How ODR is the most optimised solution for lending startups

Dhiliban Vardhrajan
March 16, 2021

With the introduction of Digital India campaign in 2015, almost all services are made available online to make every part of our lives, digitized and hassle free. People started making use of e-services line e-banking, e-commerce, e-courts, e-payment, e-shopping and benefitted from them. This increased the possibility of resolution of disputes through online platform. Even education is being imparted online in this period of COVID-19and this pandemic outbreak and national lockdown has severely affected the economy and led to salary cuts and even job losses for many working class people. In these times of financial instability, people become dependent on borrowed money to finance their living and to pay their rents, EMI and other bills. In such unprecedented times, people need ready money and so they borrow loans from financial institutions. The possibility of availing a loan from banks and other financial institutions like the NBFCs (Non- Banking Financial Companies) is less since they have stopped lending further considering the moratorium on EMIs. The only existing option is availing loans from lending fintech startups which lend money at an interest rate prevailing in the market in these tougher times. Loans from fintech companies have always been desirable because of less procedural formalities. Fintech startups are nothing but financial technology companies which form an economic industry composed of companies that use technology to make financial services more efficient. These companies are generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software. India has a growth in these lending startups in the recent times.

Startups like MoneyTap, Mobikwik, Shubh Loans and LendingKart have gained popularity and witnessed the demand of ready money. Online loans by these lending startups are treated just like any other loan from banks and NBFCs. These startups don’t ask for heavy documentation like banks and NBFCs. Like it is with any investment there is risk and you might wanna know how safe P2P lending actually is?. But when disputes arise when there are defaults in payments of the loans provided by these startups, it is important to decide which platform the disputes are going to be resolved considering the financial capacity of the startups for legal expenses. These disputes are mostly resolved out of the court through arbitration, given the small sums that are involved in the same. But while arbitration remains a cumbersome and costly process, mandating both parties to be present for hearings even at the time of COVID-19 and involving the submission of many documents, many startups opt to choose ODR to get cheaper but effective legal remedies.      

ODR (Online Dispute Resolution) is the resolution of disputes, particularly small- and medium-value cases, using digital technology and techniques of alternate dispute resolution (ADR), such as negotiation, mediation, and arbitration. While courts are becoming digitized through the efforts of the judiciary, more effective and collaborative mechanisms of resolution are urgently needed. ODR can help resolve disputes efficiently and affordably. ODR is an economically feasible process that reduces the undue cost spent on the litigating procedures and thats why ODR is more preferable.

For companies like lending fintech startups, resolving disputes through online mode would be a tailor made fit. Since fintech companies have the technical expertise it wouldn’t be of any inconvenience to them to go for ODR. The risk of pandemic is reduced as choosing ODR will relieve court congestion. It is the best alternative to exchange documents online through e-mediums and to avoid unnecessary hassle. Since the venue of proceedings is pre-decided, that is through video calls, it becomes relatively cheaper as the travel costs will be cut down and the documents need not be sent through posts and can be delivered online which further reduces expenses. The process of ODR saves time as well as efforts. On one hand, where litigation proceedings last for centuries, and ADR sessions carry on for a long time and take months to pass an award, the ODR mechanism takes only a few weeks to pass awards for the conflicting parties.

This will be completely revolutionary for startups since they cannot waste their time and resources in litigation. The growth of ODR is fueled globally, by the e-commerce boom, with millions of disputes being resolved online. Even though it is the blooming period for ODR mechanism, it has proved itself to be fruitful. Legex is one of the best ODR platforms with its product RESOLVE.RESOLVE is world’s first integrated end to end Online Dispute Resolution platform, enabling organizations to minimize their business risks and to resolve disputes, efficiently. It provides multi-layered resolution to make dispute resolution faster and more successful. Each step is built for more personalised content with technologically efficient systems and expert human interactions making it effective and efficient and it ensures complete confidentiality of sensitive and business- critical information.

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