the journey towards a digital tomorrow, some of which include:

Capital Intensity- Digitalization is a capital-intensive investment that a number of NBFC are unable to afford or unwilling to create a budget for. Many of them fail to see the potential impact and fear that it might be a risk too big to take.
Time and Man-power- Transformation is a time and effort consuming process that some NBFCs are unable to accommodate.
Stability- The NBFC market is currently in a state of influx, where most players are at a loss about what to do next.
The changes mentioned above have simplified processes, boosted the flow of credit and enhanced the overall loan experience for the MSME sector. It has also allowed financial institutions to launch MSME schemes that are customized to meet their needs. As one such NBFC, Capri Global is dedicated to empowering them with the finances to sustain and grow their businesses.

The contribution of the MSME sector to the GDP of India and the lending they receive from NBFCs, are both undeniable. Technology has become the stepping stone into the future and NBFCs that want to not just survive but win down the line have no choice other than walking the tech tight rope.

How will Artificial Intelligence change our lives in next 5 years.

This is particularly true of the business sphere. Many firms already use AI algorithms to process big data and automate simple tasks. And the trade dispute between the United State and China is highlighting the importance of artificial intelligence in commerce. In this article, we will explore the important ways AI will change the way businesses operate between 2018 and 2023. Within the next half-decade, AI will…

Become Practical for the First Time
First, the once science fictional will become increasingly affordable. That means that more and more tech startups will use AI to both streamline their workflow and increase their margins.

But the change will be subtle, almost too subtle to notice. At least at first. Many of these AI innovations will be compatible with existing infrastructure, meaning that the change will be slow, and yet impactful.

That raises a question: how will your business incorporate AI into its existing systems? And, perhaps more importantly, what systems will you use? Ideally, your firm will do its due diligence in finding the right systems. Be aware that there will be a wealth of new automation tools coming out in the next five years. Be on the lookout for ones that will be particularly useful to you.

It will…

Not Do Away With Work, but Make It More Productive
There has been a kind of moral panic with regards to AI potentially replacing human workers. But the history of automation teaches us that for every job replaced by technology, new ones take their place. In the short term, there is not a threat of human workers being completely overshadowed by robots. Blue-collar -and some white-collar- workers will be pressured, but re-training in hi-tech can alleviate some of this.

Your firm should have a robust training system in place for educating workers about how to use and fully utilize AI. Otherwise, you risk paying a premium for talent that is already familiar with the system you use. Reducing the tedium of simple yet repetitive tasks. This allows workers, management, and ownership to focus on big-picture tasks that can’t be automated.

In the next five years, AI…

Won’t Be Perfect
It may not come at you with a sawed-off shotgun on a motorcycle, but artificial intelligence will have flaws. Humans are still in the early stages of practical AI. Autonomous cars sometimes crash. Data isn’t always presented in an intuitive way. And some of Whole Foods’ woes came from an automated delivery system that was faulty. During the next five or so years, some major kinks will have to be worked out of administrative AI.

In terms of your company, it will pay to have an in-house professional -or team of professionals- who can fix, debug and improve on AI systems. Failing that, make connections with companies who can train your employees to use these systems in a cost-effective way.

Lastly, new AI will…

Revolutionize Mobile App Development
We are already seeing automated customer support bots integrated into apps. In addition, digital assistants are taking some of the legwork out of everyday operations. More importantly, AI will make user interface more friendly and also provide customer data trends. These data trends will allow managers and owners to make better-informed decisions in response to consumer demand.

The science of mobile app development will be both quantitatively and qualitatively improved. All this because of the introduction of machines capable of learning. Firms should appreciate the magnitude of this shift in app development and prepare for it by seeking out the most innovative systems.

AI’s Promising Short-Term Future
In sum, it would be foolish to ignore AI as the most promising development in web app development and information technology. Just as politicos are pressuring the United States government to invest in AI, we advise you to reap AI’s potential dividends by preparing for its homecoming.

Basic Web Application Testing FAQs

Web application testing is testing the applications that run on browsers, for faults and bugs. There are several aspects that are focused on during the process and it consists of different types of testing. You may or may not choose to go ahead with all of the components, depending on the type of product and its requirements. When you initiate yourself into it, there are certain questions that may come up in your mind. Here are the top 3 questions, along with their solutions.

Question 1: What are the components of web application testing?

Answer: Similar to QA on other platforms, web application testing consists of the following components, and each one caters to a different aspect of the application.

a] Compatibility Testing: Determines application’s level of compatibility with the other system elements.

b] Usability Testing: Checks the level of user-friendliness of the app.

c] Database Testing: Checks the coherence of the data or information that is displayed on the app.

d] Security Testing: Checks the app for possible security flaws and gaps in data security.

e] Functional Testing: Verifies the level of functionality of the app.

f] Performance Testing: Compares the app against a pre-defined set of performance requirements.

Question 2: What are some key scenarios of security testing?

Answer: It is about ensuring optimum security of the users of your app. While the scenarios may differ, based on the features and functionality of your app, here are few common scenarios that you need to verify:

Web page containing sensitive user data, such as passwords and payment details, is HTTPS enabled.
Encryption of the sensitive information, such as passwords and payment info.
Login with old password is disabled once user sets a new password.
The ‘View Source Code’ function is disabled on HTTPS pages.
The user account gets locked if the wrong password is entered for the specific number of times.
The session values are in encrypted format.
Question 3: Which tools to use for great results in automated web application testing?

Answer: Today, you have several tools in the market that are designed for projects of varying complexities. Here are 3 tools that me and my team have personally used, but you can try other tools that offer similar range of features.

a] TestComplete: Developed by Smartbear Software, it is an automation platform allows QA team to create & execute test cases for Microsoft Windows, Web, Android, and iOS applications. It runs on Microsoft Windows OS. It offers an open and flexible architecture.

Learn more: https://smartbear.com/product/testcomplete/overview/

b] QARA Test: Developed by The Digital Group Inc., it is a Selenium based automation tool that supports different browsers and platforms. It evens offers a Chrome extension for easy recording of test cases on your browser. With JIRA Integration, it is the ideal tool for complete test management.

Learn more: http://www.qaratest.com/

c] Katalon Studio: Built upon Selenium and Appium, Katalon Studio is a great automation tool for web apps, as well as mobile apps and API. It comes with a set of features to handle UI testing. Developed by Katalon LLC, it comes with an IDE interface.

Learn More: https://www.katalon.com/

Hope you found the solutions helpful. The more you practice automated web application testing, the more you learn. If you have any queries, please share with us in the comments section below.