Discussing the rapidly growing fintech market within the Indian landscape today, and the impact of digital start-ups on P2P lending
The fintech market in India is drawing more and more investment, as the number of start-ups continue to rise, making it one of the fastest growing markets globally. Demonetization, the Jan Dhan Yojana, and the Unified Payment Interface (UPI) are just a few of the government-led initiatives that have aided the industry’s growth. In addition to the impact of COVID-19, it’s cascading effects as new hygiene and safety measures are introduced, and the upsurge in contactless payments.
In recent years, there has been a substantial increase in the number of banks and their branches throughout the country. Can banks, however, satisfy the credit requirements of start-up enterprises and individuals?
The average individual’s ambitions and startups’ expansions are projected to exacerbate India’s lending gap. This is where P2P platforms come in. According to Finextra (as referenced in 2019), even though P2P lending is still in its early stages, it is predicted to develop to and feature as a $10 billion sector by 2025.
The impact of start-ups on P2P platforms
Startups are amongst the more important economic scenario generators. With the rise in the nation’s economic development, an enterprises’ contribution will only increase in the future; however, a potential bottleneck may be requiring credit to expand.
Digital start-ups are always on the look-out for new sources of lending, particularly P2P lending. The availability of credit among these entities is huge, and the potential impact of such lending availability on the country’s job creation and economic growth, is significant.
We see P2P lending platforms focusing on the credit needs of these digital start-ups, giving entrepreneurs hope that the platforms would be capable of providing financial assistance for their company’s growth, resulting in economic progress, and employment possibilities. The P2P industry will develop at an increasing rate if the demands of these start-ups are met. Apart from commercial purposes, P2P platforms may also be used to borrow funds for various personal reasons. However, this boon doesn’t come without its risks. In addition to the fact that lending a high amount to one specific borrower isn’t exactly advisable, loss due to bad loans is another key factor involved.
Convenience is another element that will propel the P2P sector forward. People will utilize P2P lending networks as a loan application since these platforms are extremely efficient. Unlike a bank, a customer may apply for a loan on a P2P lending platform from any place, and at any time, thereby eliminating the need to physically contact the lender. The procedure on P2P platforms is efficient, quick, and digitized. The entire process, from registration to loan financing, is paperless and easy.
The future of P2P platforms
- P2P lending will expand as an emerging investment pathway for lenders (investors) seeking greater returns, by permitting them to select the borrowers who best meet their risk and reward attributes. It also outperforms other investing choices presently accessible.
- These platforms will also continue to expand as a viable investment alternative for people, with more checks in place and better returns. Razorpay, Lendingkart, Policy Bazaar, Paytm, and Cred emerged as the top five fintech firms in terms of investment in 2021.
P2P lending in the fintech industry is by far the most creative of all the other recent fintech disruptions. Through P2P lending services, individuals wanting to borrow are directly linked to those intending to lend. They have been able to reduce intermediate costs by using technology-enabled procedures, allowing borrowers to enjoy cheaper interest rates and lenders to earn better returns. As a result, gaining tremendous momentum among Indian customers.
The Indian financial industry is seen to be irrevocably altered by peer-to-peer lending (P2P lending). Democratization and uberization of lending will continue as long as these lending platforms continue to develop and maintain their lending criteria, as well as periodically improve technology.