Fintech companies, the driving force behind the adoption of digital payments in India, are turning their attention to the underserved credit market of the world’s fastest-growing major economy.
Because of the low cost and last-mile connectivity fintechs offer, credit is seen as an appealing area for them to pursue, Industry leaders at the Global Fintech Festival in Mumbai told CNBC. A credit-product rollout through the Unified Payments Interface will be the next big wave of digital transformation, they added.
The credit market offers opportunities that are more than “double” the size of the payment market in the country, Sameer Nigam, founder and chief executive of Walmart-owned PhonePe, told CNBC.
In the financial year that ended in March, UPI transactions touched 314 trillion rupees ($3.2 trillion), with PhonePe and Google Pay accounting for more than 70% of the transactions, according to the National Payments Corporation of India. Paytm is the third-largest UPI transaction platform, while Meta’s WhatsApp Pay was in the eighth spot and Amazon Pay was 12th, July data showed.
Credit through UPI
On Thursday, at the Global Fintech Festival, Tiger Global-backed BharatPe unveiled a product called BharatPe Flex that gives users a pre–approved credit line of up to 60,000 rupees for UPI payments across online and offline merchant transactions.
“We see a significant opportunity to make formal credit more accessible to consumers,” Nalin Negi, chief executive of the company, said at the launch.
Only 15% of adults in the country have access to formal credit, against a global average of 24%, Deloitte said in a report in June, adding that over 85% of micro, small and medium enterprises relied on “informal, usurious financing.”
But data generated from digital transactions and services is improving access to credit, with fintechs leading the charge, especially when it comes to unsecured, small-sized loans.
The demand for small-sized, unsecured loans is rising in India, and fintech companies with their high customer reach and convenience have “cracked the model,” Vipin V., managing director and partner at BCG, told CNBC.
As the footprint of digital payments and services has increased, more data is now available on customers that can be used to weigh the risk of lending to previously underserved customers, he said.
Transaction data from UPI, purchase history from e-commerce websites, and geolocation data that assess the economic profile of the locality of the customer are helping fintechs conduct online due diligence for these digital loans, he said.
Small business loans
On Tuesday, during his speech at the Global Fintech Fest, Indian Prime Minister Narendra Modi urged fintech companies to increase the “share of non‑payment transactions,” with the same speed and scale they had shown with payments.
He underscored that providing access to capital and credit to micro and small enterprises would increase the country’s economic activity.
Amazon Pay, which has access to millions of sellers and consumers via its e-commerce platform, sees digital lending as a big opportunity in India. It currently has over 10 million customers in India who are using its “pay later” services.
“Digital credit presents a massive fintech opportunity,” Vikas Bansal, chief executive officer of Amazon Pay, told CNBC, adding that the company plans to expand “friction-free consumer credit” across its ecosystem.
Smaller cities in India such as Coimbatore, Surat, Nagpur, Indore, Prayagraj, Ranchi, Ghaziabad and Ludhiana were the “strongest centers of digital credit adoption,” as per a study released by Amazon Pay on Thursday.
By CNBC