Highlights
Consumer Durable and business needs continue to be the key reason for borrowing in 2023.
Growing acceptance of digitalisation of financial services with 29% borrowers opting for online loans; 51% desire to shift to online channels for their next loan.
Only 18% borrowers understand the data privacy rules, majority of them (88%) with just the superficial understanding on the subject.
In Bengaluru, 50% borrowers favour completing loan journey completely through online mediums; while 38% respondents say they trust embedded finance.
91% people in Bengaluru are more optimistic about continued adoption of digital lending due to internet and data revolution.
Home Credit India, a local arm of the leading global consumer finance provider launched their annual How India Borrows Survey 2023, which aims to understand the constantly evolving consumer borrowing behaviour. Since 2021, the trend in borrowing had shifted from running the household to buying consumer durable such as smartphones & home appliances (44% in 2023). While consumer durable loans decreased by 9%, business-related borrowing increased by 5%, making it a total of 19% middle class borrowing to expand or to start a new business.
Most of the borrowers in the study are online pro, with 48% relying on online shopping for their personal purchases. 44% of these borrowers rely on online banking for financial transactions. More than half (54%) comfortable with mobile banking for day-to-day financial updates.
Another major highlight is the growing acceptance of digitalisation of financial services. As per the HIB 2023, over one-fourth of borrowers opted for online channel for availing loans. Loans initiated through tele calling increased by 3% (from 16% in 2022 to 19% in 2023), while loans through POS/ bank branches saw a decline by 4% (from 56% to 51%).
In line with the digital transition, more than half of the borrowers (51%) are looking forward to completing their entire future loan application on mobile App without any physical interaction with POS/ Banks. The preference for online loan mediums is primarily driven by younger and aspirational small-town borrowers, with cities like, Dehradun at 61%, Ludhiana at 59%, Ahmedabad at 56%, and Chandigarh at 52%.
Embedded finance has gained traction in the recent years with 50% borrowers open to embrace the same during e-shopping. However, the uptake for the product among borrowers has come down by 10% from 2022 due to stringent RBI regulations on BNPL & PPI products leading to fewer offers. It is preferred as it makes borrowing faster and makes ecommerce shopping an easier process. EMI cards (49%) continue to be the most preferred medium for taking credit due to higher trust and faster disbursals.
Speaking on the consumer study, Ashish Tiwari, Chief Marketing Officer, Home Credit India, said “At Home Credit India, we are dedicated to fostering financial literacy and empowering individuals to make informed choices. The survey not only highlights the preferences of today's borrowers but also emphasizes the need for greater awareness of data privacy. As we navigate this digital era, Home Credit remains committed to providing trustworthy, transparent and accessible financial solutions, ensuring a responsible and inclusive financial future for all."
The HIB Study was conducted across 17 cities including Delhi-NCR, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad, Lucknow, Jaipur, Bhopal, Patna, Ranchi, Chandigarh, Ludhiana, Kochi, and Dehradun. The sample size is approx. 1842 borrowers in the age group of 18-55 years, with an average income of Rs. 31,000 per month.
As India accelerates into the digital lending era, the study underlines a critical concern among borrowers regarding the usage of their personal data by loan companies. Only 18% borrowers understand the data privacy rules, majority of them (88%) with just the superficial understanding on the subject. About 60% borrowers are worried about how their personal data is collected and used by the lending apps. 58% of these worried borrowers also feel that the lending apps collect more data than required. Gen Z and borrowers from smaller towns show higher concern with the amount of data being collected by lending apps. Among metros, 78% of borrowers from Chennai voice their concern about the amount of data collected.
Regionwise, in Bengaluru, only 13% of individuals in Bengaluru claim to understand how loan companies use their personal data. Additionally, 52% of respondents express worry about their data being collected by lending apps, and 18% believe that these apps gather more information than necessary. Meanwhile, a notable 50% of borrowers express a strong inclination toward completing their entire loan journey through online platforms, reflecting a growing reliance on digital channels for financial transactions. While 38% of respondents said they would like to use embedded finance.
Less than one-fourth (23%) of the borrowers understand about the usage of their personal data by loan apps. Borrowers from Chennai seem to be more digitally advanced and 76% of them claim to understand the usage of personal data. Almost 60% of the borrowers in India voice out that they don’t have any control on the data being shared by them, more so by borrowers from tier 1 towns.
70% of the borrowers feel the need of transparent communication on the usage of personal data. This is mostly driven by males and Gen Z. Borrowers across geographies except South seem to have a similar opinion.
In terms of digital literacy, 23% of the middle-class borrowers have heard/seen about the chatbot service in the past. 43% borrowers find chatbot service as easy to use, led by Women, & Gen Z. WhatsApp is an emerging digital channel for loan with 59% of borrowers having received loan messages on WhatsApp. However, only one-fourth borrowers consider loan offers received on WhatsApp as trustworthy, with Gen Z showing more trust towards this.
As interest in financial education is growing in the country, 39% of borrowers said they would like a reputed organization to educate them about finance related tasks over the internet with GenZ showing maximum interest. Smaller towns like Ludhiana (57%), Patna (55%) and Bhopal (48%) show higher interest in financial learning.
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