BENGALURU: Despite the pandemic, unsecured retail finance has steadily grown at nearly 25% over the past three years (FY19-FY22), and semi-urban markets have been the primary source of growth for unsecured retail lending products with about 32% CAGR in Tier-4 regions, says a new report.
According to Bain & Company’s India Fintech Report 2022: Sailing Through Turbulent Tides, short-term, small-ticket consumer loan products grew rapidly as a preferred mode of consumption financing. Additionally, equated monthly instalment (EMI)-based credit card propositions are gaining traction in the small-ticket-size segments.
It saw the emergence and scale-up of convenience Buy Now Pay Later (BNPL) such as Simpl and LazyPay, affordability BNPL (e.g., ZestMoney), and card-based lending products. However, the report says recent regulations restricting Prepaid Payment Instruments (PPIs) from offering credit lines and the new digital lending guidelines will adversely impact the current business models of these players, especially card-based lending and BNPL players providing a revolving line of credit.
With the RBI expected to set up a fintech division, regulatory oversight on consumption financing, specifically led by fintechs such as DLAs or loan service providers (LSPs) and on fintechs more generally is expected to increase, going forward. The report also says that currently accounting for nearly 7% of India’s $1.4 trillion Financial Services EV(Enterprise value), the fintech sector is expected to grow to $350 billion in EV by 2026, representing nearly 15% of FS market cap.
Also, digital lending apps accounted for more than 60% of loans disbursed by NBFCs in FY21. As far as funding is concerned, Indian fintechs witnessed record investment and deal activity, receiving approximately $10 billion in funding across more than 580 deals in FY21, which was three times the $3.5 billion received in 2020.