More than 50% of the borrowers prefer EMI Cards when it comes to shopping or for any credit need – an annual consumer study titled How India Borrows (HIB) 2022 conducted by Home Credit India, a local arm of the leading global consumer finance provider, has revealed.
The study further concluded that more than three-fourths of the borrowers in Tier 1 & 2 cities and Gen Z/Millennials are optimistic and buoyant about digital lending services, owing to the rising popularity of online loans, convenience experienced, and faster adoption of digital lending.
On a region-wise outlook, the north, east, west, and south have their own characteristics. South India is interested in financial literacy and embedded finance. The study stated that 52% of respondents in Hyderabad showed keen interest in learning financial management, 54% of respondents used mobile banking more than internet banking, and 49% of respondents were optimistic about fintech growth. However, Hyderabad showed the least interest in embedded finance/EMIs while shopping online when compared to other cities.
On the other hand, the North India region has shown resonance with initiating loan applications on WhatsApp chat and online loan journey. East India has shown its affinity strongly towards online shopping, trust in chatbots and having financial service apps on smartphones. West India has an inclination towards mobile banking and initiating loan applications on WhatsApp chat.
Speaking on the consumer study, Ashish Tiwari, Chief Marketing Officer, of Home Credit India, said, “The big takeaway of this year’s How India Borrows study is the digital evolution of consumer credit in India, which is being driven by GenZ/Millennials from Tier 1 & 2 cities. The key borrowing trends point to the emergence of Embedded Finance phenomena leading to the popularity of EMI financing. The new-age consumers are now not averse to going for loans or credit especially small-ticket size to fulfill aspirations and live their life to the fullest. Along with it, they are fast embracing new digital tools or platforms to ensure access to affordable and convenient credit. As most borrowers are optimistic about the future of digital lending services, they are also aware of its pitfalls and so, want to become financially literate.”
The HIB study is aimed at understanding the rapidly evolving consumer borrowing behavior, as the economy undergoes a digital transformation in the post-Covid world. The survey was conducted across 16 cities including Delhi-NCR, Mumbai, Kolkata, Bengaluru, Hyderabad, Bhopal, Patna, Ranchi, Ahmedabad, Chandigarh, Chennai, Dehradun, Jaipur, Lucknow, Ludhiana, and Pune. The sample size is approx 1500 borrowers (Home Credit customers) in the age group of 18-55 years, with an average income of Rs. 30,000 per month.
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The HIB 2022 shows the positive consumer borrowing trend that was the highlight of the 2021 study is going strong this year too irrespective of the macroeconomic headwinds, with 75% of borrowers taking credit to buy consumer durables, home appliances, home renovation, and business purposes. Owing to buoyant sentiments, more than 50% of borrowers showed a preference for EMI-Cards when it came to shopping or taking credit, followed by credit cards (25%), with new-age lending platforms including ‘Buy Now, Pay Later’ evidently losing out with less than 10% in favor. Borrowers view EMI Cards as trustworthy, with timely approvals & quick disbursals.
Similarly, 60% of borrowers primarily Millennials/GenZ from Tier 1 & 2 cities (led by Bengaluru at 82%, Patna at 74%, Lucknow at 69%, Ludhiana at 68%, and Jaipur at 68%) have shown interest in ‘embedded finance’, where e-commerce shopping can be converted to EMIs for affordable financing. Most of them believe embedded finance makes borrowing faster and eCommerce shopping easier.
Another major positive is the growing embrace of the digitalization of financial services. The HIB study states after showing affinity towards online loan journey last year, this time 40% of borrowers led by Tier 1 & 2 cities (Jaipur at 55%, Pune at 48%, Ludhiana 47%, Lucknow 44%, Chandigarh at 43%) have shown a willingness to initiate loan application through WhatsApp chat in coming time. Chatbots too are not far behind in the tech-enabled financial services race, with one-third of borrowers, led by Tier 1 & 2 cities (Ahmedabad at 54%, Lucknow 45%, Patna 44%, Jaipur 42%) showing trust & familiarity towards chatbots, a 13-point uptick from FY21. The adaptability towards online loan journey is also growing as over 50% of borrowers show affinity towards online loans, a 14-point increase from FY 21. On the same lines, borrowers have largely shown their comfort with mobile banking viz-a-viz Internet banking, especially in Tier 1 & Metros (Pune at 75%, Bengaluru 69%, Delhi-NCR 64%, Ludhiana 63%, Ahmedabad 62%, Mumbai 58%, with Bhopal lowest at 42%).
Financial Literacy is fast becoming a serious topic of concern & discussion amongst evolving borrowers in the post-pandemic world. The survey shows 40% of borrowers across demographics and regions want to attain financial education including personal finance from reputed organizations, driven by Tier 1 & 2 cities. With Bengaluru, Hyderabad, and Ludhiana leading, Jaipur, Ranchi, and Pune to follow.
Respondents interviewed during the research also highlighted that with some handholding and guidance on financial and digital literacy, will ensure their loan journey is completed hassle-free and independently.
