Channel Partners And Digital Lenders: Together Works Better!

A slew of alterative lending companies are swiftly disrupting the Indian financial services sector. While it is utterly true that working capital is the most crucial requirement of SMEs, it is a struggle for them to meet their business needs due to inconvenient processes of financial institutions. Digital lending companies are therefore, leveraging the power of tech to bridge gaps in the way traditional banks function and make capital easily accessible to nascent businesses. As per a recent research report, there are about 500+ fintech companies in India who have collectively attracted over $1.4B in funding since 2012 till late 2015. The deep impact and potential of alternative lending space can be easily estimated by this massive investment figure.

While alternative lending companies are mushrooming at a breakneck pace, they are also dealing with several challenges in their way. The poor state of internet penetration in India is inhibiting alternative lending firms from reaching to a large number of small businesses in tier II and III geographies, who are in need of immediate financial help. Despite funds being accessible on mobile apps, many SMEs are unaware about the facility, plainly because of lowly infrastructure. Therefore, they are unable to take advantage of these conveniences to grow their business.

This is where channel partners with deep regional presence and well-entrenched ties in a certain segment can play a significant role. Channel partners allies with companies to help them in selling their products, services, or technologies through a co-branding relationship. In this process, they also help companies enlarge their customer base. Channel partners know their niche consumer segments deeply and have expertise in engaging with them. They can have diverse interests and could be distributing multiple financial products like Home, Auto or Personal loans, Credit Cards, Investment products like Life Insurance, Mutual Fund, etc. Regardless of the domain, they help businesses in enhancing its reach and foraying into newer demographics. Since channel partners have strong relationships with SMEs in their regions, they can be key in introducing alternative lending companies to new potential customers.

Channel partners already have a strong presence in specific geographies and markets. With the help of their extensive range, they can help digital lenders tap these segments effectively. They can connect SMEs within their network to these digital lending facilitators and create an eco-system of mutual benefit. In fact, channel partners themselves are innovating extensively today to stay relevant and deeply engaged with their customers. They are leveraging the power of mails and text messages to connect. They also hold awareness programs and activities in the business community or industrial area of a city. Through these initiatives they can inform their existing customers about digital lenders and their services. Through this, digital lenders broaden their customer base while more and more entrepreneurs are able to take advantage of easy and competitively priced access to capital for their business.

Let's take an example of Jagmeet, who runs his small business in Tangra, a village in Punjab. He wants to expand his business but is unable to do so due to lack of working capital. He has limited knowledge about mobile apps that could help him access loan, while sitting at home. Unfortunately, even the digital lender is unable to reach him directly owing to weak infrastructural support. Amidst this scenario, Jagmeet receives a SMS informing him about an opportunity to avail collateral-free working capital finance. Without giving a second thought, he immediately calls back on the number and receives instant help from the channel partner. Subsequently, he not only gets connected to the digital lender but is also assisted throughout the process of loan disbursement. Here, the channel partner has acted as a facilitator between the lending company and Jagmeet, which ended financial woes for the latter.

In this process, benefit that channel partner derives is manifold. Firstly, he is able to strengthen his relationship with those SMEs. Secondly, he gets referred by those SMEs in their community which opens new avenues of business for him and lastly, he earns a referral fee from the alternative lender for every business that he is able to materialise. The entrepreneur, of course, enjoys the advantage of quick and easy loan application, approval and disbursal while the digital lending company is able to widen its reach.

In this manner, channel partners can have a very significant impact in the overall endeavour to provide financial assistance to small and medium enterprises in India. They can help extend advantages of efficient use of technology to emerging ventures across the country, thereby bringing many SMEs under the fold of financial inclusion.