Fintech Digital lending sector is growing rapidly in India, with estimates showing that it would reach $350 Billion (₹29.14 Lakh Crores) by 2023’s end.
As technology currently sees several enhancements with the roll out of data-driven AI, machine learning and others, financial institutions are leveraging the best out of it. The so called, fintech companies and banks switch onto digital infrastructure to ease the financial lending process, ultimately to widen their customer-base.
Indeed, the Indian government and regulatory authorities have strongly supported the advancement of digital lending. “Digital India” notion of the country is in its fast-pace and is seen as immense potential for banks and financial institutions to delve into and drive in people.
Fintech in India
Fintech sector of India is undergoing rapid evolution as people have been accustoming to digital-space for every need and want. Likely as shopping and food-orders, applying loans also gets into the list, where people started preferring online-mode or digital space for applying loans.
A survey by Way2News of 2 lakh participants, reveals that 70% of people apply for loans via mobile-apps despite high interest rate (which goes up to 27%).
Prime reasons for this are the ease of applying and approval of loans rather than traditional way of heading to banks, influence of technology and changing consumer behavior.
Apps such as PaySense, Aditya Birla Finance Limited, IndusInd Bank made the process of availing loan simple and smooth, where customers are disbursed with the amount in 1 or 2 days. Digital lending platforms have started to leverage the hot-technologies such as artificial intelligence, machine learning and big data analytics to assess the creditworthiness of potential borrowers and to mitigate the risks of lending practices.
The digital lending sector is expected to reach a market capitalization of nearly $350 billion by the close of 2023, from $270 billion in 2022. With a 29.6% YoY estimated increase, India’s fintech digital lending sector has a steady CAGR of 39.5%.
Consumer Behavior changes
The bloom of Fintech lending platforms can be attributed, in part, to the changing preferences and expectations of borrowers. Digital age and its facile and seamless services influenced borrowers’ behaviors to go with the fintech’s hassle-free lending experience and quick disbursement processes.
The demand of fintech services steadily increases, majorly driven by younger customers aged below 40. Young generation is increasingly seeking loan products and services that are tailored to their unique financial circumstances.
80% of digital lending landscape is covered by 31-40 age group people, followed by 26-30 age group. Indeed, the sector has seen a 16% rise in young borrowers of 21-25 age group, with disbursed amounts surging by over 50% from FY22 to FY23, according to Fintech Association for Consumer Empowerment (FACE) report.
As India’s digital lending market likely to hit $515 billion (₹42.88 Lakh Crores) by 2030, banks and other finance companies adapts to the digital way, primarily targeting on urban individual consumer segment and MSME sector.
In fact, the size of total lending market in India is at ₹174.3 Lakh Crores ($2.078 trillion) as of March 2022, with a 11.1% YoY growth, CRIF reports. People seldom hesitate for loans – 67% of Indians take personal loans to meet fund requirements.
Do you prefer digital space or traditional banks for personal loans?
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