The pandemic has forced a number of global financial institutions to back down. New business circumstances have necessitated a transition to the digitization of financial services. At the same time, the pandemic has created a substantial demand for low-cost loans at a rapid pace in India. These loans are used by millions of people to meet medical emergencies and various needs in the volatile post-pandemic scenario. In other words, the fintech ecosystem is going through a pivotal period of transition with the growth of consumer loans moving from metropolitan and Tier 1 cities to Tier 2, 3 and 4 regions.

Over 70 percent of total loan disbursements are currently made in small towns and regions beyond the Level 1 zone. This shift in demand is expected to increase further with various online trends indicating that small towns and villages are growing 2.5 times compared to subways. A study by Transunion Cibil and Google found Internet searches for loans to be highest in cities with level 3 at 47%, followed by level 2 at 32% and level 4 at 28%. Credit goes to the global penetration of smartphones and 4G internet services, digital lending is skyrocketing at an advanced rate.

This allows new and emerging India, made up of diverse blue and gray collar workers, micro entrepreneurs and small business owners residing in small towns, hamlets and villages to access a number of financial products and credit services that have traditionally been out of reach to this day. . To that end, a number of emerging startups are rapidly disrupting the financial outlook by leveraging a number of new age innovations such as artificial intelligence, machine language, and data science.

These companies appear to be shaking the established status quo of the industry and making huge strides in revolutionizing the country’s fintech ecosystem. By providing financial access to underserved sections, these companies have exponentially accelerated the process of financial inclusion across the country. Today, millions of citizens are able to search for financial services and personalized loan packages through other credit avenues offered by these new age fintech companies.

A number of these new generation actors responding to the needs of the underbanked revealed that the representation of borrowers from level -3 and level 4 regions has increased significantly. The credit portfolio of these companies indicated a considerable increase in participation in these areas, which increased from 33% in 2019 to 41% in 2021. It was also observed that the percentage of people in the level 3 and 4 graduates who were researching digital health and wellness options increased from 31% in 2019 to 37% in 2021. In addition to the exponential technological acceleration and internet boom, this nascent growth also has a number of ‘other contributing factors.

For example, the Indian government has been aggressive in introducing technological advancement in Tier 3 and Tier 4 regions. The focus on launching state-sponsored digital services has visibly increased from 32% in 2019 to 49% in 2021. In addition, the rapid penetration of insurance has also seen a steady increase.

A number of fintech startups that offer personalized insurance products have noted the significant growth in their services. At the same time, attachment to insurance in Level 3 and Level 4 regions has also increased from 11% in 2019 to 29% in 2021. It appears that post-pandemic turmoil has taken the pan-Indian financial inclusion process. . The demand for quick loans to deal with financial and medical emergencies has dramatically increased into the new normal. The growth of digital loans among the underserved population has led to a 23-fold increase in loans below Rs 25,000 since 2017.

That’s not all. The last financial quarter of 2020 saw a critical 36% increase in e-commerce order volumes in the country. With around 67% of total online consumer demand coming from Tier 2 cities and beyond, the reach of personalized financial services and credit packages has also widened. It further opened up several new business opportunities and prospects for the credit companies which are now an integral part of the country’s vast fintech framework.

No wonder the demand for small loans in Tier 2, 3 and 4 cities is currently at an all time high. As traditionally remote and remote parts of the country embrace digitization and become more technologically and financially smarter, India’s vision of an Atmanirbhar Bharat will soon become a reality.

The author, Rohit Garg, is the co-founder and CEO of Smartcoin. Opinions expressed are personal

First publication: STI


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