Fintech lending values have recovered consistently in the past few quarters, outpacing the previous year’s growth by a huge margin.
According to The Fintech Association for Consumer Empowerment (FACE), a lobby group consisting of around 32 fintech lenders, the total value of loans disbursed by its members increased by around 216% in Q2FY23 in comparison to the same period last year, whereas the volume of loans disbursed has seen a 149% growth over the last year.
In Q2FY23, the total value of loans disbursed by digital lending platforms amounted to Rs 14,016 crore compared to Rs 4,435 crore in the total value of loans disbursed in the same quarter last year, FACE said in a report on Monday. The total number of loans recorded in Q2FY23 was 1.62 crore, while in Q2 FY22, it stood at just around 65.56 lakhs.
FACE further added that due to Covid-induced challenges, fintech lending has seen an uneven ride in the last two financial years with choppy business trends. However, as Covid challenges subside from Q2FY22, lenders have seen a fairly consistent journey upwards.
While ticket sizes vary and are still evolving among lenders, at an aggregated level, the average ticket sizes are hovering around Rs 12,000. Average ticket size saw a marginal annual increase of 5% from Rs 11,815 in Q2 FY22 to Rs 12,368 in Q2 FY23. “Ticket sizes vary significantly amongst lenders due to the widely different focus on products and customer segments, and we see uneven movement among lenders,” FACE said in its report.
In simple average terms, the processing fee spread (range between minimum and maximum) is 1.1% to 5.3%, while the fintech lenders on the FACE consortium charge lenders interest of anywhere between 14.5% to 38.3%. “A number of factors, including the cost of funds, operations and risk profile of customers, influence the pricing for the customers and the range is perhaps reflective of the same,” the lobby group added.
The report has data from 21 FACE members directly lending to customers either as a balance sheet lender or as a platform working with balance sheet lenders (mostly NBFCs). On the basis of an industry report capturing fintech lending volumes, we estimate that FACE members account for over 50% of the retail non-bank fintech and digital consumer lending industry.
Sugandh Saxena, CEO at FACE, said that the credit expansion witnessed in the last quarter demonstrates that the fintech industry is seizing unmatched opportunities to contribute to financial inclusion and an inclusive economy. Implementation of the RBI’s Digital Lending brings tailwinds for the industry as it sets clear rules and standards, boosting the confidence of the customers, fintech lenders and other market participants, she added. “Proactive efforts by multiple stakeholders to crack down on dubious lending apps are improving the ecosystem with greater customer trust and expanding the market for legitimate players. There is no doubt that the fintech lending industry will move forward with confidence to create innovative customer journeys coalescing customer protection,” said Saxena.