There is a shift from huge branch network-dominated players to smart Internet or mobile platform-driven banking networks. The change is set to gather speed with the digital initiatives set in motion by the Government and the upsurge of start-ups. These start-ups will compete with banks’ digital initiatives for personal finance to capture the growing customer needs.

Amazon, one of the world’s largest e-retailers, has picked up stake in the Rs.375-crore funding round in online financial market place BankBazaar, a move that highlights the growing investor interest in this segment.

Surge in investments

Personal finance space is seeing a large chunk of entrepreneur interest for quite some time now. Very recently, Apnapaisa.com was acquired by Andromeda and RupeePower.com by Snapdeal. Policybazaar has raised $40 million in April this year.

Other players such as LoanStreet.in, a Mumbai-based loan disbursal platform, Scripbox and Money Wizards are riding high, as they find this market lucrative and filled with huge opportunities. Further, Snapdeal had signed an agreement with Small Industries Development Bank of India (SIDBI). “This is going to economise an entirely untapped population for consumption of services and products,” says Vineet Jain, Co-Founder and CEO, LoanStreet.in, a one-year-old start-up. There have been a surge in investments in this space and a lot of portals have raised venture capital, says Mr. Naresh Daga, CEO, Apnapaisa.com

Online Lending portals are right now divided into two categories

• Alternate lending players such as Lending Kart, Faircent, NeoGrowth, etc.
• Market places such as BankBazaar.com and LoanStreet.in. and RupeePower

Major disruption in loan market

India is having 300 million Internet users currently. It has 45 million transaction users on Internet already, and this is expected to become 100 million in two years time.

A large number of Internet consumption is happening through Mobile, and 61 per cent of the total research on Internet is done by mobile route.

About Rs.6 lakh crore retail loans disbursement is happening in India per annum. Online loan business was Rs. 4,500 crore in 2014 as per last published reports. Further, 90 per cent of growth expected in online loans segment.

“We strongly feel that the Rs. 6 lakh cror per annum loan market in India is going to see a major disruption,” says Mr. Jain.

Today, consumers, particularly in urban and metro areas, have higher disposable incomes, and are open to taking loans to meet their lifestyle needs and buying insurance to secure their future.

However, with the increasing number of over-eager lenders and insurance companies, consumers are also faced with the daunting task of choosing the right product since the decision usually has a long-term impact on domestic cash flows, says Mr. Jain. .

The outlook is very upbeat. “Personal finance in online is a very hot sector as the product per se is very amiable to digital distribution and the financial institutions themselves have made rapid progress in digitising their process,’’ Mr. Daga said. According to Mr. Daga, in most cases, the start-ups are looking at allying with banks rather than fighting it.

For example, he says, in the loans space, banks are lending and the start-ups are helping them distribute their products efficiently, thereby bringing the cost of distribution down.

Filling the gap

Recently, BankBazaar.com, a front-runner in this space, introduced SBI to its home loan product portfolio. Till date, more than 30 leading financial institutions and insurance firms of India, including ICICI Bank, HDFC bank and Axis Bank, are using BankBazaar platform. According to, BankBazaar.com, the portal itself was born in 2008 as the result of a frustrating personal search for a loan. It screams: “Frustration turned into a multi-million enterprise in the seven years that BankBazaar.com has been in existence.”

The financial products intermediation space is going through a paradigm change. Players such as Apnapaisa.com with a combination of online and offline strength are fast filling up the divide between online efficiency and last-mile requirements for actual delivery of financial products, claims Mr. Daga. “We are likely to become the biggest channel for distribution,” he claims.

Credit cards

Rough estimates for part online intermediation in some products would be close to Rs.5,000 to Rs. 6,000 crore worth of loans.

Credit cards are fast becoming big as they offer almost full digital distribution.

“We see it growing very aggressively,” says Mr. Daga.

Although, the e-commerce sector has paved the way for exponential growth in online sales across sectors, the financial services segment is yet to pick up pace and remains a “low involvement” category.

This is essentially due to the absence of compliance-friendly online infrastructure leading to high levels of customers’ dissatisfaction, according to BankBazar.

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