The Fintech Industry is catering to the consumption needs of individuals through personal loans.
Key Highlights
- Personal loans taken for consumption are driving the growth of Indian Fintechs.
- Around 79% of loan originations through Fintechs were of value less than INR 10,000.
- Wider adoption of UPI and embedded credit have played a key role in the rise of Fintech lenders.
A recent report by TransUnion CIBIL has revealed that the growth of the Fintech Industry in India is linked to the ongoing digitalisation of the economy and the consumption needs of individuals.
The report, titled ‘The Rise and Evolution of India’s Digital Finance’ estimates that in FY 2022-23, the loan originations through the Indian Fintech Industry were approximately INR 1107 billion (USD 13.3 billion), within which the share of personal loans was around 64.5 per cent.
It also reveals that the portfolio of Fintech lenders is hugely dependent on personal loans, which hold a share of 54.2% as compared to 23.4% held by business loans.
Due to the lower ticket size of such loans, the report contends that Fintechs are rising with the growing volume of such loans which reflects that the loans meet the consumption requirements of the borrowers.
This is corroborated by the data provided in the report, which reckons that the volume of consumption loan originations through Fintech lenders has risen 15 times from FY 2018-19 to FY 2022-23 with a CAGR of approximately 98 per cent.
What has helped the Fintech Industry to grab the market share in personal loans for consumption?
According to the report, penetration of digital finance through UPI and embedded credit is one of the factors that has led to the Fintechs possessing a humongous share of personal loans provided for consumption purposes.
Several e-commerce platforms provide the option to ‘Buy now and pay later’, which fuels the growth of Fintech Lenders functioning in that space.
Interestingly, around 79% of loan originations through Fintech lenders are of value less than INR 10,000 and 12% of loan originations have a value between INR 10,000-25,000.
This, the report postulates, has been made possible with the wider adoption of UPI transactions across sectors and geographies, providing the necessary infrastructure for the development of embedded credit.
The developing use cases of UPI payments have culminated in India having the third largest Fintech Industry in the world, with the industry poised to create value worth USD 400 billion by 2030 according to another report.
