The credit demand and easy availability of credit have led to a huge surge of small-ticket credit loans since the COVID-19 outbreak, experts say.
Due to the outbreak of the second wave of the coronavirus, many people faced job loss or salary cuts by their employers. To meet short-term demands such as medical or emergency expenses, purchasing health insurance policies, rental deposits, etc, Pranjal Kamra, CEO of Finology said people became adamant to take a small ticket size loan.
“People were comfortable spending on lower transactional value and further technology amalgamated with digital access helped lenders locate, reach and engage with new customers," Kamra added.
Adding to this, Kunal Gangal, Analyst - Tavaga Advisory said that first-time borrowers, particularly millennials and Gen-Z with no credit history, fuelled demand, as they found it difficult to obtain larger ticket-sized loans from traditional credit sources such as banks and NBFCs.
"Traditional lenders' reliance on formal credit history information drove more people to digital lending platforms. Unlike traditional credit channels, the fintech lenders rely less on bank statements, tax returns, credit history details, and physical engagement with customers, and instead create an ecosystem where loan disbursement was quick and seamless,” Gangal said.
Further, Anil Pinapala, founder & CEO of Vivifi India Finance said he has even observed millennials turning towards fintech for financial related worries and small-size loans.
“This is because fintech companies have been at the forefront of making financial services more accessible with instant approvals and immediate disbursements in a completely digital onboarding process. Most fintech companies that are technology-backed have gamified the entire borrowing experience where the lenders are rewarding the borrowers for positive repayment behavior. They have solved the basic problem of meaningful access to institutional credit. As fintech is expected to exponentially grow over the next 5 years, millennials and gen-z will be the foundation on which this growth will happen," Pinapala stated.
First Published: IST