Fintech NBFCs Transforming Personal Loan Landscape with Digital Offerings

Fintech Non-Banking Financial Companies (NBFCs) are revolutionizing the personal loan market with their digital offerings, capturing around 5% of the market by outstanding value. Despite their relatively small share, they are rapidly expanding their reach by targeting untapped segments, particularly through small-value loans.

A recent report by the FinTech Association for Consumer Empowerment (FACE) unveiled that fintech loans are pivotal in driving loan volumes, constituting one-third of active personal loans as of September 2023. These loans also contributed to 62% of sanction volumes in the first half of the fiscal year 2024.

The report emphasized that fintech NBFCs focus on underserved segments with small-value loans, accounting for 10% of the sanction value but a significant 62% of the sanction volume in the same period.

While Fintech NBFCs represent only 5% of total outstanding personal loans, they manage over a third of active loan volumes, primarily due to their provision of smaller loan amounts. Borrowers of fintech loans tend to be younger, with a majority below the age of 35, and often have limited credit history.

The outreach of fintech personal loans extends to 721 districts across India, with a growing presence in tier III cities and beyond. In fact, the report highlighted that 40% of loans sanctioned in the first half of FY24 were to borrowers from these regions, indicating a significant shift in market dynamics.

Overall, the average ticket size of fintech loans is decreasing, driven by the popularity of small-value loans. This trend reflects a more diverse and inclusive approach to lending, ultimately expanding access to formal credit for previously underserved populations.