Financial technology companies (Fintechs) in India are recalibrating their lending strategies, shifting from high-yield, unsecured loans to a blended portfolio that includes secured lending—a move aimed at lowering the cost of capital and improving credit quality, Yashraj Erande, global leader, fintech; India leader-financial institutions at Boston Consulting Group (BCG) said.
By introducing secured loans into their portfolios, fintechs can present a lower-risk asset mix to investors, enabling access to cheaper funding and more sustainable growth, he said.
“This is the point where new players are focusing on more profitability, better quality of lending, controlling cost, not spending a lot of money to acquire new customers. This is a period where they are becoming more mature in the business world,” Erande said.
Tirtha Chatterjee, principal at BCG also said that fintechs are focussing on improving their collection models. “Lenders in the fintech space are also looking at how to build core capabilities like collections, so the thought process on being and functioning in a sustainable model is happening,” Chatterjee said.
According to the data shared by them, the revenue growth, which stood at 56% last year slowed to 16%—a significant deceleration, though still outpacing the broader BFSI industry. They said that founders of fintech companies, focused on profitability, with over 80% now claiming either break-even status or a clear path to it, up from just 30–40% two years ago.
Investor sentiment, while tempered by past valuation corrections, is showing signs of recovery, Chatterjee said. Capital inflows have increased over the last four quarters, though exits remain a challenge. With India’s M&A exit value at just 1.5x IPO value—compared to 17x in the US—unlocking domestic capital and building a vibrant acquisition ecosystem are critical next steps, he added.
On the question of whether banks are seeing tangible gains from their technology investments, Chatterjee said, “We’ll have to wait and see how it ultimately reflects in the bottom line.”