Credit and Finance for MSMEs: Fintech-led digital lending is expected to surpass traditional ways of lending by 2030 owing to the surge in the unsecured small-ticket size segment and their venturing into asset-backed products, finds the white paper “Fintech-led Digital Lending: Coming of Age” by information services firm Experian India in collaboration with the Digital Lending Association of India (DLAI).
The uptake of digital lending is on the back of quick turnaround time for credit applications and making lending products accessible across the country, the report said. However, the post lending procedures such as collections have still not been digitised and are dependent mostly on physical interventions resulting in an increased delinquency rate and lower rollback.
The report suggests that in order to thrive in the lending space, fintech companies will also need to expand into asset-backed product segments, which are currently dominated by traditional players. To enable this, digitisation of land records and properties, field verification of borrower authenticity, and collection digitisation are areas that will need investment.
The research also noted that fintechs are motivating the traditional lenders to accelerate their digital transformation journey and a result of that is the rise of co-lending partnerships between banks and fintech players that leverage competencies of both stakeholders.
Since, fintech and new age NBFCs cater to the small ticket segment, they have reported higher application fraud incidences due to which they need to focus on strengthening their compliance, cyber security, and other business critical functions as they may come under regulatory supervision, suggests the report.
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