From $9 billion in 2012 to more than $270 billion in 2022, India’s digital lending market has grown. Future projections indicate that the sector will expand by 4.75x to $1.3 trillion in 2030. In an exclusive conversation with Rashi Aditi Ghosh of Elets News Network (ENN), Souparno Bagchi, Chief Operating Officer, Balancehero India, shares the insights on Fintech-NBFCs and future projections. Balancehero runs True Balance, an RBI authorised Prepaid Payment Instrument (PPI) issuing entity and emerging lending platform.
How has the year been for the company? What plans does True Balance have for the future?
For True Balance, 2022 has been a spectacular year. We served more than 1 million underserved users across 85 per cent of India’s pincodes, touching the daily disbursal volume of 10,000.
At True Balance, we have a competitive advantage because our PPI and NBFC firms are RBI-licensed. We have established ourselves as a pan-India leading digital lender providing access to credit for the underserved and unserved in the retail loans space. Therefore, through our regulated organisations, we are in a strategic position to drive and build businesses and portfolios. We are progressing in a well- deliberate manner to establish True Balance as a Neo Bank in India and a full-service financial institution in the coming years.
Why should one come to your app and what are the various product offerings, ticket sizes and trends that you have witnessed when it comes to digital lending?
Balancehero India, through its app “True Balance,” extends easy, seamless, and instant loans to the underserved and underbanked people in the country. We believe that lending as a business is also an asset-creation business. It is exciting to serve the underserved, as demand is always there and we get to play a vital role in financial inclusion in the country. Our DNA is that of fin-tech, but we lend from our own books. We offer 100 per cent direct-to-customer credit, through our key product-’ Cash Loan,” which is offered up to INR 50,000, and other smaller ticket-size loan products to promote financial inclusion in India.
Balancehero operates through True Balance, an RBI-authorised digital lending app that is backed by an NBFC called True Credits. We already serve more than 85 per cent of the pin codes in the country. The majority of our customers come from Tier 2+ cities with 80 per cent of customers between the age group of 25-40 years. All of our customers are smartphone users who are proficient in carrying out digital financial transactions. The majority of our borrowers are salaried or self-employed individuals with largely non-discretionary lending demands. Some of the trends that we witness are end-to-end automation, and hyper- personalisation which transform the overall customer experience.
Can you elaborate on the factors responsible for the meteoric rise of Indian fintechs?
India is home to over 7000 fintech companies, according to Tracxn figures, and the fintech industry is predicted to develop at a 31 per cent CAGR from 2021 to 2025, reaching $1.3 trillion.
Factors fostering growth in Indian fintech:
- Government initiatives like Start-up India, Digital India program, India Stack, E-RUPI, license for payments banks, UPI, Jan Dhan Yojana, etc. are driving growth for Fintech’s in India.
- Investments in finTech: According to a report by EY, Fintech is expected to have $1 trillion in AUM and $200 billion in revenue by 2030; fintech funding in India recorded a 3X jump last year in 2021. More than $9 billion in investments were made in digital lending in the last 5 years, and the market is expected to grow to $515 billion in size by 2030.
- Innovations & technology: The nationwide financial inclusion revolution has been fueled by the India stack and FinTech innovation. To serve the Tier 3+ market, innovative solutions are being implemented. In India, the fintech sector is utilising Big Data and AI technology for customisation, fraud prevention, improved risk detection, automated processes, and safe payments. There are currently more than 230 Web 3.0 start-ups in India, one of the first countries to adopt Web 3.0 technologies.
In India, how has the digital loan market grown?
From $9 billion in 2012 to more than $270 billion in 2022, India’s digital lending market has grown. Future projections indicate that the sector will expand by 4.75X to $1.3 trillion in 2030. According to data, by 2030, the fintech business in India will be 60 per cent dominated by digital lending. Digital lending is seeing rising consumer confidence across the nation, which is reflected in the number of loyal and diversified consumers as well as consumer involvement.
The factors fueling this growth are:
- Technological advancements: By offering individualised products, alternative underwriting procedures, first-degree risk-based pricing, and smooth, improved user experiences, fintechs have completely changed the customer service landscape.
- Consumer knowledge: Consumers are adopting digital technology and integrating it into their life as a result of the pandemic. Due to their cutting-edge offerings, quickness, agility, and flawless user experiences, digital lenders and their offerings are also gaining prominence in consumers’ eyes.
- Partnerships: This has been the Indian digital lending market’s secret ingredient. Industrial bodies and regulators have played a crucial role in developing positive paths for deliberate industry evolution.
What is your view on RBI’s digital lending guidelines? How will it impact the Fintech sector?
There will be a surge in co-lending agreements, and the demand for loan portfolio securitisation will rise as a result of the volume of loans that digital platforms will distribute. Lenders will resort to digital technologies to securitise their loan portfolios in the most effective way possible. A secure, open, and accessible digital lending environment is made possible by the RBI’s standards for online lending. Standardised disclosures will enable customers to make more informed decisions, and moreover, full transparency about the information and data that is being accessed by the lenders will truly empower customers. Since all businesses, including unregulated entities categorised as LSPs (Lending Service Providers), are accountable for adhering to these standards, we anticipate some filtering when these recommendations go into force.
Through initiatives like these, consumer protection, market integrity, and a growth- friendly environment for players are reinforced. We believe that through the new guidelines, lending platforms can gain increased customer trust and be instrumental in financial inclusion.
What is your outlook for the coming year and any emerging trends that you foresee in the fintech sector?
With fintech’s exponential growth, it has profoundly impacted financial inclusion and penetration.
Outlook: Rapid adoption of cutting-edge technology like blockchain and AI will improve the sector’s prospects. The adoption of RPA will fasten loan processes and help brands develop sophisticated data-driven AI digital lending systems thereby increasing credit accessibility
in India. Interoperability-based solutions may benefit us.
Emerging trends that you foresee in Fintech:
- Frontier technologies: Leverage AI/ ML and other frontier technologies like Distributed Ledger Technologies (Blockchain) to continue to build deep core functions / IP assets viz. Underwriting, Recommendation Engines and Optimis Company Operations / Cost Efficiencies.
- India stack evolution: India Stack’s goal is to advance social and financial inclusiveness and get India ready for the “Internet Age”. The growth of digital payments, made possible by the stack along with key enablers in areas of Digital Identity have been significant factors in expanding the serviceable market for Fintechs in India
- India will emerge as the Global Fintech Factory: The Socia-Economic Fabric of India is multi-layered. Therefore, solving for India is not just about frugal innovations but also about solving for India 1, India 2 etc.. thus, uniquely placing the Fintechs in India at the inflection point of going global be it in developed countries or, in Emegerging countries.
- Working closely with the regulator; creating sandboxes: Fintech innovations disrupt the financial sector, and regulatory sandboXes make them more agile. Fintech ‘sandboXes’ allow regulators and fintech companies to work together, mitigate risks, and develop evidence-based policy, while fintech companies can test new products and services.
- Green initiatives: Currently, only 8 per cent of fintech founders say they are in the “sustainable fintech” category. There are numerous green fintech businesses and initiatives around the world, and now India is also adopting the style.