Lending: All credit to festive season, digital lenders eye more business

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With the festive season setting in, the digital lending industry is betting big on a quick rebound in business, as consumers prepare to loosen their purse strings and merchants stock up to meet the additional demand.

While the December quarter historically sees consumer-facing businesses making the most of it, this year the fintech lending industry is on a much stronger footing to meet the heightened credit demand. ET wrote on August 4 how fintech lenders reported stronger and profitable balance sheets for the last fiscal year.

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“Over the last so many years, incidents around IL&FS, demonetisation, introduction of GST, Covid-19 and finally the digital lending guidelines had disrupted the industry, but this year we have not seen any such disruption,” said Prithvi Chandrasekhar, chief executive at InCred Consumer Finance.

InCred typically sees demand for credit go up two times during the festive season, Chandrasekhar said.

Also read | Unwrapped: Digital lending at an inflection point

For digital lending platforms, a jump in demand does not automatically convert into a corresponding increase in disbursals, but overall disbursals go up on an average of 15-20% during the festive period.

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Revenue from digital lending on the rise_Graphic_ETTECHETtech

Mumbai-based platform NeoGrowth is hoping to take its quarterly credit disbursal to Rs 750 crore during the current festive season.

“When we lend to businesses, demand builds over a two- or three-month period ahead of the festive season, because businesses need to order materials and store them. So, we have already seen some uptick between August and October and we expect 15% to 20% more business in this quarter compared to the last quarter,” said managing director Arun Nayyar.

Digital payments major Paytm, while announcing its quarterly results on Saturday, said in the next three months, it is expecting a revival in credit demand which had slowed in the last quarter. The company has partnered with a new set of lenders who will go live by the Diwali season, the company said.

Ecommerce company Amazon, which last week started its flagship sale event, said 25% of the shopping orders placed on the India platform were funded through instalments and that three out of four EMI offers were no-cost ones, where the customer does not have to pay any interest on the pay-later loan.

Also read | Digital lending disbursement volume rose 31%, crossing 2.2 crore loans in Q1 FY24: Report

Bengaluru-based fintech Axio, which powers a significant chunk of pay-later loans on Amazon, said the number of applications has doubled during the festive season compared with normal business days and the rate of loan disbursals has gone up three times. The company did not share the exact disbursal values.

MSME-focused lender FlexiLoans expects a 50% increase in the number of loan applications to a million during the festive season. Disbursements are expected to double from the previous quarter to more than Rs 1,500 crore, cofounder Manish Lunia said.

In comparison to last year, loan enquiries in recent months have shot up by 150%, said Hardika Shah, founder, Kinara Capital. Disbursement is 11% higher month-on-month, she added.

Growth of digital lending in India_Graphic_ETTECHETtech

Component manufacturers catering to consumer durables as well as automobile industries and textiles are the leading sub-sectors driving the demand for business loans.

“As consumer spending is projected to rise further in the upcoming months, we are anticipating a 20% year on year rise in disbursement this festive season,” Shah said.

A recent report published by credit bureau Experian and Digital Lenders’ Association of India said the overall digital lending volumes in the country had grown at an annual rate of 39.5% over the last decade to $350 billion from $9 billion.

Facilities like Aadhaar, digital customer onboarding and e-KYC are helping more consumers apply for credit online and use these new generation credit platforms.

Also, fintech firms are focusing on buy-now-pay-later loans which are getting lapped up by consumers at check-out points both in offline stores and online.

Fintechs are leading the way in catering to first-timers_Graphic_ETTECHETtech

While banks and NBFCs have historically dominated this segment with offers on cards for consumers and business loans for merchants, buoyed by the overall rise in digitisation of the economy, the fintech lending industry is coming of age and seeking a larger share of the credit pie.



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