Finsire’s Post

The Evolution of Tech Stacks in Lending Lenders have perfected the art of delivering a seamless digital experience to their borrowers, particularly through applications. This progress was especially evident 2019 onwards, and unsecured lending saw exponential growth. Securing a personal loan got so convenient that a first-time borrower could have money in their account within five minutes—all through a digital process. This development marked a significant achievement for the financial sector in perfecting the Loan Origination System (LOS) stack. However, a new challenge emerged: the Loan Management System (LMS), the front-end interface that lenders use to manage loans post-origination. While robust LMS platforms exist for unsecured lending, the same cannot be said for secured lending. Many in the industry are still grappling with the complexities of scaling LMS solutions to accommodate secured loans. Here are some key challenges: 1) Collateral Management System (CMS): When collateral is involved, an ancillary tech stack—known as the CMS—becomes essential within the LMS. Collateral has its own unique challenges, especially when dealing with assets like mutual funds, stocks, or debt where market values fluctuate daily. 2) Flexibility in Collateral Management: Features like top-ups and top-downs add further complexity. The system must provide the flexibility for borrowers to pledge additional collateral or unpledge assets as needed. 3) Varied Credit Instruments: The landscape of secured credit instruments is still evolving with term loans and overdrafts being most common. Newer instruments such as credit on UPI, secured credit cards, and other secured financing options are still in development. 4) Integration Challenges: Seamless integration between LOS, LMS, and CMS remains a hurdle, as few players in the industry have mastered all three. By FY 2025, I anticipate that infrastructure for an integrated secured lending system will have overcome these challenges altogether. At Finsire, we are actively seeking industry insights to further enhance these systems, ensuring that India has a resilient and comprehensive end-to-end secured lending technology stack.