Experian India has released a white paper titled “Small is BIG: How Fintechs are Revolutionising Lending.” The paper highlights the rapidly growing influence of fintech companies in reshaping the lending industry. The report underscores how fintech companies are providing small-ticket loans to underserved segments, using innovative technology to reach millions previously excluded from formal credit systems.
According to the white paper, fintechs have facilitated over ₹2,48,006 crore in personal loans and ₹28,607 crore in business loans as of March 2024. These loans, often under ₹50,000, are primarily disbursed to New-to-Credit (NTC) individuals, sub-prime borrowers, and those with limited credit histories. This marks a revolutionary step in financial inclusion, empowering those historically underserved by traditional banks.
Fintechs Driving Financial Inclusion
The report reveals that fintechs now command 52% of the personal loan market in India, expanding their reach into rural and semi-urban regions. For example, the penetration of personal loans increased by 24% in Bihar, 21% in Tamil Nadu, and 20% in Uttar Pradesh in FY’24 compared to the previous fiscal year. Karnataka saw a 133% increase in business loans, Uttar Pradesh grew by 118%, and Bihar by 67%. This data highlights the crucial role fintechs are playing in democratizing financial access across the country.
Managing Risk and Asset Quality
Despite the impressive growth, the Experian white paper also highlights fintechs’ challenges, particularly in managing asset quality. The Non-Performing Asset (NPA) ratio for fintech-originated loans remains higher than the industry average, signalling the need for more robust risk management frameworks. The report recommends enhanced data analytics and advanced credit scoring models to mitigate the risks associated with lending to high-risk customer segments.
Technological Innovations Fueling Growth
Technology continues to be a game-changer for fintechs. The Experian report highlights how advanced tools like artificial intelligence, blockchain, and machine learning have reduced loan approval times and improved transparency. Blockchain, in particular, is revolutionizing the loan disbursement process, minimizing fraud, and ensuring greater accountability.
Additionally, fintechs are breaking ground in green finance and agri-finance sectors, offering support to sustainable projects and small-scale farmers.
Future Outlook and Government Support
Looking ahead, the white paper forecasts that fintech could double its customer base to 200 million within three years. Key to this growth is the supportive regulatory environment, including initiatives like Digital Public Infrastructure (DPI) and the introduction of Account Aggregators and Open Credit Enablement Networks (OCEN), which have empowered fintech to innovate and scale rapidly.
Manish Jain, Country Managing Director at Experian India, remarked, “Fintech companies have made significant strides in financial inclusion, but there’s still more to be done. Collaboration between fintechs, traditional banks, and regulators will be crucial for sustained growth.”
The fintech revolution in India is only just beginning, and its impact on the future of lending is poised to be transformational. The white paper can be accessed here – How Fintechs are Revolutionising Lending.
