Banking has always been a challenge for the Indians, multiple government schemes like Jan Dhan Yojana and multiple attempts of RBI trying to reach out to the masses can be seen every year. New-age fintech companies with technological advancement in their services are trying to solve daily issues for Indian consumers and make lending seamless, affordable and hassle-free.
It has developed from physical to digital space evolving in a hybrid banking model.
In the last few years, India has seen a massive disruption in the fintech space that has brought flexibility and the versatile digital customer experience in banking and lending.
With the rapid adoption of digitization, the lending landscape in India has changed substantially. Additionally, the outbreak of COVID-19 has created a huge space for consumers and business enterprises to heighten the lending market growth.
The digital lending industry is projected to grow from $110 billion in 2019 to $350 billion in 2023, according to a report. As a result, the digital lending domain will become the highest penetration sector by digital channels in India.
Analyzing the market gaps
As per the estimates of Reserve Bank of India (RBI), the credit demand by MSMEs in India stands at $490 billion. However, the overall supply is insufficient 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 major contributors affecting the supply.
This is generating avenues for new-age digital lending platforms and NBFCs to expand in the market.
Growth drivers of digital loan apps in India
Lack of approach 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 makes it more challenging for lenders and borrowers both. Lack of formal financial data for credit assessment, time taking documentation process and long turnaround time for disbursement followed by high-interest rates.
Better smart phone penetration, improved internet penetration and connectivity accelerated by COVID-19 lockdown have improved financial accessibility. This has raised the demand and supply of consumer loans, credit cards and business loans for SMBs. To reach 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 noteworthy 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 instant need to cover the last 10 days before salary credit. However, there is a massive risk of gathering payments in digital lending solutions and zero manual intervention in the application, disbursal, and collection process. Many new-age fintech companies and startups are beating every challenge that becomes the bottleneck of their development to further transform the market like never before.
(Ajay Chaurasia is Head of Product at RupeeRedee-new-age digital lending platform)
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