Lending fintech ecosystem is going through a tough phase, where existing business models face challenges in terms of sustenance and valuation. We believe that this phase will re-baseline the ecosystem with the following changes:
1. Banks / NBFCs: Significant players are moving towards digital to help build books as their branches are expected to generate limited business. These players will also look for digital transformation for reducing their Cost Income Ratio to compensate for the anticipated losses on the credit side. These lenders will consume services of B2B players, including Data Providers, Lending, and Collection Platforms. These lenders will also partner with Fintechs for sourcing loans across Consumers as well as the SME segment.
2. Lending Fintechs (Consumer & SMEs) are working on multiple approaches including:
- Pivoting: Many players are moving towards NeoBanking to secure their businesses from “dependency on credit.
- Widening of Portfolio: Single product startups are adding newer products like supply chain financing.
- Performance Improvement: Sharper players are using this time of lower credit activities for improving their processes, products, and partnerships.
- Downsizing & Closure: The recruitment market is inundated with ex-employees of these Fintechs. Few short-term lenders have already closed shop as they lost significant portfolio due to moratorium.
- Raising Funds: Investors are backing their current portfolio instead of funding newer ones.
B2B players like those providing banking data, KYC platform, Alternate Credit Platforms, and LOS / LMS will see higher traction in the next 12 months as more and more lenders will utilize them to become efficient. Significant funding will move towards the B2B segment as investors look for innovations in areas beyond direct lending.