Small Credit is Best Served and Collected Digitally: A Peek into Our Loan Distribution Business

byKrishna VanamaliLast Updated: January 31, 2023

We have been witnessing rapid growth in our loan distribution business, where we disburse different kinds of loans to our large customer and merchant base in partnership with financial institutions.

The value of disbursements through our platform scaled to Rs 3,665 crore in the month of December 2022, growing 330% y-o-y, as per our latest operating update for Q3FY23, reflecting the strong adoption of our lending products including Paytm Postpaid, Personal loans and Merchant loans.

The growing adoption of our lending products has led to a sharp increase in the amount of revenue we generate from financial services, which contributed to 18% of total revenues in Q2FY23.

We provide a fully digital loan disbursement platform to top NBFCs, enabling customers and merchants to seamlessly apply for loans directly through our platform. We typically make 2.5% to 3.5% of loan value upfront on the disbursement of loans.

With loan disbursals through our platform rising every quarter – in terms of both value and volume – we are seeing higher revenue growth from this business.

In addition to loan distribution, we also collect loans on behalf of its financial institution partners. Led by mobile and digital capabilities, our collection business is an efficient and low-cost process, where it makes 0.5% to 1.5% of the disbursement value.

For loans issued through our app, most of the collection fees are received by us post portfolio closure, which is typically 12-14 months for personal and merchant loans and 3 months for Postpaid loans.

We expect loan sourcing and collection margins to trend upwards as the loan distribution business scales further. While all three of our lending products have been witnessing phenomenal growth, analysts believe that there is enough headroom for future growth with rising penetration and cross-sell opportunities.

We continue to seek growth and upsell opportunities as low penetration supports future growth potential, while we work with our partners to remain focused on the quality of the book.

You May Also Like