Gurgaon, Haryana, India: Paisabazaar.com, India’s largest digital marketplace for financial products, released a consumer insight report today on India’s rising credit awareness – “Making India Credit Fit”. The report said 9.23 lakh customers have improved their credit score by 50 points or more in the last 6 months. Out of this, 4.6 lakh customers have improved their score by 100+ points in the same time period.
See full report here – bit.ly/credit-awareness-report.
Paisabazaar.com has been running credit awareness initiative since January 2017, providing consumers with free credit report, with monthly updates. To strengthen this consumer education initiative, Paisabazaar.com has introduced several industry-first innovations that helps consumers check and compare their scores from multiple bureaus, conveniently track the score through WhatsApp, Amazon Alexa, Google Assistant and other platforms, get the personalized and most-suited loans and credit card offers and build their score through a specialized credit advisory service.
Naveen Kukreja, CEO & Co-founder, Paisabazaar.com, said, “As a fintech, we believe we are uniquely placed to innovate to truly make a difference in the lives of our customers, through meaningful and relevant innovations. Over the last 5 years, we have seen millions of our consumers suffer due to poor credit score. Our credit awareness initiative is aimed to make India credit aware and financially healthy, through good credit behavior.”
Paisabazaar.com’s ‘Making India Credit Fit’ report shows credit awareness in India is steadily on the rise with consumers, especially the young salaried segment, from both metros and non-metros, displaying more credit awareness, taking steps to build their score and borrowing with confidence.
Sujata Ahlawat, VP and Head, Direct-to-Consumer Interactive, TransUnion CIBIL, said, “Indian consumers are becoming more credit-conscious than ever before. Not only are they learning about how their financial decisions can impact their credit score, but also how a high score is critical influencer in getting access to funds when they need it the most and at favourable interest rates. However, checking their score once isn’t enough, and we see consumers increasingly monitoring their CIBIL scores regularly to ensure they are loan-ready to leverage lucrative offers.”
Parijat Garg, SVP, CRIF High Mark, said, “The efforts by the banks, the fintech players and the credit bureaus have helped significantly improve the awareness on the concept of credit score over the last few years. However, the drivers of credit score and the benefits one can get from a good credit score aren’t yet understood – the continued efforts are required to broaden and deepen this awareness.”
Key consumer insights from the Paisabazaar.com report
1. Emergence of Young Indian retail borrower
Traditionally, loans were restricted to in times of dire need like a financial emergency. However, with access to credit easing and aspirations rising, data suggest a shift from a “save first” philosophy to “consume first and pay over time”.
With over 65% of India under the age of 35 and internet and smartphone boom enabling access to credit, choice and information, we see Young India getting more comfortable and confident with borrowing.
The report shows that for customers who were born in 1970, the average age of the first loan taken was 38. Those born in 1985, the average age was 27.
This is corroborated by millions of conversations we have had with our consumers that suggest there has been a paradigm psychological shift in consumer borrowing behaviour, resulting in significant rise in demand for personal credit.
Navneet Singh, a Paisabazaar.com customer and a CA from Bangalore, said, “I took a personal of Rs. 2 lakh shortly after I started working to travel to Europe for two weeks. I paid it off over the next 3 years easily.”
Like Navneet, there is a large segment of young salaried professionals who are willing to borrow smartly to meet their personal aspirations like travelling, buying a car to life-stage goals like higher education and buying their own home.
2. Millennials emerging as credit aware and credit responsible
While there may be a popular perception that millennials are less responsible with personal finance, with focus being on ‘want’ than ‘need’, data clearly indicates that ‘Young India’ is both aware and responsible when it comes to credit fitness.
Ashish Singhal, Managing Director, Experian, said, “Only about 43% of adults have ever taken a credit product. But, we are seeing an increase in consumer lending and the millennials are more willing to take loans for their day to day needs as compared to the earlier generation.”
Around 74% of customers who have taken credit report from Paisabazaar.com are less than 38 years of age. 61% of these young customers are also credit healthy, with credit score of over 750, considered excellent by most institutional lenders.
Nandita Bajpai, a Paisabazaar.com customer and an MNC executive from Delhi, said, “I have been using my credit cards extensively for personal expenses ever since I started working 6 years ago. Sometimes, I made delayed payments or crossed my credit limit. My credit score dipped due to this. I began monitoring my credit score from last year and have controlled my card spending also. In the last few months, I have built a good score.”
Another interesting data point when we look at the credit reports of millennials (born after 1981), 65% of them are salaried professionals. However, when we look at the data of non-millennials (those born before 1981) there is negligible gap between salaried and non-salaried consumers – 51% of the borrowers are salaried while 49% are self-employed.
3. Credit Report penetration moving beyond Top 10 cities
Another clear trend that has emerged over the last 2 years is customers from outside Top 10 cities are becoming more credit aware. Paisabazaar.com, in the last two-and-a-half years have helped customers from 817 cities get their credit report from its platform.
Two years ago, only 39% customers who took their credit report from Paisabazaar.com came from outside the Top 10 cities (Delhi NCR, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Ahmedabad, Pune, Jaipur and Surat). Today, 54% of customers come from outside the Top 10 cities, a ~40% increase in a year.
Manu Sehgal, Business Development Leader, Equifax, said, “Although credit score awareness has grown in India in recent years, it is still a long way to be on par with mature markets. With more Indian banks adopting risk based pricing, whereby your credit score determines the interest rate that you will pay, it will be in the best interest of Indian borrowers to not only become aware of their credit scores but also understand what factors impact their scores positively or negatively.”
4. Credit awareness healthy among self-employed but still behind salaried professionals
The self-employed segment in India has been long under-served by institutional lenders. Lack of awareness around their credit score has been a major hurdle. However, there has been a shift with 38% of customers who have taken their credit report from Paisabazaar.com being self-employed; 78% of them are MSMEs.
Rathan D, a Paisabazaar.com customer and a Farm/Agro product trader, said, “Each time I applied for a cash credit facility, either the application got rejected or the credit limit sanctioned was too low. It was only after fetching the free credit report from Paisabazaar that I identified the problem. The credit experts at Paisabazaar.com helped me in correcting my credit mistakes, which increased my score steadily over a period of time. Monthly credit score updates helped me rationalize my finances and plan my cash flows accordingly.”
5. ‘New to Credit’ are getting ‘Ready for Credit’
A big segment, at 23%, are customers who do not have credit score and are ‘New to Credit’. Most of them are first time earners and professionals in their 20s who have never taken any credit product in the past. Traditionally, since these customers do not have a credit history, most banks and NBFCs are unwilling to offer them a loan.
However, this is now quickly changing with the advent of new-age products that have alternate underwriting models and banks also starting to accept these customers for small ticket size loans and credit cards. 36% of Paisabazaar.com customers who were ‘New to Credit’ were able to get their first credit product within 12 months.
Radhika Binani, Chief Product Officer, Paisabazaar.com, said, “We have seen a sharp rise in demand for credit from young salaried professionals and entrepreneurs on our platform over the last 5 years. These consumers are both confident and comfortable using credit to meet their aspirational and lifestyle needs, along with their life goals. As a market leader, we are assisting young India begin their credit journey through personalized advice and products.”
A large proportion of these customers have started opting for Short Term Personal Loans offered by digital lenders basis their income, employer, alternate data etc. This helps them not only meet their impending financial needs, but also begin building their credit profile.
As India’s largest marketplace for financial products, Paisabazaar.com has seen a big shift in consumer behaviour in the last 2-3 years. In the report, Paisabazaar.com says that today consumers are more aware about their financial health and there is a clear focus on credit fitness. However, the need to spread credit awareness still exists and banks, credit bureaus and fintechs should work towards more credit education initiatives.
Over the next 5 years, this rise in credit awareness, coupled with the continuing smartphone and internet boom, would enable a significant impact on the penetration of formal credit products in India.
