Fintech lending to youth rises 100 times in 2015-21

NEW DELHI:  Large-scale increase in the use of smartphones among the urban youth has led FinTech lenders to aggressively lend to young borrowers (below 35).  As per a report by the Centre for Advanced Financial Research and Learning (CAFRAL), an RBI affiliate, fintech NBFC lending to young borrowers has increased 100 times between 2015 and 2021.

The report titled – India Finance Report – says NBFCs and fintech lenders together account for 70% of the lending to below the 35 age group segment. Young borrowers are mainly borrowing for personal-use products and less for big ticket purchases, says the report.

With a lack of credit history and credit scores, young borrowers find it difficult to access credit from traditional banking system, and therefore, fintech NBFCs have emerged as preferred source of borrowing, especially small-ticket loans among young borrowers.

“NBFCs have been at the forefront of digital lending with banks playing a smaller role. Data on a sample of banks and NBFCs shows the share of digital lending to overall lending was 60.53% for NBFCs as opposed to a smaller 5.53% for banks in FY20. This growth is noteworthy considering the proportion of digital lending in banks and NBFCs was merely 0.33% and 0.53%, respectively, in 2016,” says the report.

Within NBFCs, fintech lenders have captured a substantial share of the consumer and retail market. As per the report, the rapid expansion in fintech lending has led to the birth of a number of fintech start-ups. Of the 14,000 newly founded start-ups from 2016 to 2021, close to half belonged to tech industry.

The RBI predicts fintech lending to exceed traditional bank lending by 2030. The report attribute the pickup in tech lending in India to the introduction of UPI, which it says has enabled an almost-universal system of digital payments and eased many logistical and geographical barriers to credit flow.

Tech-tonic shift

• Fintech NBFC lending to young borrowers has increased 100 times between 2015 and 2021
• NBFCs and Fintech lenders together account for nearly 70% of the lending to below the 35 age group segment
• Young borrowers are primarily borrowing for personal-use products and less for big ticket purchases
• The share of digital lending to overall lending was 60.53% for NBFCs as opposed to a smaller 5.53% for banks in FY 2020
• A 10% increase in UPI transactions per capita is associated with a 4.6% increase FinTech lending per capita

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