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Jul, 2021     

The elusive booming of shared credit market in India

India’s shared credit market is $550Bn size of addressable market


Over the years, India has built a strong fintech base to become one of the leading countries. However, certain facets of the financial sector still largely remain out of the formal economy, one being the credit economy. Here, we are delving into this space to see how this space is evolving despite the underlying challenges of it.

Although the concept of sharing finances is integrated in our society, there exists a pool of funds which is currently untapped. This is essentially the portion of our credit card limit which remains unused and is available liquidity, but is not readily transferable to others who may need it. With the intent to use this remaining amount of limit, platforms are now coming up with offerings which essentially allows the user to share the actual credit amount.

1. Rise of digital payments; UPI to grow 10x in next 3 years

Rise of UPI in India

So far, one of the strongest products that have garnered great utility is the UPI. Starting from zero in 2017, UPI clocked 20+ billion transactions in CY20 and $500 billion GTV through UPI in CY20. To put it into perspective, this is a 10x growth in 3 years. India’s mobile payment growth story is driven by UPI. This mobile payment revolution has come off the back of its 500+ Mn smartphone user base. And with this ongoing revolution, India’s digitally savvy user base has a chance to leapfrog the challenges of low financial services penetration and finally tech enabled financial services to all.

2. Growing fintech funding will solve the next financial services’ challenges

In the period of CY19 -H121, India outperformed China in terms of fundraising. Consecutively in Y19, CY20 and H1-21, India has raised $405 million, $508 million and $2600 which is 3-9x greater than the amount that China has bagged. This is a clear indication of the strong offerings that India is coming up with along with the increasing users base, increasing adoption especially after Covid along with other factors. The fresh fundraises in the sector will help in tackling the emerging fintech challenges.

3. Low retail credit penetration in India

India is highly underpenetrated by retail credit. There are ~62 Mn credit cards in circulation in India (FY21) and <35 Mn Indians are credit card users, compared to ~200 Mn in the USA. Moreover, household credit as % GDP is an abysmal 11% vs >65% in developed countries.

The shared credit and spending market in India does not see a buzz but is the foundation of the economy. Traditionally this market has been very cash driven and informal. However with the rapid rise of tech solutions and growing comfort with digital payments, we believe that the time is right for a digital sharing solution to emerge in the market. This solution which could potential have an end to end platform for tracking and managing all shared spends, can unlock massive efficiencies and drive large gains in customer experience.

4. India’s shared credit market is $550Bn size of addressable market

India Financial Sharing Market Size – 2020, In $ Bn

In this context of a highly underpenetrated formal credit market, India has a very large informal credit market. The concept of sharing finances is very in-built in our society but there exists a pool of un-used credit limit which is untapped. This is essentially the portion of credit limit which card users do not end up utilizing but it is not readily transferable to others who may need it.

As per RedSeer estimates, more than $200 Bn of loans are given informally to friends and family in India each year. Moreover, more than $300 Bn of spending is shared with family/dependents. Together this creates a massive opportunity for the ‘shared spending/credit’ market in India, most of which runs in cash and is extremely informal.

Currently, the market is quite nascent and only has a handful of players including Xare and Fampay amongst others. Xare offers features like controlled sharing of unused credit limit and debit cards, all without the beneficiary needing their own bank account. This allows for multiple use cases such as family finance management, lending and free instant remittances to name a few. Another is Fampay which provides pre-paid parental control cards for online and offline transactions, thus allowing sharing of finances without needing another bank account. A huge scope lies ahead for these platforms as digitization of this opportunity would unlock significant efficiencies and benefit millions of individuals and households and the entire ecosystem.