Millennials are on a borrowing binge

As a result of a confluence of favourable factors, including the rising incomes of younger population and a rapidly growing digital economy, the future of embedded finance in India is promising. With access being the operative term and an enabler in the form of Digilocker, embedded finance can transform India’s existing economy

Even as digital lending is on the rise in India, Millennials are on a borrowing binge. More than three-fourths of borrowers of tier-1, tier-2 cities and millennials are particularly buoyant for digital lending services, primarily due to the increased popularity of online loans and convenience experience than ever before, reveals a study titled ‘How India Borrows 2022’ by Home Credit India. In 2022, according to a recent study by neo-banking platform Freo, millennials continued to contribute 44 per cent of the total transactions when it comes to availing of lending products. Compared to the previous year, the share of smaller loan ticket sizes has also increased by 10 per cent in volume. The automation in lending and collection processes is helping the industry grow faster. With the purchasing population of the country getting younger and thrifty with their wealth management, there is an inclination towards short-term loans of small ticket sizes.

Additionally, Save Now, Pay Later (SNPL) and Buy Now, Pay Later (BNPL) dominate the consumer loan industry, allowing millennials to access credit at the time of purchase, breaking the ticker size further. As per reports, usage of the BNPL facility increased by a whopping 232 per cent for 2021 if the Gen Z user base is considered. E-commerce could contribute a whopping 12 per cent of global spending by consumers by the year 2025 with 59 per cent of transactions taking place via mobile devices, as per FIS.

As a snowball effect, the digital lending domain in fintech companies witnessed the highest inflow of funding – accounting for 50.6 per cent of the funding inflow in the fintech sector and 33 per cent of its funding deals in Q2 of 2022. These numbers indicate the hold the younger generation has on the economy. As their wallet share increases, this generation will play a crucial role in India's economic growth.

Talking to Bizz Buzz, Rohit Taneja, Founder & CEO, Decentro, says, “The recent announcement by the Indian government to expand the usage of DigiLocker can be influential in boosting the digitalization of MSMEs' business operations. With centralized access to documents, there is an undeniable push to drive digital payments and financial inclusion in the country.”

Subsequently, this will help fintech companies provide their customers with a streamlined experience while assuring their data's safety, which is of primary concern when dealing with sensitive documents such as policy papers, PAN, Adhaar card, and much more, he said.

In such cases, the National Financial Information Registry can be the game changer as it will promote financial inclusion, facilitate efficient credit flow, and foster financial stability in the coming months. As a result of a confluence of favourable factors, including the rising incomes of younger population and a rapidly growing digital economy, the future of embedded finance in India is promising. With access being the operative term and an enabler in the form of Digilocker, embedded finance can transform India's existing economy.