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'Fintech Disruption In Lending Space Is Very Slow Now'

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The peer-to-peer (P2P) lending space is fast becoming popular in India and abroad as a viable option for borrowers and lenders. The model’s success lies in its ability to connect borrowers, who are in dire need of money with lenders, who are ready to provide for higher returns.

India has witnessed the mushrooming of numerous lending start-ups that target people who can’t get loan easily from banks or other financial institutions. The Reserve Bank of India is expected to release a set of guidelines for the industry soon.

In a conversation with the Entrepreneur India at the Money Tech India Congress, 2017, Rajat Gandhi, the CEO and Founder of Faircent, shared his opinion about the future of  P2P model and the new developments expected in the industry.

Asked about the problems, if any, faced by the platform in terms of regulations, Rajat replied in the negative.

 “A consultation paper was published last year, following which the RBI started working on the guidelines, which would be ready soon. We are waiting for the set of norms but the draft on this seemed quite positive. The blueprint appeared to be the model’s growth promoter and RBI has liked the platform as it brings down the cost of credit and creates more access to credit. In this way, it is doing the job of reducing the cost and giving new access to credit,” Rajat explained.

P2P’s Growth Dependent On Regulations

The P2P lending space is reportedly growing steadily right now and more players are streaming in. The rising market has introduced vertical models to the P2P space, focusing on student loans and similar other things.

“This whole industry will only grow once the regulations are in place. The businesses can take place in an organized manner once the regulations come into force, which in turn invite investments and the entire process starts,” he said.

Fintech Disruption Is Very Slow

The fintech sector in India is crawling into every segment of the financial services by incorporating basic banking features. In a way, it is also disrupting the lending space.

According to Rajat, the disruption by the fintech sector is very slow right now.

“It would be false to state that the fintech companies are eating into the role of banks and NBFC. The sector can really grow very fast. In the next five to 10 years, we will observe a lateral shift in the trend with more and more customers moving to the digital mode, especially for financial services that lend itself to the digital platform like music industry,” he added.

Many alternative lending start-ups are reportedly using big data technology in each step to transform the way lenders operate. The P2P model, when coupled with big data, can help review the creditworthiness at a much faster rate and less cost, he stressed.

Rajat believes that big data is helping every type of the business and is extremely effective in financial services. He further said stock market and lending decision were based on data. With new data streams coming in, the role of big data is getting much deeper.

Build The Business Step By Step And Don’t Hurry

Although the P2P model provides crucial advantages to lenders and borrowers, certain considerations should be kept in mind before starting a P2P lending start-up.

Rajat feels lending is a difficult business for any entrepreneur. You need to have your credit cycles in place.

“Any new entrepreneur on the lending space should start small and slowly build on it because lending is a difficult business. Don’t look for hypo- growth because it’s very easy to lend money. Be careful, build the business step by step and don’t hurry,” he said before signing off.

 
Edition: May 2017

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