fintechs growth report: Fintechs see exponential growth in small-ticket loans but need to focus on sustainability: Report
Fintech lenders have a dominant share of the sub-Rs 1 lakh loan market, both in terms of number of loans and the amount disbursed, but will need to keep an eye on sustainability going forward, a report released by credit bureau Experian and Digital Lenders’ Association of India has found.
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Till September 2023, 77% of the loans under Rs 1 lakh were given out by fintech lenders, from around 50% in FY18. In value terms, fintechs accounted for 50% of market share with non-banking lenders making up 25%. In FY18, this share was 34% for NBFCs and 29% for fintechs, according to the report titled ‘Charting New Horizons for Fintech Lending: Navigating Profitability and Scalability’.
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Of the loans given out by fintechs, 75% were in the sub-Rs 10,000 category with just 2% being above Rs 1 lakh. In contrast, for public sector banks the share of loans between Rs 50,000 and Rs 1 lakh stood at 89%.
Overall assets under management, specifically in the personal loan category for less than Rs 1 lakh, stood at Rs 81,000 crore, the reported added. Of these, NBFCs have a 34% market share, followed by fintechs at 33%.
In small-ticket business loans, fintechs had pushed up sourcing to Rs 39,225 crore in FY22, which had already reached Rs 32,566 crore in September 2023. This market was dominated by NBFCs with a 97% market share in FY17, but in FY23 fintechs managed to carve out a 9% market share with 39% taken by tech-enabled lending companies, the report found.
The report further observed that fintechs are tapping into new opportunities that are opening up in very small towns and semi-urban locations in the country, since conventional business hotspots are dominated by traditional lenders.
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Stress build-upWhile the sector has seen strong growth, fintechs are also facing a higher amount of stress on loans they have sourced in FY23 compared to that in FY22. According to data on delinquencies (loans that are due for more than 90 days), the share has shot up to around 5% for loans sourced in FY23, compared to less than 2% for loans sourced in FY22.
In business loans, those that are due for more than 90 days have shot up to more than 6% for those sourced during FY23. The number for FY22 was around 1%.
Overall delinquency rate for the sector has gone down to 3.8% in September 23, compared to 5.3% in March 22. These numbers are sub-1% for private banks. Interestingly, strife-torn Manipur, financial hub Mumbai and Haryana are three locations that reported very high delinquency.
Tracking Frauds
As per Experian’s Hunter Database, which tracks frauds in this sector, the report has highlighted that both Uttar Pradesh and Haryana have rates that are north of 3%, the highest in the country.
“Absence of strong collection workforce on the ground for fintech hurt them and fintechs need to work on unit economics (as well),” the report said.
The report has observed that recovery rates have been ‘subdued’ in recent times and rates are expected to remain in single digits in the long run.
Looking into the future, the report said that with the country becoming more affluent, fintechs with their advanced analytics and digital capabilities have the chance to grow fast. But they will be hit by very low average ticket sizes which impacts scalability.
Overall, going forward, fintechs will need to build more sustainable business strategies since they already have seen growth, the report said. They will also need to work closely with traditional lenders and leverage the support from government initiatives in creating a digital economy, it added.
Fintech lenders have a dominant share of the sub-Rs 1 lakh loan market, both in terms of number of loans and the amount disbursed, but will need to keep an eye on sustainability going forward, a report released by credit bureau Experian and Digital Lenders’ Association of India has found.
![]()
Till September 2023, 77% of the loans under Rs 1 lakh were given out by fintech lenders, from around 50% in FY18. In value terms, fintechs accounted for 50% of market share with non-banking lenders making up 25%. In FY18, this share was 34% for NBFCs and 29% for fintechs, according to the report titled ‘Charting New Horizons for Fintech Lending: Navigating Profitability and Scalability’.
Elevate Your Tech Prowess with High-Value Skill Courses
| Offering College | Course | Website |
|---|---|---|
| IIM Kozhikode | IIMK Advanced Data Science For Managers | Visit |
| IIT Delhi | IITD Certificate Programme in Data Science & Machine Learning | Visit |
| Indian School of Business | ISB Professional Certificate in Product Management | Visit |
Of the loans given out by fintechs, 75% were in the sub-Rs 10,000 category with just 2% being above Rs 1 lakh. In contrast, for public sector banks the share of loans between Rs 50,000 and Rs 1 lakh stood at 89%.
Overall assets under management, specifically in the personal loan category for less than Rs 1 lakh, stood at Rs 81,000 crore, the reported added. Of these, NBFCs have a 34% market share, followed by fintechs at 33%.
In small-ticket business loans, fintechs had pushed up sourcing to Rs 39,225 crore in FY22, which had already reached Rs 32,566 crore in September 2023. This market was dominated by NBFCs with a 97% market share in FY17, but in FY23 fintechs managed to carve out a 9% market share with 39% taken by tech-enabled lending companies, the report found.
The report further observed that fintechs are tapping into new opportunities that are opening up in very small towns and semi-urban locations in the country, since conventional business hotspots are dominated by traditional lenders.
Discover the stories of your interest
Stress build-upWhile the sector has seen strong growth, fintechs are also facing a higher amount of stress on loans they have sourced in FY23 compared to that in FY22. According to data on delinquencies (loans that are due for more than 90 days), the share has shot up to around 5% for loans sourced in FY23, compared to less than 2% for loans sourced in FY22.
In business loans, those that are due for more than 90 days have shot up to more than 6% for those sourced during FY23. The number for FY22 was around 1%.
Overall delinquency rate for the sector has gone down to 3.8% in September 23, compared to 5.3% in March 22. These numbers are sub-1% for private banks. Interestingly, strife-torn Manipur, financial hub Mumbai and Haryana are three locations that reported very high delinquency.
Tracking Frauds
As per Experian’s Hunter Database, which tracks frauds in this sector, the report has highlighted that both Uttar Pradesh and Haryana have rates that are north of 3%, the highest in the country.
“Absence of strong collection workforce on the ground for fintech hurt them and fintechs need to work on unit economics (as well),” the report said.
The report has observed that recovery rates have been ‘subdued’ in recent times and rates are expected to remain in single digits in the long run.
Looking into the future, the report said that with the country becoming more affluent, fintechs with their advanced analytics and digital capabilities have the chance to grow fast. But they will be hit by very low average ticket sizes which impacts scalability.
Overall, going forward, fintechs will need to build more sustainable business strategies since they already have seen growth, the report said. They will also need to work closely with traditional lenders and leverage the support from government initiatives in creating a digital economy, it added.
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