For MSME borrowers seeking business loans, those with credit scores higher than 700 are catered to more by fintechs than by other lenders, paving the way for the co-lending model to flourish, the research said.
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).
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Experian India analysed 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 fintechs to reach a higher degree of maturity and amalgamation of core competencies.
The research found that fintechs have 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 a vastly different profile and expectations than those currently in place.
While digital lenders have responded well to automating the credit decisioning process and enhancing the onboarding experience, the evolving landscape will challenge the fintech companies in the next wave of growth.
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For MSME borrowers seeking business loans, those with credit scores higher than 700 are catered to more by fintechs than by other lenders, paving the way for the co-lending model to flourish, the research said.
Saikrishnan Srinivasan, managing director, Experian Credit Information Company of India, said, “Our research delves into how fintech-driven digital lending can help bridge the credit gap in India. Traditional lenders have always dominated asset-backed lending. With increased digitisation, this segment may become accessible to fintech lenders, allowing them to capture a sizable portion of the lending pie.”
Siddharth Mahanot, chairperson, 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 fintechs with traditional lenders.
In a similar vein, big technology organisations will also play a greater role. However, as fintechs become systemically important in catering to credit demand, they are likely to come under greater regulatory supervision, and need a significantly higher investment in compliance, cyber security, and other business critical functions.
Fintechs will also need to focus on funnel optimisation for sustainable growth. In this respect, portfolio monitoring and cross-selling will assume a lot of importance.
