Understanding why the millennials need to know-it-all about credit and credit-scoring; and how it’ll build a loyal customer base for lenders
With the popularity of Google and other such search engines, information is available on fingertips, literally. And so much information that there’s an overload of it, it’s overwhelming. While this is the current scenario, ironically on the other hand, millennials in India lack financial literacy. They do not have adequate knowledge and/or skills to make sound financial decisions.
Current Scenario of Credit in India
Around 75% of the millennials do not have data on themselves with the bureaus. The result? Inspite of them having the standing to afford credit, they cannot avail it. This is happening, largely because the lenders do not have the tools to measure their creditworthiness, except for depending on old school methods.
So then how does this segment avail credit you ask?
By tapping the informal sources of credit. They resort to the age-old money lenders who have a huge risk appetite and would lend at interest rates that are sky-high. And it doesn’t come as a surprise that high debt burden is one of the reasons for people committing suicide in India.
“Across the globe, retail lending has been a spectacular innovation in the commercial banking sector in recent years. The growth of retail lending, especially, in emerging economies, is attributable to the rapid advances in information technology, the evolving macroeconomic environment, financial market reform, and several micro-level demand and supply side factors.” -RBI
Formal institutions of credit, which consist mainly of the Banks and NBFCs have to pave their way through this. They need to underwrite more millennials for they are the future. These lenders need to adapt their lending systems to the changing customer base and their methods of transacting. Innovation enabled by using cutting edge technology that fuels their systems is the need of the hour.
According to our Director and Co-founder, Rajiv Raj,“For banks to grow, they need to go beyond their current credit-active population of 70 million and venture into the millennials who are new-to-credit, and at the forefront of the borrowers’ list. This is a 5x opportunity for lenders versus the current piece of pie.”
A New Era in the Lending Space
With banks and NBFCs catering to the tech-savvy generation, starts a new era in the credit industry. So no more would just absence of credit history determine the creditworthiness, but new tools empowered by technology would make or break credit decisions. Adopting digitization, lenders will be able to provide tailor-made financing solutions to the hyper-connected folks. Thus, creating a fostering an ecosystem of a new-age loyal customer-base.
How about you too adapt to the new-age lending system?
We can help! Simply request for a LIVE demo here.