For the past six years, most online disruption that has taken space is in the e-commerce & e-classified space. However, 2017 will mark the year of FinTech and online lending ecosystem innovation. We will see tech start-ups disrupting the traditional banking ecosystem. The ecosystem is aiming to improve both consumer credit side and SME credit pain points where traditional banks and financial institutions have left many pockets unattended for the FinTech players to disrupt and provide technology layered lending products. Some of the key trends in online lending ecosystem in India are:
Taking of the C out of the Cash on Delivery (CoD)
One of the biggest factors to the e-commerce growth story in India has been Cash-On-Delivery with nearly 60% of all transactions today being COD. From this, around 60% result in return/cancellation on delivery, causing the biggest pain point in the e-commerce growth story today. To solve this problem, many FinTech players are entering into this place to build concepts like Pay Later, Credit on Check-Out etc. basis credit check and small unsecured loans which offer similar services like BillMeLater from PayPal and PayLater by Wonga from the West.
60% of all Cash-on-Delivery products are returned is a pain point for the eCommerce industry
FinTech players will disrupt consumer durable credit market
Bajaj Finance & Capital First has dominated the consumer durable finance category for nearly seven years now and FinTech players are entering this space to disrupt this market. From offering EMI options to students to credit without a credit card, building complex machine learning credit scoring and social profiling systems to lend faster, the new age FinTech players will disrupt the current consumer durable credit market considerably.
This article is a part of the January edition of FICCI’s financial Foresights that focuses on ‘Leveraging the FinTech Opportunities in India’ and presents interesting propositions in the form of insightful write-ups contributed by both established and emerging players from the FinTech industry.
More articles from this series can be viewed here at: Financial Foresights
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Instant cash advance / loans
Traditionally banks offer over draft facilities; a few companies offer salaried loans to employees. Players like EarlySalary are disrupting this market by offering instant cash loans on a mobile app to salaried individuals for tenures less than one month.
Disrupting the credit score driven by Credit Bureaus
Traditionally, CIBIL score is what you need to get any form of credit. But this is very age bias and relies on banks and other institutions submitting their portfolio data to financial bureaus. Today many new FinTech start-ups are either focusing on building a new credit score using multiple data sourcing combing credit bureau reports to social media profile of the user to make their decision faster and more accurate.
Financier disruption with Peer to Peer (P2P) model
P2P model is changing the landscape of capital provider for lending. Traditionally banks and NBFCs borrowed to lend to others, and customer had to approach these institutions to borrow. Peer to Peer platforms act as catalyst for anyone to become a lender and offering his cash as credit to anyone in need of credit. These platforms act as big catalyst for growing the lending space. SME finance and working capital funding has got mass acceptance in a very early stage already and many FinTech players are operating in this market already.
Akshay Mehrotra, Co-Founder & CEO, EarlySalary writes for our publication: Financial Foresights. EarlySalary is a short term lending platform which gives cash loans to working individuals via a mobile app.