Digital lending is poised to capture 5% of the retail loan market by FY28, up from 2.5% in FY24, a recent report by Redseer Strategy Consultants said.
The report titled “The New Age of Borrowing: A Generational Shift Towards Digital Lending,” projects that digital lending will grow at a CAGR of 40% from FY24 to FY28, reaching Rs 4.5-5.0 trillion by FY28.
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Notably, this marks a significant increase from the 2.5% share (Rs 1.5-1.6 trillion) in FY24 and the 1.8% share (Rs 0.8 trillion) in FY22.
Gen Z, in particular, along with millennials shows a higher penetration in digital lending compared to older age groups. They favor digital solutions for their financial needs due to the convenience and speed offered by the new-age players, the report highlighted.
The report said Gen Z contributes Rs 3.5-4 lakh crore to retail loan disbursals, millennials account for Rs 25-28 lakh crore, and the remaining disbursals total Rs 28-30 lakh crore.
Digital lending has made significant inroads with this demographic, offering tailored financial products and achieving notable disbursals.
The value and volume penetration of digital loans is significantly higher for Gen Z compared to millennials and other demographics. The substantial volume of digital loans underscores the fact that more Gen Z individuals are embracing this convenient and accessible financial solution, the report added.
Personal loans make up about 40% of GenZ borrowing, often used for things like travel and technology upgrades. Millennials on the other hand make up only 21% of personal loans, reflecting a lesser reliance on this category compared to Gen Z. This can be attributed to the different life stages and financial needs of the two cohorts, highlighted the report.
The report examines the credit patterns of two age groups in FY24—Gen Z (aged 18-25) and millennials (aged 26-38)—who are increasingly borrowing digitally, with each cohort fulfilling distinct needs.
