Why Banks and NBFCs Are Rapidly Adopting Digital Lending Solutions

In recent times, digital lending and technology have led to a revolution in loan processing and made loan origination and loan approvals much easier and faster. Digital lending is the practice of offering loans online rather than through traditional, in-person methods. Borrowers can apply, have their loan approved, and receive funds through websites or mobile apps. Lenders transfer funds directly to the borrower’s bank account, and borrowers repay the loans online. This digitization eliminates the need for physical paperwork, accelerates the lending process, and makes lending more accessible.

Banks and NBFCs are increasingly adopting digital lending solutions to work more efficiently, save money, and provide a better customer experience. Automation, machine learning, and artificial intelligence have allowed financial institutions to do better loan management and create loan products that fit each customer’s needs.

The digital lending market size is estimated at USD 507.27 billion in 2025, and is expected to reach USD 889.99 billion by 2030, at a CAGR of 11.9% during the forecast period (2025-2030). Digital lending platforms offer various types of digital loans, including personal loans, business loans, payday loans, and mortgages. These digital solutions have reshaped the lending business, and the convenience and effectiveness of digital lending services continue to drive adoption.

In this blog post, we will explore how banks are using digital lending solutions to streamline loan application processing. We will also discuss the benefits of DigiKred as a next-gen, scalable, and modular digital lending solution designed for Indian financial institutions.

How Does Digital Lending Work?

The process to obtain a loan from traditional sources is complicated and takes too long due to physical paperwork and visiting branches of Banks or NBFCs. This process is time-consuming and challenging for those needing quick money.

A digital loan platform seeks to simplify this ‘end-to-end’ loan process by fully automating and digitizing it. This is how digital lending solutions function:

• Step 1: Application Process

  Digital lending solutions provide an entirely online application process. Borrowers need to fill out and submit an online form. This may include offering information such as their employment type, source of income, and other specific details. Borrowers are also required to submit minimal documentation to enable background checks and verification to ensure they receive loans on time.

• Step 2: Approval

  The next step is approval, which uses advanced machine learning models and algorithms to study and analyze the borrower’s data. These algorithms perform risk assessment and creditworthiness checks. Banks and institutions utilize digital lending solutions that focus on these algorithms. They help determine whether a loan request should be approved and what terms should be assigned to an applicant.

• Step 3: Disbursal Process

  Digital lending solutions provide for a more easy disbursal process, as compared to traditional lending. Borrowers are issued the proceeds a few days after the funds are received. It is a fast and convenient process that provides borrowers with quick access to critical funds. And the best part of all is that even the loan repayment process is entirely online, and repayments are handled through online lending software.

Benefits of Digital Lending Solutions

Digital lending solutions are transforming banking by making the loan process faster, more efficient, and more accessible. As digital lending evolves, it will continue to change how financial services are delivered, increasing financial inclusion and improving loan processes.

• Speed

  Traditional lending has a lot of paperwork and delayed approval times. Digital lending platforms leverage automation and data analytics to accelerate processes. Algorithms make quick credit assessments, resulting in speedier loan approvals and disbursements. Lenders process more loans, and borrowers get their money faster.

• Accessibility

  Digital lending, which can be accessed online via smartphones and other devices, promotes financial inclusion. Digital lending solutions can reach more people and provide accessibility to those in remote areas that regular banks might overlook. Digital lenders look at many different types of information when deciding whether to give someone a loan. This helps people who traditional banks might reject get access to the credit they need.

• Cost

  Digital lending solutions save money by using automation and data analytics instead of manual processing. Digital lending solutions cost less to run because they don’t need as many physical bank branches or employees as regular banks. These savings mean that banks can offer better interest rates and lower fees for borrowers.

• Customer experience

  Digital lending platforms provide a user-friendly experience. Borrowers can apply for loans, track applications, and manage repayments online or via mobile apps. They also have 24/7 access to financial services and the ability to apply for a loan from anywhere.

• Innovative services

  Digital lending solutions have led to innovations in the loan process, such as peer-to-peer lending platforms that connect borrowers directly with individual lenders (often at better rates), or microloans for specific short-term needs. This increased innovation and competition from digital lenders pushes regular banks to offer more types of services too.

• Regulatory changes

  The rise of digital lending solutions has led to new regulations to protect consumers and ensure financial stability. For example, the Reserve Bank of India issued new guidelines on digital lending in 2022, requiring the disclosure of interest rates and a cooling-off period during which borrowers can repay loans without any penalties. Regulatory changes do present challenges, but they also give digital lenders a chance to shape future financial regulations.

Advanced Technologies Used in Digital Lending Solutions

The advancements in technology have had a major impact on digital lending solutions, making banking services more convenient, efficient, and innovative. Digital lending within banking has the following technologies in common:

• Machine Learning (ML) and Artificial Intelligence (AI)

  offer tailored insights, recognize patterns, and make predictions by processing huge volumes of data. AI-powered chatbots serve customer care, virtual financial planners make personalized suggestions, and machine learning programs identify online banking fraud.

• Blockchain and Distributed Ledger Technology (DLT)

  Initially developed to support cryptocurrency, these technologies are now used for secure and transparent banking operations. Blockchain and DLT allow for secure cross-border payments, smart contracts, digital identity verification, and better remittance and settlement processes.

• Biometric Authentication

  It improves security by using fingerprint, facial, and voice recognition methods. In mobile banking apps, they are used for logging in, authorizing transactions, and verifying identities.

• Robotic Process Automation (RPA)

  The purpose of robotic process automation is to remove repetitive tasks as well as attain efficiency in operation. It is applied in various areas such as customer onboarding, data input, and compliance checks.

• Data Analytics

  Banks can analyze customer behavior, preferences, and spending patterns by using advanced data analytics tools. Also, data analytics is applied in marketing strategies, developing products, credit scoring, and risk assessment.

• Cloud Computing

  Cloud technology provides banks with the ability to store and analyze data in secure environments to scale their operations and provide services to customers across various devices. Furthermore, it facilitates collaboration between departments and branches.

• Chatbots and Virtual Assistants

  Chatbots powered by AI provide customers with real-time assistance, answering queries, processing transactions, and guiding them through the banking process.

• Application Programming Interfaces (APIs)

  APIs provide various software systems with the ability to communicate with each other. With APIs, third-party developers can build new financial apps and services.

• Virtual Reality (VR)

  Virtual branch tours, property walk-throughs, and interactive financial education are all examples of immersive banking experiences banks can offer using VR technology.

Future Trends in Digital Lending Solutions

• Embedded finance

  Lending will become more embedded within goods and services we use every day, making access to credit faster and easier for both consumers and businesses at the point of need.

• Open banking

  Open bank initiatives will also place more power and control in the hands of borrowers, enabling them to share their financial data securely with multiple lenders to secure a better loan.

• Greater competition

  Fintechs and neobanks will further rival traditional lenders as another choice for customers, forcing innovation and improved customer experience.

• Hyperpersonalisation

  AI and customer data will enable lenders to develop extremely personalized loan products and terms that help consumers meet their specific financial objectives.

• Instantaneous loans

  Loan approvals and disbursals will be as good as immediate, given technology and automation.

• Improved security

  Digital lending platforms and borrowers will have better risk management options due to biometrics, AI-powered fraud detection, and other advanced technologies.

• Financial inclusion

  Digital lending will help more people get loans, especially those in rural areas who don’t have easy access to banks. Banks can optimize their services through omnichannel platforms to reach such groups.

DigiKred: Offers Complete Digital Lending Solutions

DigiKred from Biz2X is a loan origination system engineered to address the unique operational needs and regulatory demands of Indian banks and NBFCs:

• Time-tested scale: Originated loans worth INR 9,000+ crore and counting, and on-boarded banks and NBFCs have achieved a loan book growth of 30-50% YoY.
• AI underwriting: Real-time auto-approval on pre-qualified applications with the flexibility to tailor high-risk rules and scenario modeling.
• Secure strength: Completely E2E secured integrations, biometric entry, and continuous compliance audits.
• Customized for you: Batch handling, lawyer dashboards, for cued servicing, co-lending dashboards, embedded lending for marketplaces or e-commerce.
• Market-leading onboarding: White-label digital experiences so financial institutions can deliver branded, seamless borrower experiences.

Book a demo today for complete digital lending solutions.

FAQs About Digital Lending Solutions

• What are digital lending solutions?

  Digital lending in India refers to the loans facilitated through online platforms and digital channels, bypassing financial institutions. It involves the use of technology such as mobile apps, websites, and data analytics to simplify the lending workflows, from application to disbursal.

• Is a digital loan safe?

  The main risks involved in taking digital loans include high interest rates, hidden fees and charges, data privacy and security concerns, and the possibility of falling into a debt trap if not repaid on time. It’s important to thoroughly research and understand the terms and conditions before borrowing.

• Why is digital lending the future?

  Digital lending revolutionized banking by quickening the loan process, making it more accessible and efficient. It also lowers the cost and enhances customer experience through innovative financial products that minimize the hassle. That’s why it will not be incorrect to term digital lending as the future of finance and banking.

• What is the loan origination solution?

  A loan origination solution is technology that helps financial institutions generate loan documentation in a way that complies with regulatory and internal requirements. Banks and credit unions usually install loan origination software on their local servers or access it through a cloud-based platform.

• What is the difference between LMS and LOS?

  LOS handles the initial stages of the loan lifecycle (application, approval), while LMS (Loan Management System) manages the loan throughout its entire lifecycle, including servicing and repayment. LOS automates the process of getting a loan, while LMS manages the loan after it’s been given out.