Amid a rather dilapidated economy, India’s lending sector has seen increased activity off late. And startups don’t want to be too far behind. According to a report on ET, fintech startups such as OkCredit, Khatabook, Bharatpe and Niyo are shifting their focus from being credit marketplaces, that act as an intermediary between consumer and Investor, to becoming Non-Banking Finance Companies(NBFC) themselves. These companies have applied for NBFC licenses that will help them in maintaining steady revenue streams and increase profits, as now they won’t have to share profits with partner lenders.
These Fintech startups will also benefit from significantly lower cost of capital on NBFC loans and quicker loan disbursal process, if they get the license. This move will also allow fintech firms, partnering with banks to offer loans allowing them to retain profit.
India has stringent norms for NBFCs and that has been a reason why a lot of these fintech companies did not go for the license right away. By the end of March 2019, the Reserve bank of India had already revoked Licences of 1,701 NBFC holders as their minimum balance didn’t meet the norms.
Other challenges that these companies have to face are building an effective credit assessment process and improvising the loan collection process, which are basic challenges of any banking system. Well there work doesn’t stop here, Frauds and leakages also hamper the growth of these companies, so they will have to apply tech that detects them effectively.
Currently, several payment gateways such as Razorpay, Instamojo, EnKash, BharatPe and Paytm offer loans to their customers in a partner-led model.
This shift in strategy from fee-based to interest-based revenue model underlines the growing interest of several Fintech startups to become key lenders in the market. Their customer data and loyalty can serve as an added bonus in their future ambitions.
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