Lending — some thoughts

Lending is a pricing problem
In an ideal marketplace, no one should be denied a loan. The pricing of the loan should be differential to the risk of the customer. No matter the borrower, there exists a lender willing to lend at a particular rate

Lending book optimisation is about local maxima
All lending institutions pick their customer profile and then target those. By keeping a particular target customer profile, they optimise their book within the segment. Which is why lenders dont necessarily move segments. HDFC prefers retail, Bajaj prefers retail unsecured, ICICI — corporate, NBFC1 — invoice discounting etc.
Using the same underwriting logic for every profile limits the lenders reach and thus opens the market for new niche players

Lending is about crunching down the risk
All Fintechs and new lenders try to bring a new way of crunching risk. (Some may just price it high in absence of any new risk models at start). Think risk crunching as — new proprietary data, evaluation of social graph, collection mechanism (daily PoS deduction etc).

Their paperwork is your opportunity
Biggest value of credit is when given at the right time. Process innovation is often overlooked by lenders. Ability to give loans faster is a definite differentiator. Traditional lenders are unwilling to put in the hard yards and process change required for this. Interest rates matter less than we generally presume

Lending is NOT one-way communication
Have not come across lending application process that is a dialog. There is no communication with the user on why a particular data is needed, what is the upside of sharing bank statements or PAN for CIBIL etc. Current process is — dump data and pray. There is a huge opportunity to make lending a discussion like you would do it in real-life.