Lending businesses have a hyperbolic curve. The inflection point is c. two credit cycles. That is the time it takes to understand and build systems to cope with the massive complexity and nuances of collecting and operating. Once done: huge. Too early: catastrophic.
Fintech lenders will go through a period of consolidation - the relative ease of lending & hence (investor demanded) growth temporarily masks limited operartional capability. Few startups have the appetite / capability / real world understanding to collect what they have lent.
Lending Nationwide in India (akin to launching the whole of 2x Europe in one go) on an unsecured loan wouldn't happen outside startup land: the guy from tier 3 UP East who bought a phone and dropped it, funded by a startup in BLR with no regional collection or recourse won't pay.
Which means such fintechs can ONLY lend to highly lendable borrowers at rates that allow c. 8 to 15 percent write off who are competed for by their banks, credit card companies at lower rates bcos they have massive established collection, distribution capability & low cost of $.
All of which means the value add of tech lenders is on the inbound decision and speed OR on in solving the under invested but much needed smart propensity driven collection capability.
Or (ahem) secured, faster lending in large categories but regionalised initially.
Or (ahem) secured, faster lending in large categories but regionalised initially.
NB thread only relates to consumer small ticket lending. Great bizes in SME and larger biz finance.
OR by being able to lend (responsibly) to New to Credit Borrowers. By helping a largely pre paid / no regular payment (note Telco) nation to learn regular payments and the benefits of becoming creditworthy.
