There are some key Game-Changing Trends in the Personal Loan Market in India in 2019. In this article, we will take a look at some of them: Open banking, Cryptocurrency-based loans, Niche online lenders, and more. We will also discuss some of the nuances of how these trends are affecting the market. So, get reading! You’ll find out what makes a personal loan a game-changer!
Online personal loan application process
As a matter of fact, the online personal loan application process is transforming the way consumers borrow and apply for loans. With a click of a button, borrowers are able to complete the process in just a few minutes. Unlike traditional offline loan applications, online personal loans have simpler eligibility criteria and terms. In addition, borrowers are no longer stuck standing in long queues. Instead, borrowers can choose how to make their payments, based on a variety of options.
Digital technology is also bringing a significant impact in the personal loan industry. It has been reported that most lenders require minimal documentation to approve a loan application. They require only a few documents to verify a borrower’s identity, address, and income. The streamlined application process has also simplified the process by eliminating the need for applicants to visit a physical lender’s office or submit documents. Moreover, KYC updated with Aadhaar and PAN can be verified online. This further reduces the documentation burden, and makes the process faster.
Digital platforms have played a crucial role in revolutionizing the personal loan market. Increasing internet penetration and digitization are driving the adoption of digital platforms. The online personal loan application process is the first of its kind to completely digitize the entire process. The process begins with obtaining your PAN and Aadhaar numbers. The next step is choosing the loan term and amount.
Cryptocurrency-based loans
The idea of using cryptocurrencies as collateral for loans is nothing new. Bitcoin was the first cryptocurrency, and it was developed by an anonymous person or group of people under the name of Satoshi Nakamoto. Today, Bitcoin trades on exchanges under the symbol BTC, and its value has risen significantly since its creation. There were 114 million accounts that held Bitcoin in 2021, according to CoinDesk. While the benefits of crypto lending are clear, the risks involved must be carefully considered before opting for it.
Unlike traditional banks and financial institutions, cryptocurrency lending platforms do not require a credit check and can provide loan funds in just a few hours. Some crypto lending platforms offer interest accounts, which allow borrowers to earn high APY without the hassle of putting up collateral. The process of getting a cryptocurrency-based loan is similar to getting an auto or mortgage loan, but with more flexibility.
The major drawbacks of cryptocurrency-based loans are that there is a high risk of margin calls if the value of the assets pledged as collateral drops below a certain threshold. Moreover, because cryptocurrencies are highly volatile, lenders may have to sell collateral to reduce the loan-to-value ratio. And this can cause a problem if the borrower needs money now.
Open banking
Open banking in the personal loan market in India is an evolving system that can allow users to pull together financial data in one place and share it immediately, temporarily, or permanently. While the central bank of India is not yet on board with this new system, it has laid the groundwork for it by requiring that financial data be in machine-readable form. Using machine-readable data will allow users to slice and dice the data.
This system enables third parties and fintechs to provide financial services without being subject to traditional banking regulation. The open banking system functions as a centralized command for SMEs in India and reduces unnecessary costs by eliminating repetitive administrative processes. This model will also assist SMEs by enabling financial management by reducing unnecessary business costs. It will also allow customers to choose their personal finance manager, which is vital for their financial well-being.
In addition to making it easier for consumers to compare products, open banking could also make it easier for SMEs to compete for new customers. The new system could combine information about the person’s location and the segment in which they conduct business to make lending decisions more efficient. The World Bank has found that nearly one-quarter of the global population has savings in the formal financial system, but only 10% can borrow without tangible collateral.
Niche online lenders
In a report by IMD, India ranks 32nd out of 63 countries in business efficiency, while its overall competitiveness score is only 20th. However, the growing demand for sachet credit products such as Pay Now Pay Later, advance salary and payday loans is fueling the growth of digital lending businesses in India. The country’s large working population and high proportion of small and medium enterprises (SME) community are positive factors, but the challenge remains labour efficiency at the macro level.
Indian Personal Loan Market is segmented on the basis of source, tenure, interest rate, company, region, and purpose. Major players in the market are IDFC First Bank, HDFC Bank . ICICI Bank, TATA Capital, Kotak Mahindra Bank, IndusInd, Fullerton India, and SBI Bank. However, a growing number of niche lenders in India have emerged and are proving to be very competitive in the market.
The recent growth in digital lending in India has helped a number of startups. Apart from account aggregation, digital banking has become the lowest-hanging fruit for lending tech startups. Besides, India’s consumer demand is massive. While income growth has been slow over the past year, there are still 5.6 million credit cards issued each year. The online lending sector in India has been buoyant, and the opportunity is huge.
Payment from home
The recent pandemic of economic activity has hit India once again, resulting in lockdowns in many states. As a result, people are turning to instant loans for financial aid. There are a number of game-changing trends currently shaping the personal loan market in India. These changes are set to make the country future-ready. Below are five such trends:
Increase in adoption of digital technology: With a surge in mobile data usage . The people in Tier II, III, and IV cities can now access digital lending channels. While rural India still has a small percentage of internet users, data costs are affordable. As a result, lenders will increasingly focus their efforts on this segment due to their proven credit repayment behavior. These trends also offer lenders and platform providers an opportunity to expand their reach to non-tier-I markets.
Increasing use of unsecured personal loans: Most NBFCs now offer unsecured personal loans. Since the borrowers do not have to pledge any assets as collateral, they are able to apply for unsecured personal loans without much trouble. NBFCs assess borrowers The credibility based on their credit score. However, unsecured personal loans often come with hefty late payment penalties. In other words, borrowers should be aware of the late payment penalties.
Brand trust
The recent boom in the Indian consumer credit market has created new opportunities for the finance industry. The increasing demand of young consumers has driven the growth of the sector. The study conducted by TransUnion CIBIL .The largest credit bureau in the country, examines the emerging trends in consumer credit in India .The changing behavior of retail borrowers. This paper highlights some of the key findings of the study. Read on to learn more about this emerging market.