The digital payment ducks all got into a row in 2017. Starting with demonetisation in November 2016 to the government getting into the payments space (BHIM) to zero commissions for digital transactions to the entry of international giants like Google and Facebook (WhatsApp’s entry is imminent) into payments, the ducks were all in a row. Quietly waiting in the wings, biding their time, were fintech lenders.

Though on paper, collateral-less lending is going to be a $2.1 trillion-sized opportunity by 2026, according to Credit Suisse, but so far, lenders have had little going for them. They could neither target all available opportunities nor find rich enough data sources (digital lending is primarily a data-driven game).

But with the explosive growth in payments, lenders may be about to find their mojo.

Because if “data is the new oil”, then payment histories are the wells. Digital payments leave a rich trail of data on users that lenders can use to assess credit-worthiness. Traditionally, lenders use data like repayment history, income from salary slips to give loans. But with payment data, companies can know when you pay your bills, how often you make high-ticket purchases. And this goes into determining someone’s intent to repay. Thus, lenders have on their hands an alternative credit scoring pattern of borrowers to add to more traditional data sets.

By extension, payment platforms could be the new credit gatekeepers. Every time you buy digitally, lenders will have a chance to offer loans of any size to the right set of people. Earlier, this was not possible because the economics for giving such small loans didn’t add up. But with the cost of acquisition now taken care of, loan ticket sizes are not a matter of concern.

Credit on demand for users of Walnut, an expense management app. Image source:

Fintech lenders are also finding allies in banks and non-bank financial institutions who view these companies as a way to acquire newer sets of customers. Whatever little traction lending has seen so far is because of companies like Capital Float and LendingKart that give loans to small and medium businesses. Consumer lending fintechs are yet to see that kind of scale given the low ticket sizes and cautiousness with which they lend.

But that could change in 2018.

The missing pieces of the lending puzzle

In the sequence of steps leading up to digital lending, the first and last ones have proved most troublesome for startups.The first is the Know Your Customer (KYC) formalities for new customers and the last is the actual collection of amounts lent. Lenders who wanted to be fully digital could not as they needed to physically perform a KYC of new borrowers.


Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

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