Fintech companies have rapidly adopted the lending space in India, particularly in the personal loans segment. According to a white paper titled “Small is BIG: How Fintechs are Revolutionising Lending” by Experian, it is mentioned that fintechs have reached a leading share in the small personal loan market, with a share of 52% as of the end of FY24 (page 28). This remarkable growth is due to their ability to provide quick and easy credit access, especially to those new to credit or with limited credit history.
The document also states that “Fintech majorly operates in smaller ticket Business and Personal Loans. Fintech has a higher penetration in segments with low credit access such as Women, New To Credit/Bureau Thin and customers with sub-prime Bureau scores”
Fintech companies have tremendously helped both urban and rural areas by making personal loans accessible and convenient. States such as Gujarat, Maharashtra, Tamil Nadu, Bihar, and Uttar Pradesh comprise more than 50% of the share in loans availed in small amounts for personal purposes. Thereafter, Bihar, Tamil Nadu, and Uttar Pradesh witnessed the growth of around 24%, 21%, and 20% respectively in fintech markets. That indicates that fintech firms are doing very great business across urban cities with new loan propositions to a large number of customers.
The paper also points to different opportunities in MSME and Green technology, MSME remains a lucrative segment with a credit gap of $530 billion. Fintech can address these gaps through innovative solutions like blockchain-based vendor financing and digital credit assessment models.
Fintech also has an opportunity to enter into the emerging market of Electrical Vehicles (EVs), the potential size of the EV financing market by 2030 will be around INR 3.7 lakh crore ($50 billion) making it a promising sector to target.
The document notes that certain micro-segments, like customers with multiple personal loans, show a high incidence of delinquency, which poses a challenge for fintechs. Manish Jain, Country Managing Director of Experian India, mentions that “higher risk is also largely priced” and that fintechs must reassess segments with high incidences of delinquency, like customers with multiple personal loans.
The future of fintech lending seems bright but requires careful navigation. Fintechs should focus towards more sustainable growth by focusing on new product segments like green finance, agriculture finance, MSME lending, and education loans.
As Manish Jain points out, “Adoption of technology is in the core DNA of fintech and the extended use of the same will enable the next wave of growth.”
In a nutshell, fintechs have revolutionised the personal loan market by making credit more easier, especially in both urban and rural areas. They must, however, address challenges around asset quality, regulatory compliance, and cybersecurity to build a sustainable and inclusive lending ecosystem.
To read more on White paper by Experian, click here
