India’s Digital Economy: How Fintech is Revolutionising Loans and Payments

Owing to deep smartphone penetration and globally low data rates, more and more Indians are now part of the nation’s fintech story. Fast, cheap, transparent, and secure are buzzwords no more, but they are quickly becoming a reality for a growing section of the population. 

In fact, Sanjiv Bajaj, one of the best fintech leaders in India and Chairman & Managing Director of Bajaj Finserv, highlights that “The digital world is breaking old monopolies and driving competition because consumers have choices”. He says, “Today, financial technology or Fintech is changing how we earn, buy, spend, and invest. Fast adoption of technology is pivotal to financial inclusion with Fintech as the biggest support in strengthening a country’s economy.”

Top fintech leaders agree the digital landscape flourishes when there is a synergy between technology, regulatory affairs, and customer behaviour. Unthinkable less than a decade ago, today, customers enjoy everything from instant working capital loans for MSMEs to financing for retail purchases in less than 60 seconds. So, what factors underlie India’s massive fintech revolution, and what might be in store for 2023 and beyond? 

Here are 3 major fintech trends revolutionising loans and payments.

  1. Companies leverage tech to adopt new-age lending models

Since digitisation and automation entered into BFSI, companies and customers have benefitted from easier ways of dealing with credit. Fintech greatly impacts the cost to process transactions, for instance, with fewer human interactions required and the removal of brokers. But the fintech revolution doesn’t end at automation and lower costs. Fintech industry leaders are intent on remaining agile and creating customer-focused products.

Think of Buy Now Pay Later (BNPL), a product pioneered by brands like LazyPay, ZestMoney, and Simpl. The idea of availing short-term credit for 2-4 weeks and paying little-to-no interest resonates with India’s young demographic. While offering convenience to customers, BNPL promises merchants higher purchase volumes and earns on merchant fees. For Simpl’s CEO Nitya Sharma, BNPL is “our gateway to the internet-first way of buying and selling”.

The idea of having a digital EMI Card for consumer durables, travel, healthcare or groceries is becoming mainstream. The Sanjiv Bajaj-led Bajaj Finance, similarly, revolutionised the way consumers purchase everything from TVs and refrigerators to smartwatches and clothes with No Cost EMI financing. According to data from quarters 1 to 3 of FY23, Bajaj Finance projects 3-3.5 lakh EMI cards being acquired on their app and 2-2.2 million digital EMI cards being acquired. 

  1. Customers benefit from data-enabled loan underwriting

On the customer side, perhaps the biggest revolution fintech brings to lending is in the loan acquisition and underwriting process. For many, this proves to be an insurmountable hurdle. Lending companies need to assess a customer’s risk before issuing an approval, and many customers simply do not have enough means to prove their creditworthiness. Fintech players are now changing the game with eKYC and alternate data sources – like social profiles, phone usage, and utility payments – upon which they can perform data analytics and glean insights. 

With more data on hand, financial leaders are working towards customised products. Bajaj Finance, for instance, has over 30 credit products spanning categories like consumer, SME, commercial, and rural. According to national data, digital lending is on the rise in Tier II-IV cities, which indicates Fintech’s ability to power financial inclusion. 

Once a customer uses a fintech platform, the company can analyse data to make loans available. For instance, India now has close to 450 WealthTech start-ups. Based on a customer’s behaviour, any of these can cross-sell loan products with a reduced need for credit assessment. 

  1. Government powers public architecture for a digital economy

India offers its fintech sector a powerful public architecture by means of the “India stack”. UPI, eKYC, Aadhaar, PAN, and DigiLocker are all digital infrastructure’s components that give fintech a competitive and level playing field. In India, any tech company can blossom into a fintech company. Simply consider the rise of PayTm from being a mobile and DTH recharge platform to a digital supermarket with forays into insurance, travel, wealth management, and more.

While UPI is a major disruptive force in India, more is on the cards in the form of ONDC and account aggregators. The Open Network for Digital Commerce (ONDC) aims to decentralise e-commerce in India and create a UPI-like effect in this sector. With ONDC, buyers and sellers can transact even if they are on different platforms. This may present a massive opportunity for fintech players to promote their lending services. Meanwhile, the account aggregator framework enables financial inclusion by means of democratising access to financial data stored in one place.

Thanks to the interplay of technology, customer needs, and regulatory decisions, fintech’s growth in India is fast and furious. This ties in fintech with the observation of the best leader of the year Priyanka Brahmbhatt who said, “Fintech is integrating itself into our lives, more intimately with each passing day.” The goal, then, for fintech leaders is to ride the tide and anticipate the disruptions of tomorrow.

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