The Fintech Industry is to develop at a 31% CAGR from 2021 to 2025

From $9 billion in 2012 to more than $270 billion in 2022, India’s digital lending market has grown. Future projections indicate that the sector will expand by 4.75x to $1.3 trillion by 2030. In an exclusive conversation with Rashi Aditi Ghosh from Elets News Network (ENN), Souparno Bagchi, Chief Operating Officer, Balancehero, India, shares the insights on Fintech NBFCs and future projections. Balancehero operates True Balance, an RBI authorized prepaid payment instrument (PPI) issuing entity and emerging lending platform.

How has the year been for the company? What plans does True Balance have for the future?

For True Balance, 2022 has been a spectacular year. We served more than 1 million underserved users across 85 percent of India’s PINs, reaching the daily payout volume of 10,000.

At True Balance, we have a competitive edge because our PPI and NBFC firms are RBI licensed. We have established ourselves as a pan-India leading digital lender providing access to credit for the underserved and unserved in the retail lending space. Therefore, through our regulated organisations, we are in a strategic position to run and build businesses and portfolios. We are progressing in a deliberate manner to establish True Balance as a Neo Bank in India and a full service financial institution in the coming years.

Why should people come to your app and what are the different product offerings, ticket sizes and trends you’ve witnessed in digital lending?

Balancehero India, through its app ‘True Balance’, provides simple, seamless and instant loans to the underserved and underbanked people in the country. We believe that lending as a business is also an asset-creating business. It is exciting to serve the underserved, as the demand is always there and we get to play an important role in economic inclusion in the country. Our DNA is fin-tech, but we borrow from our own books. We offer 100 percent credit directly to the customer, through our key product – ‘Cash Loan’, which is offered up to INR 50,000, and other smaller ticket size loan products to promote financial inclusion in India.

Balancehero operates through True Balance, an RBI authorized digital lending app backed by an NBFC called True Credits. We already serve more than 85 percent of the pin codes in the country. The majority of our customers come from Tier 2+ cities with 80 percent of customers in the 25-40 age group. All our customers are smartphone users who are adept at conducting digital financial transactions. The majority of our borrowers are salaried or self-employed with largely non-discretionary loan requirements. Some of the trends we see are end-to-end automation and hyper-personalization transforming the overall customer experience.

Can you elaborate on the factors responsible for the meteoric rise of Indian fintechs?

India is home to over 7,000 fintech companies, according to Tracxn figures, and fintech industry is forecast to grow at a CAGR of 31 percent from 2021 to 2025, reaching $1.3 trillion.

Factors promoting growth in Indian fintech:

• Government initiatives like Start-up India, Digital India programme, India Stack, E-RUPI, license for payments banks, UPI, Jan Dhan Yojana, etc. are driving growth for Fintech’s in India.
• Investments in finTech: According to a report by EY, Fintech is expected to have $1 trillion in AUM and $200 billion in revenue by 2030; fintech funding in India registered a 3X jump last year by 2021. More than $9 billion in investments were made in digital lending in the last 5 years, and the market is expected to grow to $515 billion in size by 2030.
• Innovations and technology: The nationwide financial inclusion revolution has been fueled by the India stack and FinTech innovation. To serve the Tier 3+ market, innovative solutions are implemented. In India, the fintech sector is using Big Data and AI technology for customization, fraud prevention, improved risk detection, automated processes and secure payments. There are currently more than 230 Web 3.0 start-ups in India, one of the first countries to adopt Web 3.0 technologies.

How has the digital loan market grown in India?

From $9 billion in 2012 to more than $270 billion in 2022, India’s digital lending market has grown. Future projections indicate that the sector will expand by 4.75X to $1.3 trillion by 2030. According to data, the fintech business in India by 2030 will be 60 percent dominated by digital lending. Digital lending is seeing increasing consumer confidence across the country, which is reflected in the number of loyal and diversified consumers as well as consumer involvement.

The factors driving this growth are:

• Technological advances: By offering individualized products, alternative underwriting procedures, premium risk-based pricing and consistent, enhanced user experiences, fintechs have completely changed the customer service landscape.
• Consumer knowledge: Consumers are adopting digital technology and integrating it into their lives as a result of the pandemic. Due to their cutting-edge offerings, speed, agility and flawless user experiences, digital lenders and their offerings are also becoming prominent in the eyes of consumers.
• Partnership: This has been the Indian digital loan market’s secret ingredient. Industry bodies and regulators have played a crucial role in developing positive pathways for conscious industrial development.

What is your view on RBI’s digital lending guidelines? How will it affect the Fintech sector?

There will be an increase in joint loan agreements, and the demand for securitization of the loan portfolio will increase as a result of the loan volume that digital platforms will distribute. Lenders will resort to digital technologies to secure their loan portfolios in the most efficient way possible. A secure, open and accessible digital lending environment is made possible by RBI’s standards for online lending. Standardized disclosures will enable customers to make more informed decisions, and furthermore, full transparency about the information and data that lenders access will truly empower customers. Since all businesses, including unregulated entities categorized as Lending Service Providers (LSPs), are responsible for complying with these standards, we expect some filtering when these recommendations take effect.

Through initiatives such as these, consumer protection, market integrity and a growth-friendly environment for actors are strengthened. We believe that through the new guidelines, lending platforms can gain increased customer trust and contribute to financial inclusion.

What is your outlook for the coming year and any new trends you foresee in the fintech sector?

With fintech’s exponential growth, it has had a profound impact on financial inclusion and penetration.

Read also | The fintech industry is seeing new techniques for assessing credit history

Outlook: Rapid adoption of cutting-edge technology such as blockchain and AI will improve the sector’s outlook. The introduction of RPA will speed up loan processes and help brands develop sophisticated data-driven AI digital lending systems and thus increase credit availability
in India. Interoperability-based solutions can be of use to us.

New trends that you foresee in Fintech:

• Frontier Technologies: Leverage AI/ML and other frontier technologies like Distributed Ledger Technologies (Blockchain) to continue building deep core capabilities/IP assets viz. Underwriting, recommendation engines and Optimis Company Operations / Cost Efficiencies.
• India Stack Evolution: India Stack’s objective is to promote social and economic inclusion and make India ready for the “Internet Age”. The growth of digital payments, enabled by the stack along with key enablers in digital identity, have been important factors in expanding the viable market for Fintechs in India
• India Will Emerge as Global Fintech Factory: India’s socio-economic fabric is multi-layered. Therefore, solving for India is not only about frugal innovations but also about solving for India 1, India 2 etc.. Thus, Fintechs in India uniquely place at the tipping point of going global, be it in developed countries or in emerging countries .
• Work closely with the regulator; make sandboxes: Fintech innovations are disrupting the financial sector, and regulatory sandboxes are making them more agile. Fintech ‘sandboxes’ allow regulators and fintech companies to collaborate, reduce risks and develop evidence-based policy, while fintech companies can test new products and services.
• Green initiatives: Currently, only 8 percent of fintech entrepreneurs say they are in the “sustainable fintech” category. There are many green fintech companies and initiatives around the world, and now India is also adopting the style.

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