Digital lending has seen a strong surge in the last few years in India’s evolving economy. The consumer lending industry has specifically grown exponentially since several businesses that process payday loans have emerged, helping people ease their cash flow challenges towards the end of the month. 

The concept of lending isn’t really new. But the digitised consumer lending industry is very attractive for startups, and for good reasons. A huge chunk of the population being internet users, the rapid smartphone proliferation, and the changing in consumerism, have stirred up the growth of lending companies in India. 

What is consumer lending

Lending companies provide short and long term loans to their customers, along with flexible schemes for them to choose from. The loan can be used towards the purchase of goods and services for personal use. 

Consumer lending companies are making financial services accessible to most consumers at affordable rates, thereby driving financial inclusion and widening the capital base of the financial system. 

How consumer lending works

There is an increased demand for consumer lending services because of the options they provide, making loans more accessible than ever. 

Traditionally, lending involves underwriting a customer, checking their credit score, assigning creditworthiness, and then, disbursing the loan amount. This process is very time consuming. The new wave of consumer lending is all about providing instant gratification to the consumer.

The entire underwriting process is automated to ensure faster disbursal of loans to the consumer through –

  • Digital channels like mobile and web applications are used so that the customers can access the company’s financial services on the go
  • Digitised data like bank account statements, e-commerce purchases, bill payment histories, and more, are fed into algorithms that determine the consumer’s willingness to repay the loan
  • Digital channels and data are used to offer their consumers faster approvals, real-time support, personalised communication, and more

Problems faced by consumer lending companies

While their underwriting process doesn’t take long anymore, consumer lending companies still face a number of challenges.

Problem: Loan disbursals are time-consuming

One of the key reasons why consumers choose lending companies over banks is for speed. Banks take longer than lending companies to disburse loans because their underwriting process is more exhaustive. But consumers prefer to have their loans processed instantly. 

The reason disbursals take time is that there are multiple stakeholders involved in the process. The lender may want to process the loan and disburse it immediately, but they have to create a list of consumers with their details, and their loan amounts in a specific format and upload it to the bank portal. And then, it’s on the bank. 

If there are any problems with the details provided by the consumer, the bank communicates with the lender. Since the Finance team plays a role in ensuring the bank processes the request, their efforts and delays get compounded. 

Solution: RazorpayX Payouts

Consumer lending companies can make one-off or bulk loan disbursals without having to rely on bank portals or banking hours. RazorpayX Payouts allows disbursals upon adding beneficiaries without any cooling period, and without a cap on the number of beneficiaries. 

With UPI and IMPS enabled disbursals, consumers don’t have to wait long periods to receive their loan.  The shortest time before API banking came into play where the loan disbursal process could be manually carried out was 3 hours. 

Today, we are at 30 seconds with RazorpayX.


Apart from quick loan disbursals, RazorpayX also helps with account validation before disbursement and intelligent error code mapping.

[ Suggested read: How Businesses can Simplify Payouts ]

Problem: Transaction failures

After the loan is approved, the disbursal happens like any other transaction. A bank faces several challenges that can impact the transaction.

Downtime – All banks have their own downtimes in place. Some of these are scheduled ones, while others are unscheduled.

Incorrect data – If the account details provided by the consumer are incorrect, the transaction eventually fails.

Solution: API banking

Powerful APIs that are easy to deploy and integrate banking with payment infrastructure should be the way to go to reduce transaction failures. 

The use of API banking is popular all over the world. With APIs, consumer lending companies can have more flexibility to provide the best features and services while keeping their costs low, and ensuring the transactions go through easily without any manual intervention. 

Today, RazorpayX helps many top consumer lending companies process their loans in under 30 seconds. 

Problem: Month-on-Month collections

Many consumers pay back their loans through EMIs, especially if they opted for a long term loan. Lending companies have to ensure that the repayments take place in a timely manner. 

This becomes quite a big problem if not automated.

Solution: Razorpay’s product suite

Razorpay provides several instruments that achieve timely loan repayments. Along with API integrations, consumer lending companies can use E-mandate and reduce operational costs of managing month-on-month collections.

Technology has drastically changed the way lending is carried out. With more and more digital lenders on the rise, Razorpay aims to tackle all the challenges the consumer lending industry faces. 

Currently, Razorpay powers some of the market leaders in the consumer lending industry like Capital Float, MoneyTap, CASHe, Kissht, and more.



Harshitha is a marketer at the future-forward RazorpayX. She has an insatiable love for travel and culture, rock music, and the work of Neil Gaiman.

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