Synopsis: Tech is reshaping how consumers borrow, with P2P, BNPL, mobile banking, and Open Banking leading the charge. Read ahead to know more about how these innovations are transforming the lending landscape and shaping the future of finance.

The way we borrow money is undergoing a dramatic shift. We are no longer limited by lengthy bank visits and limited loan options. As tech-savvy consumers, we are taking full advantage of various innovative borrowing solutions – from peer-to-peer lending platforms (P2P) and Buy Now, Pay Later (BNPL) services to the convenience of mobile banking and the transparency of Open Banking. This digital revolution is fundamentally changing consumer behavior, and lending companies need to adapt to thrive in this new environment.

Consumer Lending Trends in the Market

Peer-to-Peer (P2P) lending platforms

The Indian P2P lending market size is expected to reach $10.5 billion by 2026. P2P platforms can be quicker and more streamlined in loan approvals compared to traditional banks. Especially, consumers with limited credit history can get instant credit based on detailed borrower information available to lenders.

P2P platforms often cut out the middleman (the bank) and its associated overhead costs. This can translate to lower interest rates for borrowers compared to traditional loans. Also, P2P platforms typically rely on streamlined online applications and automated credit checks. This leads to a faster loan approval process compared to banks with their stricter procedures.

Unlike banks that heavily weigh credit scores, P2P platforms might consider alternative factors like income stability and alternative data. This can be helpful for borrowers who are new to the credit system or have a less-than-perfect credit history.

Buy Now Pay Later (BNPL)

The Buy Now, Pay Later (BNPL) scheme is a trend in India’s fintech sector with 22% of consumers using the service. India’s BNPL market has minted USD 8 billion revenue in the current year and is expected to grow at a CAGR of 10% for the forecast period. Two major reasons for this popularity are the rise of the e-commerce market and the growing appetite of consumers for flexible payment methods.

Apart from that, the young, tech-savvy consumers of India appreciate the ease and convenience BNPL apps offer. There is no stringent signup processing like traditional credit cards, and you can even split payments into smaller manageable installments. Additionally, if you’re making repayments within the stipulated deadline, you don’t have to pay any interest charges.

Digitalization and Automation

There’s a strong trend towards digitalization and automation in borrowing services among Indian consumers. Digital platforms allow 24/7 access to loan applications. Borrowers can easily submit necessary documents and check the status of their applications from the comfort of their homes. No need for physical visits to banks. This speeds up the entire borrowing process.

Some key drivers for the growth of the digital market in India are:

• Increasing smartphone and internet access
• Increase in tech-savvy millennial and Gen-Z customers (52% Gen-Z millennials by 2021)
• Rise in small ticket credit demand (85% of personal loans under 1 lakh value in FY23)

However, digital platforms still need robust data security and privacy measures to prevent fraud and protect user information.

Mobile payments

There’s a surge in Indian consumers preferring mobile payments for borrowing services. The latest transaction data reported 11790.361 Unit mn in Jan 2024. This trend is due to several factors. First, borrowers like the convenience and speed. Mobile apps facilitate on-the-go loan applications and repayments, unlike traditional mediums.  Second, the seamless integration with existing mobile wallets and UPI allows users to instant and secure loan repayments directly from their mobile. Lastly, people get a user-friendly interface for managing finances. They get a personalized dashboard to check transaction history and receive push notifications for upcoming payments.

Lending platforms can attract and penetrate a huge potential customer base with highly user-friendly mobile loan applications. However, the security breaches and data theft concerns will likely pose challenges. But, fintechs can implement multi-factor authentication, and data encryption to mitigate such security risks with ease.

Open Banking

As per the McKinsey report, 85% of financial institutions have embraced open banking solutions to improve their lending offerings. Open Banking allows lenders to access a borrower’s financial data directly with their consent. Borrowers are relieved from mundane tasks like manual document submission and verification. Needless to say, this has led to a 40% increase in faster loan approvals for first-time borrowers. Open banking also offers a more holistic view of a borrower’s financial health. Lenders can make better selections as a result. This helps fintechs offer better loan terms, interest rates, and even loan approvals for customers who might not qualify through traditional methods.

How Protium is Shaping the Future of Borrowing in India

The future of borrowing is about real-world solutions. At Protium, we’re not just riding the wave of digital lending trends – we’re building the wave itself. We offer a robust suite of high-quality credit solutions designed for speed, efficiency, and unmatched convenience.

Protium caters to a diverse range of borrowers by offering business finance, education institutional finance, and machinery and equipment finance. Our streamlined digital platform simplifies the borrowing process and makes it faster, simpler, and more accessible for every Indian borrower. This is how we have empowered over 8 lakh+ customers to achieve their financial goals, and we’re just getting started.