How a Loan Management System can Impact Credit line on UPI Operations

According to a report by AT Kearney and Amazon Pay, 53% of consumers prefer UPI for online purchases and 25% for offline purchases. Last year, the Reserve Bank of India (RBI) had allowed banks to offer credit lines to customers through Unified Payments Interface (UPI) platform to provide a boost to digital transactions in the country. This credit line aims to enable users to access instant credit while making payments through UPI. This pre-sanctioned credit line on UPI can give a huge fillip to the credit ecosystem within the country. As more consumers gain access to instant credit, the volume of transactions will surge, creating an increased demand for efficient and seamless lending processes.  This surge will put pressure on banks to adopt a robust and scalable lending technology infrastructure that can not only handle the growing volume but also deliver faster credit approvals, better risk management, and personalised financial solutions in real time.

For banks to launch their Credit line on UPI service, they can leverage their existing core banking system or their credit card system or go for a loan management system. Each of the systems bring specific pros and cons to deliver a successful operation. However, to effectively manage large loan volumes, handle customer credit demands, and ensure a seamless loan servicing experience, banks and financial institutions need a robust loan management system.

A Loan Management System (LMS) can play a crucial role while handling the high-volume loan processing demands in a credit line on UPI environment. These systems are designed to handle a large number of loan related transactions including disbursements, repayments efficiently and accurately. With the increasing popularity of UPI and the potential growth in credit line transactions, it is essential for banks to have a loan management system that can handle the scale and complexity of a credit line on UPI operations.

A loan management system can be a core differentiator against a core banking system in the context of a credit line on UPI. While a core banking system primarily focuses on managing various banking operations, such as account management, deposits, and withdrawals, the LMS on the other hand specifically caters to the management and administration of loans.

Here are a few ways in which a LMS or a loan servicing system can bring differentiated value to the unique, high-volume needs of a credit line on UPI service:

• Loan Management: Such a system provides comprehensive loan management capabilities, allowing banks to efficiently handle the lending lifecycle complexities. By having a dedicated system, banks can streamline their loan operations and ensure accurate and timely processing of credit line transactions on UPI.
• Customisation and Flexibility: A loan servicing system can be customised to meet the specific requirements of managing credit lines on UPI. It can be tailored to handle the unique features and functionalities of the credit line, such as determining credit limits, interest rates, repayment terms, and disbursement processes. This flexibility enables banks to adapt to the evolving needs of borrowers and provide a seamless and personalised credit line experience.
• Integration with UPI Platform: A loan servicing system can be integrated with the UPI platform to enable seamless processing of credit line transactions. This integration ensures that loan-related information, such as loan balances, repayment schedules, and transaction history, is synchronised with the UPI platform in real-time. This allows borrowers to access their credit line information through their UPI apps and make payments conveniently.
• Reporting and Analytics: A loan servicing system provides a platform for robust reporting and analytics capabilities, allowing banks to gain insights into credit line performance, borrower behaviour, and portfolio risk. By leveraging data analytics, banks can identify creditworthy customers, monitor repayment patterns, and make informed lending decisions. This helps in managing credit risk effectively and optimising the credit line on UPI offering.

Credit line on UPI System – Need for Variety, Volume and Velocity

The demands on the systems managing the Credit Line on UPI service will be multi-fold, as the target customer segments will be cohorts across demography, socio-economic criteria, etc. What will be of essence is the ability of the systems to bring flexibility, adaptability, performance at scale and speed. What sets LMS apart from its competing peers is a robust platform that:

• Offers Variety: One of the key advantages of a loan management system is its ability to structure different product types, launch multiple variants.
• Seamlessly Drive Volume: It is expected that with the passage of time and adoption, the credit line on UPI will expand the credit market and drive huge loan volume transactions. This will have an adverse impact on operations where underlying systems are not able to take increased volume related loads. This is where LMS can seamlessly scale operations as business grows.
• Bring Velocity: An LMS offers inbuilt capabilities for banks to quickly configure or effect changes in the operations, as per the needs and dynamics of the market. For example, with the credit line on UPI, borrowers have the option to repay the borrowed amount in full or in instalments, depending on their financial capabilities. A loan management system can facilitate this flexibility by automating the repayment process and providing borrowers with various repayment options. This not only enhances the borrower’s experience but also improves the overall efficiency of loan servicing.

In summary, a loan management system or a loan servicing system can be a critical differentiator against a core banking system by providing specialised loan management capabilities, customization and flexibility, integration with the UPI platform, reporting and analytics, and enhanced customer relationship management. These features enable banks to effectively manage credit lines on UPI and deliver a superior credit line experience to their customers.

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