According to the annual survey ‘How India Borrows (HIB) Survey 2023’ by Home Credit India, the local arm of Home Credit India, WhatsApp is emerging as a major channel for digital loan disbursement. 59% of borrowers have received credit messages through the instant messaging application of the global consumer finance provider.
The aim of the survey is to understand the ever-evolving borrowing behavior of consumers. One of its highlights is the growing acceptance of the digitalization of financial services. According to HIB 2023, over a quarter of borrowers chose online channels to avail loans. Loans made via telephone calls increased 3 percentage points to 19% in 2023, while loans made through POS/bank branches increased 4 percentage points to 51%.
In line with digital transformation, more than half of borrowers (51%) are looking forward to completing their entire loan application through mobile apps in the future, without the need for physical interaction with POS/banks. The preference for online lending media is primarily driven by younger and aspiring small town borrowers with cities like Dehradun accounting for 61%, Ludhiana 59%, Ahmedabad 56% and Chandigarh 52%.
Most borrowers in the study are comfortable online, with 48% trusting to shop online for their personal purchases. Up to 44% of these borrowers rely on online banking for financial transactions. More than half (54%) trust mobile banking for daily financial updates.
The survey also shows that since 2021, the trend in borrowing has shifted from running a household to purchasing consumer durables such as smartphones and home appliances (44% in 2023). While consumer durable loans fell by 9%, business borrowing increased by 5%, making up 19% of middle class loans for expansion or starting a new business.
Embedded finance has gained traction in recent years and 50% of borrowers are willing to embrace it when it comes to e-shopping. However, adoption of the product among borrowers has declined by 10% from 2022 as stricter RBI regulations on BNPL and PPI products result in fewer offerings. This is preferred as it speeds up borrowing and makes e-commerce shopping easier. EMI cards (49%) remain the most popular medium for borrowing due to higher trust and faster disbursements.
“At Home Credit India, we are dedicated to promoting financial literacy and empowering individuals to make informed decisions. The survey not only highlights the preferences of today’s borrowers, but also highlights the need for greater awareness of data protection. As we move through this digital era, Home Credit remains committed to providing trusted, transparent and accessible financial solutions, ensuring a responsible and inclusive financial future for all,” said Ashish Tiwari, Chief Marketing Officer, Home Credit India.
As India accelerates into the digital lending era, the study highlights that borrowers have major concerns about the use of their personal data by lending companies. Only 18% of borrowers understand data protection regulations, most of them (88%) only have a superficial understanding of the topic. About 60% of borrowers are concerned about how their personal information is collected and used by loan apps. 58% of these concerned borrowers also believe that loan apps collect more data than necessary. Generation Z and borrowers from smaller cities are more concerned about the amount of data collected by loan apps. Among metros, 78% of borrowers from Chennai express concern over the amount of data collected.
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Less than a quarter (23%) of borrowers are aware of how their personal information is being used by loan apps. Borrowers from Chennai appear to be more digitally advanced and 76% of them say they understand the use of personal data. Nearly 60% of borrowers in India say they have no control over the data they share, especially borrowers from tier 1 cities.
Up to 70% of borrowers feel the need for transparent communication about the use of personal data. This is primarily driven by men and Generation Z. Borrowers in all regions except the South appear to have a similar opinion.
When it comes to digital literacy, 23% of middle class borrowers have heard/seen about the chatbot service in the past. 43% of borrowers find the chatbot service user-friendly, led by women and Generation Z. WhatsApp is an emerging digital channel for loans, with 59% of borrowers having received loan messages on WhatsApp. However, only a quarter of borrowers consider the loan offers received via WhatsApp to be trustworthy, with Generation Z showing more trust in this regard.
As interest in financial education is increasing 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 cities like Ludhiana (57%), Patna (55%) and Bhopal (48%) show higher interest in financial literacy.
The HIB study was conducted in 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 approximately 1842 borrowers in the age group of 18 to 55 years with an average income of Rs 31,000 per month.
