The year 2017 turned out to be a significant milestone in the financial history of the country, has had a decided impact on the Indian economy. As much as digital technology pervades our personal and professional lives, it has also started to transform our financial lives. Overall, the mood is positive, with GDP growth jumping back to 6.3% in Q2, 2017, riding on the back of better consumerism aided by government reform. And with all this 2018 appears to be an exciting phase for consumer lending.
A Look Back into 2017
Standardisation, digitalisation and regulation were the key themes in India’s financial story of 2017. The big move of demonetisation seems to be making a positive mark as it continues to give impetus to the cashless economy in the form of e-wallets and other digital financial means. Another regulatory measure to control tax evasion was the Aadhaar card being made mandatory for opening new banks accounts and for carrying out transactions above INR 50,000.
This amendment to the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 is a step towards standardisation and providing a visible digital identity, thereby promoting transparency in financial transactions. Another factor that is pushing financial transparency is the rise of Fintech and the subsequent new-age companies that are offering digital avenues for finance such as payment platforms, blockchain companies, alternative financers like P2P lenders and so on.
New service providers are making available opportunities to consumers by way of creating access and affordability.
Profiling the Indian Consumer
What is encouraging is that the Indian consumer is rising to this opportunity. Increasing affluence in terms of disposable income, a range of options for career & personal advancement, and a propensity to experiment & be open to new avenues defines the modern Indian consumer. People are no longer content with traditional mechanisms.
They are willing to explore and experiment, and acceptance of change is high, thanks to globalisation and privatisation. Having access to information at one’s fingertips is encouraging people to make informed decisions and this extends to financial decisions.
The new-age Indian consumer is thus curious, informed, and accepting of new financial products and services, which in turn is boosting consumer lending.
Consumer Lending Trends To Look Forward To In 2018
2018 appears to be an exciting phase for consumer lending, with the following expected trends:
Alternative lending boom
New service providers will serve the underserved and unserved, meeting the unmet demand. We will continue to see the rise of direct lending as well as P2P lending, marketplaces, crowdfunding platforms etc. As our interactions go highly virtual, peer to peer lenders (P2P) are expected to grow simply because they offer convenient, quick and affordable financing options, both for business and personal use.
Ease of access to credit
Credit will continue to grow, thanks to the alternative lending boom. Not only will credit instruments be readily available through a number of options, but they will be affordable to the masses. One such burgeoning space is the Line of Credit. It has gained momentum in 2017 with the metros being early adopters and is expected to expand into tier 2 & tier 3 cities in 2018.
The rise of InsurTech
We are seeing technologies and platforms that optimise the workings of the insurance industry make a real impact. We will see a higher degree of customization in offerings backed by solid consumer data and analytics. This will help predict consumer behaviour in a better fashion.
For example, linking the health and wellness data can help devise smarter pricing strategies and packages. Other areas that show promise are micro-insurance, P2P insurance etc.
Investment in emerging technologies
We have already seen the use of Artificial Intelligence, Machine Learning and Blockchain for customer acquisition, customer service, KYC and onboarding, risk and credit etc.
Blockchain will expand in putting together smart contracts, and digital identification. Much of this expansion will be funded by VCs. Already, FinTech investments in Asia increased to $5.4 billion in 2016, up 12.5% from $4.8 billion in 2015, driven mainly by China and India.
Government and regulatory push for Fintech
Strong government measures for financial inclusion, digitisation and start-up activity will continue. Initiatives like IndiaStack, Start-up India Program, Jan Dhan Yojana, Aadhar adoption, Unified Payments Interface (UPIs) etc. will gain prominence and increased user adoption.
These five consumer lending trends are set to shape a new financial construct for 2018. It is up to financial businesses to grab these opportunities and ride high on the wave of positive change. Also, it is up to consumers to be on the lookout to make the most of the numerous financing options, especially because many of them will be delivered to their doorstep.
This story is a part of our Predictions series where we bring to you the forecasts and predictions for the year 2018, hand-curated by the Inc42 editorial team and industry experts. You can read all the stories of Predictions 2018 series here.