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Consumer Credit – What’s Your White Space Strategy?

Lost in the headline-grabbing news events of January 2018 (including Davos, the Budget, India-South Africa cricket series, and the stock market) was another RBI update on bank credit. While certainly not as interesting as the other topics it had a notable piece of information: consumer lending rose 17.3% in November and at the fastest pace since September 2016. This is probably the first strong evidence of the diminishing impact of demonetization and an increase in credit activity.

For financial institutions and a slew of providers ranging from FinTech startups to new-age NBFCs, this is great news to kick off 2018. In our last post on this topic, we highlighted the massive consumer lending opportunity but also the inverted credit consumption pyramid today. The top 24 million households have deep access to credit and consume in excess of 70% of formal loan disbursements in India (estimated at $287 billion in 2017). But if you fast-forward ten years, the situation could look very different.

India’s consumer credit market is projected to grow 4.3 times to $1.3 trillion by 2025. The bulk of consumer credit growth over the next decade is not from the top two segments. The middle of the pyramid – Aspirers and the Next Billion together are likely to account for ~50% of total credit usage – growing 7 times from $85 billion in 2017 to a staggering $590 billion in 2025. You can read the complete post here.

This is a shift driven by:

1. Increasing prosperity leading to an upward shift in incomes and access to the formal financial services ecosystem; and

2. New product and distribution platforms that can leverage smartphone penetration and open APIs ...

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