The increased diversity in borrower profiles is indicated by the fact that, in 2020, 49 per cent of first-time borrowers were less than 30 years old and 71 per cent were based in non-metro locations, while 24 per cent were women, according to a joint report by Transunion CIBIL and Google titled "Credit Distributed".
Further, these profiles vary when analyzed at credit product level based on credit appetite, credit experience, credit discipline, and channel of consumption, and have made segmentation increasingly nuanced and complex.
Underlining the report's insights is the 2.5X surge in searches for loans from non-Tier 1 cities than from tiered cities across 2017-2020.
Overall, growth in searches for car loans between the two halves of 2020 grew the fastest at 55 per cent with home loans following with 22 per cent growth.
The report identifies the significance of small ticket less than or equal to Rs 25,000 loans, characterized by searches for "phone on loan", "laptop on EMI", and "mahila loan 30,000".
The share of these loan disbursals amongst all personal loans has gone up from 10per cent in 2017 to 60 per cent in 2020.
With disbursal speed and convenience being the hallmarks of these loans, the digital-first sellers have the largest share in this category with 97 per cent of all personal loans disbursed by them being under Rs 25,000.
Interestingly, small loan borrowers demonstrate higher loyalty with 42X growth in repeat customer base amongst lenders in CY 2020 versus CY 2017. Moreover, this growth is as high as 64X for digital-first lenders i.e FinTech NBFCs (non-banking financial company) indicating higher stickiness driven by convenience, over the same time period.
There is a perceptible acceleration in credit demand from non-metro locations, with 77 per cent of all retail loan enquiries on the TransUnion CIBIL bureau originating from tier 2 cities and beyond in CY 2020.
Also, 70 per cent of total credit enquiries are from existing-to-credit borrowers outside tier 1 cities. Alongside, loan-related searches from tier 2 and tier 3 locations grew by 32 per cent and 47 per cent respectively in 2020 over those for 2017.
Interestingly, ticket sizes on loan products like personal loans, auto loans and consumer durable loans are geo-agnostic.
In line with the geographical expansion of new digital users in tier 2/3/4 locations and rural India, and a preference for the mother tongue, local language searches for credit showed an exponential increase. Searches in local languages and for translations of terms such as ‘Credit', ‘Term loan', and ‘Moratorium' have also witnessed an uptick.
For the past year, the report showcases an extraordinary diversification of demand for consumer credit, with 49 per cent of new-to-credit retail borrowers being less than 30 years old, 71 per cent of them being located in non-tier 1 cities, and increasingly, more women availing credit opportunities.
In the consumer survey accompanying the report, customers rate trust in the brand higher than other traditional parameters like low interest rates, which came second, before recommendations, disbursal time, and online process, all considered to drive value perception with customers.
Sixty-four per cent of credit buyers say that brand is a major factor in choosing their loan provider. Considerable time and effort goes into choosing the lender brand with 76 per cent of borrowers taking a minimum of two weeks between exploration and finally choosing the lender.
Almost a third (32 per cent) of borrowers consider over five providers before proceeding to apply.
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