Fintech-led digital lending will surpass traditional lending by 2030 on account of a growth in the small-ticket unsecured segment, according to a study conducted by information services provider Experian India.

With the growth in fintech lending and some of the companies becoming systemically important, the co-lending model will likely become the predominant operating model in India, as traditional lenders will collaborate with digital lenders. The co-lending model will also receive a boost from the attractive MSME space as fintech lending to the sector is typically to companies with credit scores of higher than 700, the report said.

The research found that fintechs have significantly reduced geographical disparities in the credit supply, and the growth in the space was aided by better customer experience and smaller turnaround time in processing credit applications.

“Traditional lenders have always dominated asset-backed lending. With increased digitisation, this segment may become accessible to fintech lenders, allowing them to capture a sizable portion of the lending pie,” Saikrishnan Srinivasan, MD, Experian Credit Information Company of India, said.

The agency has said fintechs need to improve risk and fraud prevention as challenges on this front will increase. The data ecosystem is likely to explode with proliferation of open data, but fintechs need to harness that facility while the frictionless experience offered in the unsecured loans space needs to be expanded to new products, the report said.

Recently, the government reportedly blocked 94 loan apps with links to China and alleged involvement in money laundering and sent a list of digital lending apps to be taken off from the Google Play Store. The government is readying a framework to facilitate secure digital credit to small and micro businesses as per the regulations of the Reserve Bank of India, information technology minister Ashwini Vaishnaw has said.

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