While the fintech sector may have started getting overcrowded with many players, industry insiders believe many areas in the credit space are waiting to be disrupted through technology.

In a panel discussion at TechSparks Mumbai 2023, Alok Mittal, Co-founder, Indifi; Bhavik Vasa, Founder, GetVantage; and Treasa Mathew, Director at impact investing company Omidyar Network argued that technology is changing the way lending happens, and entrepreneurs can take advantage of that.

“Real-time data has changed the game and allowed many tech-driven platforms to tap into the liquidity by partnering with traditional lenders,” said Vasa.

He pointed out data sources like GST filings, ad spends on Google, or even transaction data which shows digital revenues for a company can help underwrite small businesses better. Such data sources were never available in the past, he added.

For liquidity, they can enter into interesting co-lending partnerships with traditional lenders, which can help create granular exposure and thereby reduce risk, he added.

Mathew of Omidyar Network spoke about how her own portfolio companies have changed with time. The first generation of lenders whom Omidyar invested in 2014-15 were all physical players. But over time, startups started focusing on digital data sources.

They started tapping into supply chain finance and embedded finance opportunities. Startups have access to high-quality data which helps them to embed contextual credit products, Mathew argued.

While the panel members discussed the opportunity, Mittal of Indifi wanted to take a step back to analyse why India, which prioritises MSME loans, still has a 50% unmet demand. He pointed out that while the market is big, it is heterogeneous in nature, hence a one-size-fits-all product would never solve the problem.

“The definition of MSME is fluid and all these variations make MSME lending harder,” he said.

Mathew observed that new-generation companies are using technology extensively in three major areas:

1. Segmenting target customers better.
2. Leveraging supply chains and thereby working towards reducing customer acquisition costs.
3. Developing high data analytics capabilities to be able to tap into the data sources and understand them better.

Mittal added that fintechs should not bother about doing everything themselves, rather they can unbundle the entire fintech value chain and specialise in certain domains. 

“So we don’t have to straddle ourselves where we are borrowing at 14%, rather we can work with a bank who has a lower cost of capital,” he said.

The Indifi co-founder also added that there is a lot of private equity and venture capital money chasing fintech startups, so there is no dearth of capital.

Vasa of GetVantage added saying that there is a need to build lending models which are not dependent on physical collateral only. Talking about the ability to generate massive revenues through lending, Vasa pointed out that almost every founder no matter which part of the lending value chain they start from, eventually intends to monetise through credit. 

So this goes on to show the massive opportunity in digital lending.