Fintechs Lead Digital Lending Revolution: Report

A recent report by the Fintech Association for Consumer Empowerment (FACE) highlights the significant role of fintechs in driving financial inclusion in India's personal loan market. The report, titled "Fintech Personal Loans," analyzes data from 71 fintech NBFCs over a six-year period (April 2018 - March 2024).

Key Findings:

• Market Share Surge: Fintech NBFCs sanctioned nearly 9 crore loans worth Rs 98,111 crore in FY 23-24, capturing a significant 65% of the loan volume and 11% of the loan value in the personal loan market. This is a substantial increase from their 30% volume share and 4% value share in FY 18-19.
• Financial Inclusion Champion: Fintechs are making credit more accessible, with borrowers coming from 717 districts across 35 states and UTs. Notably, over a third of borrowers hail from Tier III cities and beyond, highlighting the impact on underserved areas.
• Younger Generation Focus: Over two-thirds of the loan value by sanction in FY 23-24 went to borrowers under 35, indicating a strong focus on the growing young population.
• Responsible Growth: Fintech loans are witnessing a rise in ticket sizes, credit bureau vintage, and risk profiles. More than half of the sanctioned value comes from borrowers with larger ticket sizes (> Rs 50,000), longer credit history (5+ years), and mid-to-low credit risk.
• Serving the Underserved: Fintechs cater primarily to the aspirational mass market with an annual family income of Rs 3-12 lakhs. While the average ticket size is around Rs 11,000, with half the value going to loans under Rs 50,000, the overall composition is diverse, reflecting a focus on smaller loans as well.
• Improving Portfolio Quality: The industry demonstrates a commitment to responsible lending with a delinquency rate (DPD 90+) of just 3.5% in March 2024.

Industry Leader's Perspective:

Sugandh Saxena, CEO of FACE, emphasizes the importance of responsible innovation and data usage to build customer trust. He highlights the need for a supportive regulatory environment and continuous technological advancements to ensure the industry's sustainable growth.

Report Significance:

This report underlines the crucial role of fintechs in expanding financial inclusion and making personal loans more accessible to a wider segment of the Indian population, particularly the youth and those in Tier III cities and beyond. While the industry shows promising growth and responsible practices, continuous focus on innovation and responsible lending will be critical for its future success.