EMI cards remain a popular medium of credit, reflect Home Credit India’s How India Borrows Survey 2023

Hyderabad: Home Credit India, a local arm of the leading global consumer finance provider, on Tuesday launched its annual How India Borrows Survey 2023, which aims to understand the constantly evolving consumer borrowing behaviour. Since 2021, the trend in borrowing has shifted from running the household to buying consumer durable such as smartphones & home appliances (44 per cent in 2023). While consumer durable loans decreased by 9 per cent, business-related borrowing increased by 5 per cent, making it a total of 19 per cent middle-class borrowing to expand or to start a new business.

Most of the borrowers in the study are online pros, with 48 per cent relying on online shopping for their purchases. 44 per cent of these borrowers rely on online banking for financial transactions. More than half (54 per cent) are comfortable with mobile banking for day-to-day financial updates.

Another major highlight is the growing acceptance of the digitalisation of financial services. As per the HIB 2023, over one-fourth of borrowers opted for online channels for availing loans. Loans initiated through telecalling increased by 3 per cent (from 16 per cent in 2022 to 19 per cent in 2023), while loans through POS/ bank branches saw a decline of 4 per cent(from 56 per cent to 51 per cent).

In line with the digital transition, more than half of the borrowers (51 per cent) are looking forward to completing their entire future loan application on a 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 per cent, Ludhiana at 59 per cent, Ahmedabad at 56 per cent, and Chandigarh at 52 per cent.

Embedded finance has gained traction in recent years with 50 per cent of borrowers open to embracing the same during e-shopping. However, the uptake for the product among borrowers has come down by 10 per cent 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 e-commerce shopping an easier process. EMI cards (49 per cent) 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 data by loan companies. Only 18 per cent of borrowers understand the data privacy rules, majority of them (88 per cent) with just a superficial understanding of the subject. About 60 per cent of borrowers are worried about how their data is collected and used by lending apps. 58 per cent of these worried borrowers also feel that 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 per cent of borrowers from Chennai voice their concern about the amount of data collected.

Less than one-fourth (23 per cent) of the borrowers understand the usage of their data by loan apps. Borrowers from Chennai seem to be more digitally advanced and 76 per cent of them claim to understand the usage of personal data. Almost 60 per cent of the borrowers in India voice out that they don’t have any control over the data being shared by them, more so by borrowers from tier 1 towns. 70 per cent of the borrowers feel the need for transparent communication on the usage of personal data. This is mostly driven by males and Gen Z. Borrowers across geographies except the South seem to have a similar opinion.

In terms of digital literacy, 23 per cent of middle-class borrowers have heard/seen about the chatbot service in the past. 43 per cent of borrowers find chatbot service as easy to use, led by Women, & Gen Z. WhatsApp is an emerging digital channel for loan with 59 per cent of borrowers having received loan messages on WhatsApp. However, only one-fourth of 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 per cent 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 per cent), Patna (55 per cent) and Bhopal (48 per cent) show a higher interest in financial learning.