Digital Lending And Payment Trends Shaping the RetailTech Landscape in India It is the convergence of retailtech and fintech that must shape the next wave of consumer demand and drive the agenda of financial inclusion

By Khushnud Khan

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Though it sounds like a modern invention as a marketing tool to attract consumers, credit has been around for at least 5,000 years now. About 3,500 BC, the ancient civilization of Sumer is considered as the first place where consumer loan was used for agriculture. The birth of modern consumer credit happened in England in 1803 wherein a group of tailors came together to swap information about customers failing to pay back for their debt; this is where credit reporting began.

A consumer credit boom began by 1908 in Detroit when Henry Ford launched his most ambitious model T with the aim to make cars affordable to masses. But still they were too expensive for a large number of people to buy in cash and hence cars were not selling as Ford initially thought. By 1919, General Motors solved the problem Ford created, by loaning consumers the money they needed to buy a new car.

Today, credit is everywhere—auto, home and goods and there are several forms of credits available to consumers, in each segment. Although the home and auto credit segments are majorly dominated by banking institutions, it is the consumer goods retail segment where credit cards, banks, and NBFCs have been playing equally important roles in facilitating goods purchases on credits.

While each of them fuels the consumer demand for goods, their dynamics are very different in different parts of India. Credit cards remain a popular form of retail goods credits in metros and Tier-1 cities as a majority of about 50 million credit cards issued are in these big cities. With lower credit card penetration in Tier-II and III towns, the credit lending from NBFCs are the main driver of goods credit in these markets.

These non-banking financial institutions not only have been the engine behind credit lending growth, they potentially drive financial inclusion. However, in a country as populated and as diverse as India, the reach of these credit finance has been largely limited to urban middle class for a long time, meaning a major chunk of 1.3 billion still did not have access to, and that poses a challenge of financial inclusion. Despite being a priority on policy agenda for decades, the goal of a universal financial inclusion is yet to be achieved and much of the problem has been due to the lack of access besides financial literacy.

The limitation of the reach of NBFCs and the aversion of traditional financial institutions to service apparently risky low income but credit devoid markets has enabled new age digital lenders leveraging cutting edge technology and alternative credit assessment models to quickly fill the void and reach out to a wider customer base. With advances in technology and a conducive policy environment alternative lending as a service is catching the eyes of consumers and retailers alike.

Tech platforms have capitalized upon the needs and the pain points of consumers across credit lending value chain for uncomplicated KYC processes, prompt decision making and instant disbursals in a seamless and automated experience. Digital lending with distinguishable advantages of speedier approval of credit, evaluations, and loan disbursal with quicker turnaround time, promises to address credit related challenges in India.

In last the three-four years, credit lending models have seen frenetic activities in India shaping the ecosystem for digital lending, driven by four key factors—rise of Internet-savvy millennials; big data and technology advancements; conducive regulatory environment; and innovative operating models. Today we have some very promising fintech start-ups building consumer friendly credit lending platforms that will not only change the way credit lending works but it will also create access to finance to a mass of Indians left out.

Alongside the rise of fintech in digital lending, in last couple of years, we are witnessing the rise of retail technology platforms helping millions of medium and small retailers sourcing their inventories more efficiently than done traditionally. Various platforms are enabling retail stores with direct sourcing disintermediating the multi-layer channel and getting retail store better prices with faster deliveries and hence improved margins.

What retail tech platforms are doing now is disrupting the conventional sourcing mechanism and building efficiency on the supply side of retail stores. But what is getting more exciting is a retailtech platform helping retailers in their demand generations while solving for the supply side inefficiencies.

At a time where retailtech and fintech space is shaping up helping the space grow with disruptive technology, it is the convergence of retailtech and fintech that must shape up to next wave of consumer demand and driving the agenda of financial inclusion of 1.3 billion people. Retail technology is potentially at the forefront of driving this convergence to scale consumer participation into lending and drive up NTC (new to credit) share.

By 2019, the share of NTC in consumer durable loans was at 22 per cent; this is still better than how the ratio was five years ago. But rising retail tech innovation and adoption by retail community and consumers, this is expected to be about 30 per cent of total consumer durable loans by 2024. As a result, access to credit expands to larger base where we will have India and Bharat participating in equal ratio.

Khushnud Khan

Co-founder and CEO of

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