With technological advancement in the fintech industry, new-age fintech companies are trying to solve daily issues for Indian consumers and make lending affordable, seamless, and hassle-free.
Banking has always been a challenge for the Indians, multiple government schemes like Jan Dhan Yojana and multiple efforts of RBI trying to reach out to the masses can be seen every year. With technological advancement in the fintech industry, new-age fintech companies are trying to solve daily issues for Indian consumers and make lending affordable, seamless, and hassle-free.
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It has evolved from physical to digital space resulting in a hybrid banking model.
In the last few years, India has seen a massive disruption in the fintech space that has brought agility and the versatile digital customer experience in banking and lending.
With the rapid adoption of digitization, the lending landscape in India has changed drastically. Additionally, the outbreak of COVID-19 has created a huge space for consumers and business enterprises to push the lending market growth. According to a report, the digital lending market is projected to grow from $110 billion in 2019 to $350 billion in 2023. As a result, the digital lending sector will become the highest penetration sector by digital channels in India.
Analyzing the market gaps
As per the estimates of The Reserve Bank of India (RBI), the credit demand by MSMEs in India stands at $490 billion. However, the overall supply is scarce from formal sources standing at $192 billion. The estimates of demand and supply suggest there is a huge credit gap of $330 billion that banks and other conventional financial institutions are not able to serve. Lack of credit history and documentation is one of the biggest contributors affecting the supply.
This is creating avenues for new-age digital lending platforms and NBFCs to grow in the market.
Growth drivers of digital loan apps in India
Lack of access to finances and consumer-centric lending solutions has always been cited as a challenge to businesses and consumers. Old school financial institutions and banks are reluctant to grant loans further creating more challenges to both lenders and borrowers. Lack of formal financial data for credit assessment, lengthy documentation process and long turnaround time for disbursement followed by high-interest rates.
Better smartphone penetration, improved internet penetration and connectivity accelerated by COVID-19 lockdown have improved financial accessibility. This has increased the demand and supply of consumer loans, credit cards and business loans for SMBs. To meet the market demand, app-based lending solutions are continuing to grow dramatically while driving the overall growth of digital lending solutions.
Lending has seen a dramatic evolution in the last few years from Home, Auto and Personal loans to Consumer loans for shopping, medical emergencies, Buy Now Pay Later and short-term loans for an immediate need to cover the last 10 days before salary credit. However, there is a huge risk of collecting payments in digital lending solutions and zero manual intervention in the application, disbursal, and collection process. Many new-age fintech companies and startups are overcoming every challenge that becomes the bottleneck of their growth to further transform the market like never before.
The author, Ajay Chaurasia, is Head of Product at RupeeRedee. The views expressed are personal
(Edited by : Anshul)
First Published: IST