Non-Fintech startups are riding the digital lending wave, adding a new revenue stream and retaining customers by providing end-to-end solutions. With the boom in the fintech sector, lending has become a natural choice for many consumer-facing companies, especially those dealing with higher ticket sizes. An example of this is Car Dekho’s digital lending platform, Rupyy, which offers financing options to automobile customers and retailers. Similarly, Spinny, Udaan, Upstox, CredR, and Bajaao Music have also gone the lending way. India being a perpetually credit-deficient society, innovative lending solutions present a relatively easier play for personal needs and corporate lending, said Ashwani Singh, managing partner, 35 North Ventures India Discovery Fund.
By offering easy disbursal facilities and tailored loans, these companies tap into the substantial market demand for easy credit services, especially among underserved segments. This shift allows startups to reach a large customer base while generating attractive revenue through interest income and fees. P2P lending platforms offer attractive returns of 9%-14% for investors, along with borrowers having processing fees of 2-4% and interest rates exceeding 15%. China and the USA are reporting domestic credit at ~175% and ~200%, respectively, while in India, this number stands at ~50% of the country’s GDP.
Non-fintech companies can find it a struggle in the beginning to tap into lending opportunities. Still, over time, they often garner the expertise of credit in terms of people, knowledge, and tech to effectively meet customer demands. Startups leverage technology, alternative data, and innovative approaches to bridge the gap and cater to a wider customer base, said Teja Ramineni, co-founder, Avenue Holdings.
With the rise in EMIs and the buy now, pay later concept, the appetite for credit in India is continuously growing. On both the private sector and domestic household front, the demand for easy access, low-cost, and highly diversified products to suit consumers’ needs is rapidly increasing. Startups are now offering hassle-free loans to lure customers into buying from their platform while generating higher margins than payments due to underwriting processes. The success of digital lending business models in India can be accredited to the country’s improving digital infrastructure and the untapped market of unbanked individuals.
