The year 2021 was crucial for the evolution of the Indian consumer credit segment. Catalyzed by circumstances induced by the pandemic, the credit scenario witnessed a massive transformation, with digitized operations taking centre stage.
Madhusudan Ekambaram, Co-Founder and CEO, KreditBee and Co-Founder, FACE says “The significant factors influencing the trend were increased demand, a borrower-friendly approach by lenders, reduced paperwork in the application process, and high availability of credit. This reflected a greater emphasis on the traits of convenience and quickness by borrowers while availing loans, which has been aptly served by loan service providers. This has been made possible by low overhead cost and use of effective technology.”
According to industry reports, the credit demand was dominated by personal loans, also evident from the fact that they constituted over half, by value, of the digital loans given by banks. Further, experts say the nature of credit preference also witnessed changes with an increased demand for small-ticket loans and services like Buy Now Pay Later (BNPL). While BNPL loans had less than 1 per cent share by value, the credit tool accounted for 37 per cent share of the number of loans.
Ekambaram says, “Considering the momentum of personal credit growth, one can only expect the trend to follow an upward trajectory. 2022 fiscal will certainly witness further technology integration coupled with more effective credit products. Digital cards have demonstrated the operational capability to mirror the success which BNPL showcased. The innovative tool is more scalable and resonates well with the universal case of purchases.”
It is seen that with the rise in demand and operations, there is a greater focus on safeguarding consumer interest. For instance, experts believe the recent regulatory actions by the central bank as well as formulation and operations of entities are indicators of the healthy growth the ecosystem aspires to achieve.
“The degree of scrutiny in the segment will further witness an upsurge in 2022, considering the dynamic nature of the industry. This will favourably result in a more inclusive financial environment, with the existence of credible lenders and greater consumer awareness,” adds Ekambaram.