There’s been a recent boom in India’s consumer credit industry, with an increasing demand from young, non-metro, and increasingly female customers offering new opportunities for finance players.
To learn more about this new and diverse group of credit customers, Google partnered with TransUnion CIBIL, India’s largest credit bureau, on a thought paper that explores emerging trends in India’s consumer credit industry and the changing behavior of its retail borrowers.
Between 2017 and 2020, as India’s consumer credit markets grew by 18% to $613 billion,1 we noticed several noteworthy consumer lending trends emerge both in search and demand. In the second half of 2020, there was an increase in the following search queries: “home loan” (+22%), “personal loan” (+8%), “car loan” (+55%), and “phone loan” (+10%).2 In 2020, there were 2.5X more credit checks for loan applications than in 2017.3
In this growing retail credit market, the opportunity for marketers lies in five key areas:
1. Small loans become possible at large volumes
Many people across India are looking for small-ticket loans. If they were not easy to reach before, technology has quickly changed that. Between 2017 and 2020, the number of disbursed small personal loans — valued below Rs. 25,000 — jumped 23X.4 We also found that people were searching for loans based on salary (“how much loan can I get for 40,000 salary”), consumption (“phone on loan”), even gender (“mahila (female) loan 30,000”).5 Of note, these borrowers seem to show loyalty to the same consumer lenders. For example, between 2017 and 2020, small-ticket borrowers taking a loan from the same lender brand grew by 42X.6 With their repeat borrowing, these borrowers are increasing the volume of loans and the value of the market.
For lenders to tap into this high-volume demand at scale, they’ll need data-driven tools. One instance of its use is helping lenders find out what drives conversion.
Recommendation: Improve conversion with data-driven testing
Creditplus, a Germany-based loan provider, believed that a shorter, simpler mobile application form would increase its conversion rate. To learn which experience performed best, the team ran an A/B test through Google Optimize on its Ads campaign directing traffic to a prototype form. They could then build a great initial experience and continue tweaking the form for improvement over time.
The new form increased conversion by 55% on mobile. After tests showed a 30% increase on desktop, they implemented the new form across all campaigns. With data-driven testing, Creditplus was able to determine what improved the purchase experience without much upfront investment.
2. High-quality borrowers are outside of big cities, too
It’s worth noting that credit customers in India are also located in small and mid-size regions, and there is an untapped opportunity there for consumer lenders. Credit enquiries for retail loans have shown a 5% shift to non-Tier 1 regions,7 with search interest for loans growing 2.5X faster outside large cities than inside.8 What’s more, nearly 80% of the demand from prime and high-quality credit seekers is coming from outside Tier 1 cities. To seize the growing opportunity for retail credit in India, lenders should start paying attention to the demand outside India’s big cities.
We also see this trend in searches. Because people in smaller cities are searching for credit information in their preferred language, we see more searches in local languages. For instance: a 24% increase for “ಸಾಲ” (management loans), an 80% jump for “லோன்” (loan), a 27% growth in “होम लोन कैलकुलेटर” (home loan calculator), and a 260% surge in searches for “लघु उद्योग लोन” (small-scale business loan scheme).
Recommendation: For the best customer experience, connect with audiences in their local language
There‘s generally a prevalence of regional languages in India’s non-metro areas, so marketers need to ensure they’re thinking and speaking local. Policybazaar, for example, worked with Google on a local-language strategy to capture the Hindi-speaking audience for life and health insurance. They launched an end-to-end vernacular campaign focusing on Search, targeting, and content creation.
To maximize its reach, Policybazaar used automated translation tools to convert a high volume of English keywords into translated and transliterated Hindi versions for Search ads. Where possible, they also used text-free images to improve localization. Even the brand’s call centers were designed to cater to the Hindi-speaking market. The campaign achieved a 11% higher click rate from vernacular keywords and an 18% lower cost of lead compared to English campaigns.
3. Many opportunities for niche marketing if you can manage the data
The emerging group of credit customers is diverse: 71% come from non-metros, 49% are under 30, and 24% are female. There are large differences within product categories, too. For example, of those looking for personal loans, 65% are under 30. Meanwhile, among home loan seekers, only 21% are under 30. Therefore, lenders need to be aware that audiences can be segmented many ways.
There are opportunities to reach niche markets, but it also means that the data needed to reach them becomes complex.
Throw in all the parameters involved in credit assessments, such as retail credit reports and hundreds of contextual consumer signals, and you have a complex mass of data to process. But machine learning can help.
Recommendation: Use machine learning to deliver personalization at scale
A data-first approach can help companies target diverse groups efficiently by personalizing everything from product offerings to user experience — at scale. In the case of Max Bupa Health Insurance, Google Smart Bidding helped process hundreds of signals for each user context, automating the display of the right creative to the right audience. And by constantly tweaking multiple signals, it also optimized the conversion rate. As a result of its machine learning-driven campaign, Max Bupa achieved 51% incremental conversions at 88% better conversion rate.
4. Borrowers will only borrow from brands they trust
Brand trust is crucial in connecting with borrowers. A Google consumer survey found that 64% of credit buyers say a brand is a major factor in choosing their loan provider,9 whereas 76% take at least two weeks to research before choosing a lender. Given the uncertainty of the pandemic over the past year, it is understandable that consumers are doubly cautious about whom to trust when it comes to money.
But when people find a lender they trust, they tend to keep borrowing from the same one. For instance, only 32% of the consumers who took a consumption loan switched to a different lender type on their subsequent loan.10
Unsurprisingly, borrowers use Search to discover credit products, with nearly 1 billion searches for credit-related information,11 whereas 55% use an online tool or recommendation platform to connect with potential consumer lenders.
Recommendation: Win customers’ trust with authenticity
More than other sectors, trust is especially important to consumers buying financial products. They look for integrity, good intentions, and quality in your brand. So be up-front about your product (especially terms and conditions). Be contactable when customers need to get in touch. These basic tenets of trust shape a customer’s perception of how genuine your brand is.
And to deepen the connection with your customers, don’t just sell. Provide something that adds value. DBS, for instance, provides financial literacy articles on its channels to educate its customers. On social media, it has also created forums that engage the community through discussions on finance. In doing so, the brand connects on a personal level with its customers (and non-customers) while building a community.
5. The future of lending is digital
With the growth of the fintech industry and more customers leaning toward digital banking, businesses need to do the same. Between 2017 and 2020, fintech non-banking financial companies (NBFCs) saw a 30X growth in outstanding balances.
They also accounted for 45% of all personal loans disbursed in 2020. Notably, fintech NBFCs disbursed 38% of the prime loans disbursed in 2020 — typically the largest customer pool for traditional banks.12
But fintech customers are not just “urban youth.” They cut across geographical boundaries. Approximately 70% of disbursals 13 and 52% of searches 14 sit outside India’s Tier 1 cities, and 82% of the audience is over 25.
Recommendation: Democratize the digital banking experience with Cloud
Lenders can get a leg up in the growing retail credit market by shifting their business to a cloud platform that’s secure, open, and agile. Australia’s Macquarie Bank, for instance, built its digital platform on the cloud with an open API architecture so developers can connect their services to work securely with the bank. Macquarie gets new innovative tools built on top of its own while increasing developer relations and providing customers with more options to personalize their experience.
The boom of retail lending in India and new group of borrowers presents a rich, untapped market for lenders. Technology and data are powerful tools to both segment this diverse audience and reach them effectively at scale. To build a long-term relationship with these emerging borrowers, lenders need to find ways to speak their language and, above all, earn their trust.
