Digital Lending: Top trends to look out for in 2022

The pandemic has accelerated digital transformation across financial services and products at both ends of the spectrum. Experts say, on the one side, consumers are getting more used to digital platforms, while on the other side, service providers such as banks, NBFCs and fintech platforms are also rapidly transforming.

Siddharth Mehta, CEO, Freecharge says, “With increased digitization and formalization, Digital Lending in India has seen a steady rise and if properly regulated, will scale up significantly and sustainably shortly. While 2021 started slow, it eventually picked up with several digital lending start-ups and NBFCs paving the way, catering to new to bank, new to credit and the under-served population, thus resulting in surge concerning unsecured lending.” Additionally, high internet penetration coupled with robust technological advancement has provided the required impetus to strong financial inclusion and growth.

Having said that, he points out “there is more room for innovation across the spectrum of products within lending, savings, and investments.”

Industry experts say, that Indian consumer behaviour has also seen a monumental shift over the past decade. The middle class is becoming aspirational and is looking at means to help them acquire products and experiences, which is where the BNPL offering comes into play, as it is helping bridge the gap between Aspiration and Affordability.

Mehta adds, “In 2022, the ‘Buy Now Pay Later ‘offering, which is revolutionizing access to credit, will see massive adoption, including uptake in the EMI product category. Digital lending has the potential to gradually become the new normal and can pave the way for a huge growth opportunity for the Indian eCommerce sector as well.” The consumer readiness will further propel this space and truly add value to the digital consumer consumption narrative.

Digital lending, experts believe will undoubtedly rise in the next few years, with loans to small and micro enterprises seeing a massive increase. “The factors crucial to the growth of the lending and banking services to the SME sector will be a better collaboration amongst banks/NBFC’s and fintech and digital adoption by SME’s. The partnership between banks/NBFC’s and Fintechs will help scale the ability to provide these segments loans starting from as low as Rs 1000 completely digitally along with the ability to also collect them digitally and seamlessly,” says Mehta.

He further adds, “Additionally these partnerships will help build alternate data-based underwriting for these segments considering that structured data for most of these segments are not easily available.” A clear example of this is the flow-based lending that has started, this lending utilizes the transaction data processed through the UPI QR at these merchants to assess the size of loan that can be given.