India Optimistic About Digital Lending Services: Study

Home Credit India, a local arm of the global consumer finance provider, released its annual consumer study - How India Borrows (HIB) 2022 study today. The HIB 2022 study concludes that more than 50 per cent of the borrowers surveyed show preference and acceptability for EMI Cards when it comes to shopping or for any credit need. Overall, more than three-fourth of the borrowers led by Tier 1 and 2 cities and Gen Z/Millennials are optimistic and buoyant about digital lending services, owing to rising popularity of online loans, convenience experienced, and faster adoption of digital lending. 

The HIB study is aimed at understanding the rapidly evolving consumer borrowing behavior as the economy undergoes digital transformation in the post-Covid world. The HIB 2022 shows the positive consumer borrowing trend that was the highlight of 2021 study is going strong this year too irrespective of the macroeconomic headwinds, with 75 per cent borrowers taken credit to buy consumer durables, home appliances, home renovation and business purposes. Owing to buoyant sentiments, more than 50 per cent borrowers showed preference for EMI-Cards when it came to shopping or taking credit, followed by credit cards (25 per cent), with new-age lending platforms including ‘Buy Now, Pay Later’ evidently losing out with less than 10 per cent in favour. Borrowers view EMI Cards as trustworthy, with timely approvals & quick disbursals. 

Similarly, 60 per cent borrowers primarily Millennials/GenZ from Tier 1 & 2 cities (led by Bengaluru at 82 per cent, Patna 74 per cent, Lucknow 69 per cent, Ludhiana 68 per cent and Jaipur 68 per cent) have shown interest in ‘embedded finance’, where e-commerce shopping can be converted to EMIs for affordable financing. Most of them believe embedded finance makes borrowing faster and ecommerce shopping easier. 

 Another major positive is the growing embrace towards digitalisation of financial services. The HIB study states after showing affinity towards online loan journey last year, this time 40 per cent borrowers led by Tier 1 & 2 cities (Jaipur at 55 per cent , Pune 48  per cent, Ludhiana 47  per cent, Lucknow 44  per cent, Chandigarh 43  per cent) have shown willingness to initiate loan application through WhatsApp chat in coming time. Chatbots too are not far behind in tech-enabled financial services race, with one-third borrowers, led by Tier 1 & 2 cities (Ahmedabad at 54%, Lucknow 45 per cent , Patna 44  per cent, Jaipur 42  per cent) shown trust & familiarity towards chatbots, a 13-point uptick from FY21. The adaptability towards online loan journey is also growing as over 50  per cent borrowers show affinity towards online loans, a 14-point increase from FY 21. On same lines, borrowers have largely shown their comfort with mobile banking viz-a-viz Internet banking, especially in Tier 1 & Metros (Pune at 75 per cent , Bengaluru 69 per cent , Delhi-NCR 64  per cent, Ludhiana 63  per cent, Ahmedabad 62  per cent, Mumbai 58 per cent , with Bhopal lowest at 42  per cent)  

Speaking on the consumer study, Mr. Ashish Tiwari, Chief Marketing Officer, Home Credit India, said, “The big take away of this year’s How India Borrows study is the digital evolution of consumer credit in India, which is being driven by GenZ/Milennials from Tier 1 & 2 cities. The key borrowing trends point to the emergence of Embedded Finance phenomena leading to the popularity of EMI financing. The new-age consumers are now not averse to going for loans or credit especially small-ticket size to fulfill aspirations and live their life to fullest. Along with it, they are fast embracing new digital tools or platforms to ensure access to affordable and convenient credit. As most borrowers are optimistic about the future of digital lending services, they are also aware of its pitfalls and so, want to become financial literate.”      

Financial Literacy is fast becoming a serious topic of concern & discussion amongst evolving borrowers in post-pandemic world. The survey shows 40% borrowers across demographics and regions want to attain financial education including personal finance from reputed organizations, driven by Tier 1 & 2 cities. With Bengaluru, Hyderabad and Ludhiana leading, Jaipur, Ranchi and Pune to follow. 

On a region-wise outlook, the north, east, west and south have their own characteristics. North India region has shown resonance with initiating loan applications on WhatsApp chat and online loan journey. East India has shown its affinity strongly towards online shopping, trust in chatbots and having financial service apps on smartphone. West India has inclination towards mobile banking and initiating loan applications on WhatsApp chat. And South India is interested in financial literacy and embedded finance.  

Respondents interviewed during the research also highlighted that with some handholding and guidance on financial and digital literacy, will ensure their loan journey is completed hassle free and independently.