The fintech revolution is likely to spur digital lending in India, which is expected to surpass traditional avenues of lending by 2030. This will be driven by deeper inroads being made in the unsecured small-ticket size segment and the secured collateral-based high-ticket size market, according to the latest white paper, Fintech-led Digital Lending: Coming of Age, by Experian India in collaboration with the Digital Lending Association of India (DLAI). Experian India analyzed the role of fintech-led digital lending in reducing the credit gap, which drives credit coverage and financial inclusion.
The research provides key predictions on the digital lending landscape till 2030, providing valuable takeaways across the digital lending ecosystem, including the digital lending industry, key stakeholders, and regulators. As co-lending becomes the predominant operating model in India, more traditional lenders will collaborate with fintech to reach a higher degree of maturity and amalgamation of core competencies. The research found that fintech has significantly helped reduce geographical disparities in the credit supply.
The Indian credit market has undergone significant changes over the last few years, and this trend is likely to accelerate further in the near future. The research highlights that the next 100 million customers are likely to have vastly different profiles and expectations than those currently in place. While digital lenders have responded well to automating the credit decision process and enhancing the onboarding experience, the evolving landscape will challenge the fintech companies in the next wave of growth.
For MSME borrowers seeking business loans, those with credit scores higher than 700 are catered to more by fintech than by other lenders, paving the way for the co-lending model to flourish, the research said.
Siddharth Mahanot, chairperson, of the knowledge committee, DLAI, said, “With the release of this whitepaper, we are excited to offer a comprehensive look into the impact of fintech-led digital lending in India. This report represents our joint efforts with Experian to assess the impact of the digital lending ecosystem.” The white paper added that open data will become wider in scope, creating a level playing field for fintech with traditional lenders.
Similarly, large technology corporations will play a larger role. However, as fintech becomes more systemically important in meeting credit demand, it will be subject to increased regulatory scrutiny and will require significantly more investment in compliance, cyber security, and other business-critical functions.
Fintechs will also need to focus on funnel optimization in order to achieve long-term growth. Portfolio monitoring and cross-selling will be critical in this regard.