By Arjun Harindranath
Two years after demonetisation in India, the amount of credit available to the Indian consumer remains low as a surging middle class looks to spend more on goods that had previously seemed unaffordable. Digital lending, which works in conjoint with traditional banks, hopes to change that by putting in place easy processes to ensure those without credit histories aren’t left behind in the new economy. But how far can digital lending go in India?
“A billion people are coming online faster, and more aggressively than they ever have anywhere in the world,” Lizzie Chapman of ZestMoney said recently, noting the potential in a country where many have gone from no internet to unlimited 4G coverage. “We saw a huge opportunity eight years ago to completely automate lending. And nobody in India was doing that or thinking about it at that time.”
Chapman was speaking last week at a panel canvassing India as a hub for foreign companies DisruptBerlin organised by TechCrunch in Berlin. The cofounder of ZestMoney has been in the country for nearly eight years, and their platform can now be found across 4000 cities in India and has found powerful backers like Xiaomi.
Newer fintech platforms are now aiming to be sleeker and more data-driven than traditional banks, which often use cumbersome and overly onerous methods to establish creditworthiness when giving out loans. Over the last decade many other digital lending platforms like Kissht, Capital Float, Faircent and Telr have popped up to harness the potential of this space.
In addition to allowing individuals access to loans that they may not otherwise have, digital lending also applies to smaller businesses within the retail sector. In a growing segment–worth up to $100 billion for MSMEs by 2023 according to a new report by Omidyar Network–the focus has been on the customer journey and their user experience in taking out loans through digital lenders.
By way of example, Chapman referred to the curiosity of how many Indian customers would ring up, unnerved about how easy and quick the process was in taking out loans. “And so we got this funny thing where pretty much after every application the customer would call up and say, Did that really happen? Am I actually approved? Is it that smooth? Is it that quick? They just wanted to talk about it.”
This is not to say that digital banking won’t come across its own roadblocks. British lender Wonga, which had been in India as well, is a case in point as it strapped borrowers with exorbitant interest rates and has subsequently collapsed. In a country which has the very real concern over suicide threats over unpaid debts, digital lenders will look to tread carefully in a space that will require a firm and clear regulatory framework.
Arjun Harindranath is a freelance contributor and editor of The Tech Panda.