Fintech companies have captured a 52% market share in personal loans, according to a report released by Experian India on Tuesday. The report noted that these companies have facilitated over Rs 2.48 trillion in personal loans and Rs 28,607 crore in business loans as of March 2024. These loans, often under Rs 50,000, have primarily been extended to New-to-Credit (NTC) individuals.
Fintech firms could potentially double their customer base to 200 million within the next three years if they continue to innovate and overcome current challenges, the report added.
The penetration of fintech into rural and semi-urban areas has grown significantly. The penetration of personal loans has increased by 24% in Bihar, 21% in Tamil Nadu and 20% in Uttar Pradesh in FY’24 compared to FY ‘23. For Business loans, the growth rate is 133% in Karnataka, 118% in Uttar Pradesh and 67% in Bihar for the same period.
The penetration of fintech into rural and semi-urban areas has grown significantly. The share of personal loans increased by 24% in Bihar, 21% in Tamil Nadu, and 20% in Uttar Pradesh in FY24 compared to FY23. For business loans, the growth rate was 133% in Karnataka, 118% in Uttar Pradesh, and 67% in Bihar during the same period.
“The fintech revolution in India is just beginning, and there’s enormous growth potential. Fintech companies have already made a big impact by providing credit to those who need it most, but there’s still more to be done,” said Manish Jain, country managing director, Experian India.
Fintechs have higher penetration in segments with low credit access such as Women, New To Credit and customers with sub-prime Bureau scores.
The report further stated that while fintechs have successfully catered to high-risk segments, the Non-Performing Asset (NPA) ratio for fintech-originated loans remains higher than the industry average. This highlights the need for fintechs to strengthen their risk management frameworks, particularly when dealing with overleveraged customers.
“Asset quality worsened in FY23, reflected in an increased slippage ratio, but is expected to moderate in FY24 as the vintage curve plateaus, indicating that the worst may be over,” noted the report.
The adoption of the latest technologies and tools has enabled fintechs to significantly reduce loan approval times. Blockchain technology, in particular, is highlighted as a game-changer, enhancing transparency and reducing fraud in loan disbursement.
Moreover, the report points out that fintechs are leading the way in sectors like green finance, to support sustainable and environmentally friendly projects. Similarly, fintech companies have made significant inroads into the Agri-finance sector, helping to support millions of small farmers.
The white paper suggests that improved data analytics and more robust credit scoring models could help mitigate these risks.