Digital Lending Business Plan A digital lending business plan outlines the strategy and operational framework for a financial services company. It specialises in providing loans through digital channels. The plan serves as a roadmap for the organisation, detailing its mission, vision, target market, competitive landscape, marketing strategy, financial projections and risk management. It provides a detailed explanation of the digital lending business model and an overview of the products and services offered. While formulating a business plan, market analysis is conducted by identifying the target market and analysing the market trends and demands for digital lending services. An Overview of Digital Lending Business Plan Digital Lending is an emerging global practice. The market size of digital lending platforms across the globe may expand to 12.1 billion dollars in the coming years. The shift in consumer demands and expectations has led to the development of alternate borrowing methods. Further, businesses have also accepted the need for customer experience as a differentiating factor. Coming to what is Digital Lending? It is a process of quick loan disbursal via electronic mode. It is an effective, convenient, and faster way to disburse loans than the traditional method. With the growing digital ecosystem and the increased use of analytics, automation and blockchain, lending financial institutions rely more on algorithms and automated processes for loan approval and disbursals. Digital Lending Business Plan Market Research and Analysis Before starting a digital lending business, it is crucial to conduct thorough market research. Market research is essential to identify the target audience, assess their needs and preferences and analyse the competition. Market research will not only help you understand the market landscape but also help you tailor your offerings and stand out. Business Plan Development Develop a well-structured business plan outlining your business model, target market, value proposition, revenue streams and growth strategies. A robust business plan is necessary to attract investors and develop your business. Legal and Regulatory Compliance Having knowledge about the legal and regulatory landscape is essential for digital lending success. Based on your jurisdiction, necessary licenses and permits are required to operate legally. Adhering to data protection, consumer lending, and financial regulations is paramount. Benefits of Digital Lending Easier access to loan Digitisation has provided access to loans easily and without physically going to the bank. An application for a loan can be made anytime and at any place. It brings convenience to the borrower, so it is widely accepted. Quick disbursement of loan Digital lending is efficient in its work, and it means it is swift in disbursing the loan to the borrower. Minimal Documentation Another benefit of digital lending is that it needs less paperwork for grant loans, and people can apply for the loan without having to file forms as in the case of banks, Easy access to loans for first-time borrowers Traditional lenders may be reluctant to grant loans to first-time borrowers, but in the case of the digital mode of lending, one can easily avail of a loan even if the borrower is a first-time borrower. Functions of Digital Lending Online Application It provides a seamless and intuitive online platform for borrowers to submit loan applications. It also uses automation to process and validate application information. User-friendly interface is used to describe the design and layout of the online application portal. Emphasis is given to a user-friendly interface to enhance the borrower experience. Credit Scoring and Risk Assessment When developing a section on "Credit Scoring and Risk Assessment" in your digital lending business plan, it is crucial to showcase how your platform will evaluate the creditworthiness of applicants and manage associated risks. Algorithms are employed to assess the creditworthiness of applicants based on various factors, including financial history and transaction data. Digital Lending Business Plan evaluates and quantifies the risk associated with each loan application. Automated Decisioning In the "Automated Decisioning" section of your digital lending business plan, emphasis is given to how your platform leverages automation to make swift and informed decisions on loan applications. Automated systems are utilised to make quick decisions on loan approvals or rejections. Loan terms and interest rates are tailored based on the borrower's creditworthiness. The goal of providing instant decisions on loan applications should be clearly stated. Documentation and Verification This section outlines how the platform manages the collection, processing and verification of applicant documents. The process by which applicants submit their required documents digitally is described. It enables borrowers to submit necessary documents electronically. Technology is used to verify the authenticity of submitted documents and information. Shared Digital Lending Services for Startups Cost-effective Our shared Digital Lending services provide cost-effective solutions for startups looking to manage their digital lending process with expert help. Expert Guidance You will be assigned a dedicated Digital Lending Partner who will provide expert guidance and support to help you make informed decisions. Flexibility Enterslice offers flexible packages that can be tailored to meet your specific needs and business goals. Digital Lending Consultancy Digital Lending Consultancy Services involve providing expert guidance and support to organisations in the financial and lending industry, particularly those looking to establish or enhance their presence in the digital lending space. Enterslice provides advisory services for setting up and managing digital lending platforms. We provide guidance on regulatory compliance and legal framework. We conduct thorough market research to identify trends, opportunities and potential challenges in the digital lending landscape. We advise on regulatory requirements and compliance issues relevant to digital lending. We also assist in obtaining necessary licenses and approvals. Key Challenges faced by lenders Acquiring customers at a low cost Customer acquisition cost has remained a deterrent and makes it harder than it appears. Customer acquisition costs run into thousands of rupees, so it is impossible to make it profitable in just one cycle of digital lending. Customer Engagement Customers do not have to engage with the lender's post disbursement, which results in complete disengagement with lenders, where lenders keep track of repayments by the customers. Most lenders have tried to offer apps and complimentary services, but very few have been successful. With low customer engagement, it is even more difficult to get the second cycle of digital lending. Lack of Continuous flow of Capital We have seen this as the starting point for major breakdowns of digital lenders in the last couple of years. This is amongst the hardest parts, and many lenders have now focused on partnering with other lenders to source their business through FLDG-based risk-sharing or co-lending. As business starts and stops due to Capital with the availability of funds, we have seen a sudden rush to disburse funds without enough focus on risk management. Lack of Collection and Credit Skills It is very clear that in lending, getting back the money is the hardest part. Credit and collections take the back seat initially, with no one in senior leadership from these backgrounds. With time and an increase in NPAs, many of these lenders tend to fix these areas. While it may work for some, it may be too late in most cases. Partnerships for sourcing Customers We have seen most customers, including Edutechs, e-commerce, taxi aggregators, etc., helping their customers get credit. It is critical for digital lenders to partner with these platforms to serve the credit needs of the customers. This not only reduces the customer onboarding costs but also helps the lenders in getting deeper insights into the customer based on the proprietary data of the platform. Disjointed/Weak Technology To build and/or implement end-to-end technology platforms, digital lenders need very strong technology leadership. This is lacking in many Digital lenders. Regulatory Compliance Services Regulatory Compliance Services outlines the strategies and measures the company will employ to ensure adherence to relevant laws and regulations. Enterslice assists in navigating and complying with financial regulations and licensing requirements. We conduct an overview of the regulatory environment in the target markets. We identify and list key regulations impacting digital lending. We formulated a comprehensive compliance framework for digital lending operations, and we clearly defined the roles and responsibilities for compliance within the organisation. Technology Solutions Technology Solutions outlines the technological infrastructure and solutions that will support the digital lending platform. Enterslice assists in selecting, implementing and optimising technology solutions for digital lending. We integrate the lending platforms with other financial systems. We describe the core digital lending platform that facilitates loan origination, processing and management. We specify whether it is a custom-built platform or an existing system is leveraged. Our Commitment to Excellence Quality Service At Enterslice, we are committed to providing our clients with top-notch service, ensuring that their financial needs are met with precision and accuracy. Our team of dedicated professionals goes above and beyond to deliver exceptional results. Client Satisfaction Your satisfaction is our priority. We strive to exceed your expectations by listening to your needs, addressing your concerns and providing personalised solutions. We value your trust and work tirelessly to ensure your complete satisfaction. Continuous Improvement We believe in constantly evolving and improving our services to stay ahead of the curve. Our team is dedicated to staying up-to-date with the latest industry trends and best practices to provide you with innovative solutions that drive success. Market Analysis Target Market Segmentation Target Market Segmentation outlines the specific groups of customers or businesses that the digital lending platform aims to serve. It involves dividing the market into distinct segments based on certain characteristics. The segmentation can be based on demographic segmentation, geographic segmentation, psychographic segmentation and financial behaviour and attitudes. We specify whether the target market includes small businesses, medium-sized enterprises or both. We identify specific industries that align with lending products for business customers. Market Trends It is important to understand the current and emerging trends in the industry. Market Trends help showcase that your business is positioned to capitalise on opportunities and adapt to market dynamics. The broader trends of digital transformation in the financial services industry are discussed. How this trend is shaping customer expectations and the competitive landscape is explained. The growth of FinTech companies and alternative lending platforms is explored. Customer Needs and Pain Points Understanding customer needs and pain points is crucial for the success of any digital lending business. It provides a detailed analysis of what target customers are looking for and the challenges they currently face. It is important to understand the range of loan amounts that customers typically seek. It is determined if customers prefer flexible repayment schedules. The need for quick loan approval and disbursement is identified. The importance of a simple and intuitive application process is addressed, and the need for mobile-friendly applications is recognised. Business Model Description of Services Description of Services sets out the specific lending products and services the digital lending platform offers its target customers. It includes a description of the features and terms of personal loans offered by the platform. It includes details of the types of business loans available, including term loans, lines of credit, etc. The minimum and maximum loan amounts that customers can apply for are also specified. Technology Infrastructure Technology Infrastructure in Digital Lending Business lays out the foundational technology components and systems that power your digital lending platform. It helps investors, stakeholders, and team members understand the robustness and efficiency of your technological architecture. It provides an introduction to the core digital lending platform that facilitates loan origination, processing and management. The design principles that govern the user interface for borrowers, lenders and administrators are described. Emphasis is given to user-friendly experiences to enhance customer satisfaction. Loan Products and Terms A detailed description of the types of loans the digital lending platform offers should be provided, along with the specific terms and conditions associated with each product. The description of Loan Products and Terms is crucial for potential investors and stakeholders to understand the range of financial solutions your platform provides. The purposes for which the customers can obtain personal loans are specified. Pricing Strategy The Pricing Strategy states how your platform will structure and determine the costs associated with the loans or financial products offered. It is a critical aspect of a business plan, as it affects revenue generation, competitiveness and attractiveness to borrowers. Whether the interest rates are fixed or flexible is specified. The interest rates compared to those offered by competitors are discussed. The factors that influence your interest rate calculations, such as creditworthiness and market conditions, are explained. Marketing and Sales Strategy Branding and Positioning Branding and Positioning articulate how your platform will establish a distinctive brand identity and position itself in the market. It is essential for attracting customers, building trust and differentiating your digital lending business from competitors. The name of the digital lending platform should be clearly stated. The design elements of the logo and other visual aspects that represent your brand should also be described. Digital Marketing Plan Digital Marketing Plan sets out the strategies and tactics the platform will employ to reach and engage with your target audience online. Digital marketing is important for creating awareness, attracting borrowers and driving customer acquisition. The demographics, psychographics and behaviours of your target borrowers should be clearly outlined. Any specific niche markets or segments within your target audience should be highlighted. Sales Channels Sales Channels lays out the various channels through which your digital lending platform will acquire and serve customers. It is important to demonstrate how your platform will reach its target audience, generate leads, and convert prospects into borrowers. The features and functionalities of online platforms where borrowers can access information and apply for loans should be described. Customer Acquisition and Retention Strategies Customer Acquisition and Retention Strategy lays down how a platform will attract new borrowers, convert them into customers and retain their loyalty over time. Such strategies are essential for sustainable growth and profitability. Some customer acquisition strategies include specific campaigns for online channels like SEO, paid advertising, and social media marketing. A content strategy should be developed to educate and engage potential borrowers. Risk Management In the digital lending business, risk management addresses the potential challenges and uncertainties associated with the operations of the platform. It demonstrates to the investors and stakeholders that the business has identified, assessed and has strategies in place to mitigate various risks. Enterslice assesses the regulatory landscape and potential changes in laws affecting the digital lending industry. We outline the compliance framework in place to ensure adherence to relevant financial regulations. We describe how the platform monitors regulatory changes and adapts policies accordingly. We describe how the platform monitors regulatory changes and adapts policies accordingly. Credit Scoring and Decisioning Credit Scoring and Decisioning is the methodology and process used to evaluate the creditworthiness of borrowers and make informed lending decisions. This section demonstrates how your platform assesses risk and ensures responsible lending practices. Enterslice specifies the key components considered in calculating credit scores. We describe using alternative data such as utility payments, rental history or non-traditional financial data. We also discuss the potential use of social media and online behaviour data in credit scoring. We explore using alternative data such as utility payments, rental history or non-traditional financial data. We outline the machine learning algorithms and predictive analytics used in credit scoring. Financial Projections Cost Structure The cost structure sets out various expenses and financial considerations associated with operating the platform. It provides insights into how the company allocates resources to different aspects of its business. It includes costs related to the development, maintenance and hosting of the digital platform. A detailed list of fixed costs associated with employee salaries, benefits, and any other compensation is provided. Capital and Funding Requirements Capital and Funding Requirements outline the financial needs of the platform, detailing how much Capital is required to start and sustain operations. It provides insights into how funds will be utilised and where additional funding may be sourced. It provides a breakdown of the initial expenses required to launch the digital lending platform and specifies costs related to developing and launching the lending platform. Financial Assumptions In a Digital Lending Business Plan, financial assumptions are the foundations for projecting future financial performance. These assumptions help stakeholders, investors, and lenders understand the underlying factors and variables that influence the financial projections. It specifies the expected growth rate for the loan portfolio over time and projects how quickly the platform will acquire new borrowers. Compliance and Data Protection Laws Compliance and Data Protection Laws are essential for demonstrating the platform's commitment to legal and regulatory requirements as well as protecting the privacy and data security of borrowers. Enterslice provides an overview of the key financial regulations that apply to digital lending operations. We specify the licenses and authorisations required to operate legally in the target jurisdiction. We also specify compliance with other regional or national data protection laws. Financial Modelling and Projections Financial Modelling and Projections are required to provide a detailed and realistic outlook on the company's financial performance. It helps investors, stakeholders, and potential lenders understand the revenue, expenses, and profitability of the lending platform over a specified period. Enterslice outlines the projected revenue generated from loan origination fees and details the expected interest income from the loan portfolio. It includes revenue projections from servicing fees charged for managing loans. We identify and project revenue from any additional fees charged. Customer Support and Communication Strategies In a digital lending business, customer support and communication strategies outline how the company plans to provide excellent customer support and maintain effective communication with borrowers. It is crucial for building trust, ensuring customer satisfaction and addressing any concerns promptly. Enterslice outlines the various channels through which customers can access support. We specify the hours during which customer support services are available. We provide details about the organisational structure of the customer support team.